Faraday Future is still haunted by the past of its billionaire founder

Faraday Future, once the most mortgaged start of electric vehicles that followed Tesla, is now known for its money problems, if it is already known. Speedy employees – from SpaceX, Tesla, Apple and Ford – have usually gone further. The $ 2 billion it has spent to develop a luxury SUV has not paid off; the vehicle is still not in production. This is all due to the company's founder, a man who fled China in 2017 to flee billions of dollars in debt, but declare bankruptcy in the US this month: former Faraday Future CEO Jia Yueting.


Smart money keeps an eye on the company. But Faraday Future is still alive, and the new CEO would like to explain why.

During a "media day" last month at Faraday Future headquarters, across the street from Pet Haven Cemetery and Crematory in Gardena, California, newly appointed CEO Carsten Breitfeld told a dozen reporters and bloggers that he was joining the struggling EV startup has joined because he believes it & # 39; the number one company in future mobility & # 39; can become.

With black loafers, black socks, dark jeans and a shiny black Faraday Future polo, Breitfeld flipped through slides on a huge video wall behind him and explained in a thick German accent that the transport industry is ready for a new revolution. Although Faraday Future has relatively little money in the bank, more than $ 100 million is owed to suppliers and has a reputation compromised by Jia & # 39; s financial and management debtors (who The edge documented the past two years), Breitfeld claimed that Faraday Future is uniquely equipped to transform transport as we know it.

It is a daring vision that Breitfeld must now sell to investors, potential new employees and the company's own creditors. If he succeeds, Breitfeld said the startup will return to the Consumer Electronics Show in 2021, where it will debut a new vehicle and platform that Faraday Future plans to use to disrupt the mobility industry.

Surviving until then would be an achievement in itself. But to even try it, Breitfeld has to resuscitate Faraday Future and restrain Jia. Despite the fact that Jia stepped down as CEO and filed for bankruptcy, the man in the center of the biggest problems of the startup does not go anywhere quickly.

Illustration by Alex Castro / The Verge

Storm clouds roll in, set on a sad string arrangement, before the music video cuts into images of smog-suffocated China where cars seem to be supported for kilometers. Then, above the strings, the voice of billionaire Jia Yueting, the founder of the Chinese technology conglomerate LeEco and EV startup Faraday Future, emerges.


"We are convinced that the 1 percent can write history," he says in Chinese, according to a translation of the texts.

Then the music video, which was distributed internally at LeEco, became the center of the company collapse in 2017, goes back to images of Jia wearing black over-the-ear headphones. While he is in a recording studio, the billionaire tries to express his gratitude to "all cold, indifferent people" for "disapproving". Their criticism has brought him to life, he moans.

Later, Jia turns directly to the camera and says that he "wants to share this song to encourage all entrepreneurs."

"No matter how crazy the thunderstorm is, as long as you are persistent and never look back, you will certainly meet the vast world, or even harvest in the desert," he says.

The brash personality of Jia, shown in the video, is one of the reasons why he made a name for himself in China. (For example, he once compared Apple to Hitler during the emergence of LeEco.) Jia was a little daring in the way he built his business and assumed billions of dollars in debts to help LeEco move from the "Netflix of China" to a conglomerate made phones, televisions and even tried electric cars.

But Jia's ambition caught up with him at the end of 2016, when he unsuccessfully tried to introduce LeEco to the US. Just a few weeks after the launch of a blood-curdling product in October, he announced layoffs and claimed that LeEco was suffering from & # 39; major corporate disease & # 39 ;. Six months later, after the video clip was circulated within LeEco, the Shanghai High People & # 39; s Court froze $ 182 million of his assets. He was eventually named after an official blacklist of debtors in China, and when the government ordered him to return to his creditors, had his wife and brother answer the call instead.

With creditors literally camping in the LeEco offices hoping for repayment and the government exhaling his neck, Jia moved to California in July 2017 where he had founded a new company three years earlier: Faraday Future. He settled in a country house on the coast, one of a handful of millions-dollar houses that he had purchased from a shell company in 2014 and 2015.


However, moving halfway around the world was not enough to escape the "crazy thunderstorm" from his video clip, as Jia had created a new crisis at Faraday Future.

After Jia Faraday Future was founded in 2014, the startup gathered talent from the largest companies in Silicon Valley and Detroit in an effort to build a luxury, ultra-connected electric SUV called the FF91. The hiring party blended with the overwhelming secret of the startup to create such a powerful # hype that at some point it was a rumor that Faraday Future was a front for Apple's self-driving car project.

But Jia – who quietly ran the company from the start – rejected the advice of the automotive executives he had hired and set too ambitious goals for Faraday Future, The edge learned in 2017.

Jia quickly burned most of the $ 900 million he had pumped into the company. By the time Faraday Future unveiled the FF91 at the Consumer Electronics Show 2017, the startup was already behind bills, some key employees had been lost, and delayed construction at a $ 1 billion plant in the Nevada desert.

A few months later, the startup hired former BMW and Deutsche Bank financial director Stefan Krause to arrange his finances. He finally decided that bankruptcy was the solution. Jia saw this as a challenge for his controlling interest in the company and fought behind the scenes against Krause. Krause finally resigned in October 2017 and Jia called himself the first public CEO of Faraday Future, and confirmed what many employees already knew: he led the show.


At the end of December, Faraday Future was weeks away from not having enough money to cover the payroll, so Jia exchanged 45 percent of Faraday Future shares in exchange for a $ 2 billion investment from the Chinese real estate conglomerate Evergrande. But Jia still had a third of a share class with more voting rights. So even though Evergrande owned a significant portion of the company, Jia was still in charge. (Jia did not respond to a mailed request for comment.)

In 2018, Faraday Future spent the first $ 800 million on Evergrande's investment in just six months. Then Jia asked for an advance on the rest of the money. Evergrande tried to take this opportunity to marginalize the founder and asked him to transfer his controlling shares in the company to an independent third party in exchange for the money. Jia agreed but transferred the shares to the daughter of his vice-president. In response, Evergrande refused to make further payments.

Faraday Future abandoned this. Only the inner circle of Jia knew about the battle with Evergrande, according to two former high-level employees who received anonymity because of confidentiality agreements they had concluded with the company. The western managers of Faraday Future – those with experience in the automotive industry – stayed in the dark. In fact, they discovered the truth just days before the company & # 39;futuristic day"Event on September 19, 2018. (Faraday Future spokesman John Schilling denies this, saying," We were timely transparent about management on this type of issue. ") During the event, executives told employees and their families that Faraday Future was still on track to start production by the end of the year.

As a result of the fight with Evergrande, Faraday Future had only $ 18 million in the bank at the beginning of September 2018, according to information shared in court in November 2018 by Faraday Future's own vice-president. That was only $ 2 million more than it monthly costs of his payroll; In the meantime, suppliers owed at least $ 59 million. So in October 2018, Faraday Future began a series of rolling redundancies, leave and salary cuts. Many of the top Western executives have stopped, including co-founder and former Tesla and Lotus engineer Nick Sampson.

Faraday Future and Evergrande eventually renegotiated their deal on the last day of 2018: Evergrande reduced its stake to 32 percent, was freed from further financial obligations and allowed Faraday Future to look for new investors. Faraday Future ended 2018 with only $ 7.4 million in the bank, although it received a final loan of $ 10 million from Evergrande. According to the recent bankruptcy of Jia, this loan is still outstanding. (Schilling says the startup "was unable to secure the financing that we originally thought we had against (the due date) to repay this, so we pushed it back.")


New investors were not interested in Jia and therefore not in Faraday Future as long as he was in charge, according to a former employee who was close to the investment discussions and who became anonymous because of the secrecy agreements that Faraday Future requires. They had good reason to be wary, this person said, because Jia once used LeEco to buy a huge stake in competing EV startup Lucid Motors. This was a clear conflict of interest and, perhaps predictably, Jia used his position with Lucid block potential investments in that company.

"The investor's primary request is:" Do you just want to stand aside and face and let us lead the business? ", The person said close to the discussions." And his answer is always "No" or "You can get a new CEO, but they will still report to me."

Illustration by Alex Castro / The Verge

Breitfeld, the new CEO, spent much of the media day acknowledging that the company has spent more than two years in a virtually constant financial crisis while turning spins & # 39; yes, but & # 39; performed:

Yes, the FF91 is still months away from production, he said, but it will surpass and surpass almost every other EV on the market when it gets on the road. Yes, Faraday Future still needs $ 850 million to make that possible, but the company's internal technology, intellectual property, and other assets have value.

Yes, Faraday Future has fired hundreds of employees and lost important executives, and yes, many suppliers still owe a lot of money. But the restructuring company has set up a trust for suppliers and the $ 1.7 billion that the company has spent so far has not just disappeared. Much of that capital went to developing an SUV that is full of the kind of technology that Breitfeld believes will help disrupt the transport sector.


In that spirit, Breitfeld said that he wants Faraday Future to be more open, both about what it has achieved so far and what it intends to do, if it can successfully ask for new investors.

"There was a strange attitude here where people would say," Hey, we can't show anything to the outside world, "said Breitfeld The edge about how Jia arranged things. “This is completely wrong, because there is only negative news about this company and nothing about the content. All other startups are talking about the things they don't have now, and we're not talking about the things we have. How crazy is this? & # 39;

Which substance? To start with, the battery pack, electric motors and inverter of the FF91 are designed and packaged in such a way that they can easily be adapted to cars of different sizes and price ranges.

Faraday Future has also developed these components of its electric power train in-house, which means that it is something of its own supplier. This gives the company more control over the way these components all work together, and reflects how large companies such as Apple often design their products. This helped Faraday Future to design more powerful engines that do not easily overheat, making it possible to continue zipping from 0 to 60. Faraday Future also claims to have developed one of the few cars with a battery pack that can match Tesla's leading series figures.

The engines and the inverter are the work of the team that developed the EV1 for General Motors, which is considered the first mass-produced electric car of the modern age. Although almost all that team have since left Faraday Future for rival startup Rivian, their work has not left them and it remains a source of pride for the employees who have followed the startup and a potential point of interest for potential investors.

In accordance with Breitfeld's promise to show more work, the startup unveiled the interior of the FF91 for the first time. The SUV of the future is packed with screens: 11 in total, with more than 100 combined screen real estate. The centerpiece is a 27-inch display that can be folded down from the ceiling and offers passengers in the back seat a theater-like experience enhanced by cooling and heating systems and massage engines. The seats also tilt back at a 60-degree angle.

Faraday Future finally showed its high-tech interior to journalists on its media day, although it did not allow photos.
Image: Faraday Future

There is another large entertainment screen in the dashboard in front of the passenger seat that is recessed so that the driver cannot see it, the company explained. A huge vertical touchscreen protrudes from the center of the dashboard and there are even touch screens on the inside of each door to give every passenger quick access to their own climate and seat adjustments. Apparently the "future" in Faraday Future means that as many screens as possible must be put in a car.

Drivers and passengers can also communicate with the car's software using voice controls, which the company says can handle compound questions, such as "finding a restaurant with an open terrace within five miles." The car is also equipped with a number of interior cameras that drivers and passengers can recognize and quickly choose their favorite personal settings.

A problem with such a & # 39; n technical approach is that the car is now in production, which means that part of the technology is outdated. Faraday Future managers offered one & # 39; yes, but & # 39; to: yes, that was not the intention, but the delay gave the remaining team time to try to incorporate new processors and cameras into the design of the car prior to the intended production date 2020.

The costs are of course huge: the FF91 will be priced somewhere between $ 150,000 and $ 200,000 should it ever come on sale. But Breitfeld believes it will be an attractive car for the wealthy in China, which he expects to be the primary market. And if it goes well, which is a major problem, the FF91 will only be the start of a comeback story in which the startup becomes more than just an automaker, Breitfeld says.


After the FF91, Breitfeld wants to use the Faraday Future electric platform to power smaller, more affordable cars. This second generation version of the platform, which he said will be unveiled at CES 2021, is the focus of what he believes the for real Faraday Future sees business opportunities as a remake and remake of car sharing with high-tech vehicles that serve as a platform for revenue-generating software services.

While services such as Uber take you neatly and safely to where you are going, Breitfeld believes that "the experience is pretty bad" during the ride. "We don't have the right product for it," Breitfeld said confidently. “Your telephones are not connected. You have no access to your music, nothing. It just sits in it and goes from A to B. "

Breitfeld wants to solve this imagined problem by transferring the Faraday Future technology for the FF91 to something that is better suited to these shared mobility settings. He wants a car that a user could recognize "through face recognition or whatever you want" and then download his "digital ecosystem to the car" via 5G. In this way, Breitfeld said, the car will "feel like yours in a matter of seconds."

Breitfeld, however, did not explain why technology such as face recognition is a better solution than what is already available. For what it's worth, Uber has one dealing with Pandora and Spotifyand apps that drive, already know who you are when you book a car.

Breitfeld sees the biggest dollar signs on the screens: selling services to the public in Faraday Future cars.


To hammer this point home, Breitfeld presented a slide with an overview of the FF91. Above the vehicle were four logos: Tesla, Google, Apple and Uber. Above everything else was a fifth logo: the FF iconography of Faraday Future.

“You can smile or laugh a little. But Faraday Future's goal is to bring those business models and competencies together in one company, create them, and integrate them into one digital eco-shared mobility system, & Breitfeld said. “Tesla builds electric cars & # 39; s and was the first company to really create a strong premium brand for electric cars. Google is perhaps the best company in managing data and creating data. Apple is probably the best company when it comes to user experience. And Uber – and you could call others such as Didi and Lyft – ensure that business models work for shared mobility.

"But what you really need to become a disruptor and to become the next company to dominate shared mobility systems in the future is that you have to combine all of them," Breitfeld added.

By 2030, Breitfeld claimed that this super business version of Faraday Future will generate nearly half of its revenue from car sales and the remainder from a combination of car sharing, in-car services, as well as sales or licensing of the company's technology. But nearly 70 percent of the profit would come from those more service parts of the company.

"I think this can happen," he said. "There is still a long way to go. There is no doubt about it. But this can happen. And this will put us in a position that we can definitely become the number one company in future mobility."

A pre-production FF91 that is being worked on in one of the Faraday Future facilities in Los Angeles.
Photo by Sean O & # 39; Kane / The Verge


Can Faraday Future achieve all this with Jia still around? On the media day, Breitfeld claimed that the founder would not be a problem because Jia gave his controlling shares to a new commission consisting of corporate lawyers and executives. Breitfeld also said that at his request, Jia stepped out of the role of CEO ("I told him there is only one position that I would consider coming on board here," he said The edge) and now allegedly has less control over the company's activities. On October 14, Jia personally filed for Chapter 11 bankruptcy in an attempt to settle the $ 3.6 billion of debt he still has in China.

But Jia still has a veto over certain decisions, and he will continue to shape the technology in Faraday Future vehicles as the "main product and user officer." Jia also still receives a substantial salary from Faraday Future, according to his bankruptcy application. Although he promised to take only $ 1 as a salary during last year's layoffs, Jia is currently earning $ 50,000 at the startup. (Schilling says he "cannot comment on current pay levels" for executives.)

Breitfeld says that Jia told him (with a kind of humility that the founder is not known for): & # 39; & # 39; When you come here, I let you run the business because I know what I can do and what I'm good at, and I know what I'm not good at. & # 39; Again, his words. And it's a really great decision, I would say. "Breitfeld calls the" leadership "and" know-how of all digital technology "of the founder as crucial for the future of the company.

But even as Jia has waived some control, potential investors will probably have to cope with maintaining their presence at Faraday Future for some reason: his immigration status.

Jia remained in the US on an L-1 visa, according to a person with direct knowledge of his immigration status who was not authorized to share the information. L-1 visa Allow companies to transfer executives and managers to existing US branches or to allow these executives and managers to enter the country for the purpose of establishing a branch. Crucial is that the company & # 39; viable & # 39; must be. That means that without Faraday Future or his role there, Jia may have to be forced to return to China, where he faces his creditors and the government.

In the US, this specific visa has helped explain why Jia fought so fiercely to reduce (or fully resolve) his role with Faraday Future, especially after LeEco & # 39; s US operations were closed in 2017. It is not clear whether Jia has sought a more permanent residence; a Chinese blogger in Seattle claimed that Jia applied for a green card in 2017, but LeEco managers called the information & # 39; fake news & # 39; and Jia persecuted the man for defamation. The case was finally resolved. (Schilling refused to confirm Jia's specific immigration status and only said he "has the status to legally stay and work in the US.")

Breitfeld takes on the role that Jia now has in the company, is bright. But Jia's promises – such as a $ 1 salary that has turned into $ 50,000 a month – suggest that Breitfeld may need to worry more because no one has successfully taken Jia's power from Faraday Future.

In many ways, Breitfeld is the CEO that Faraday Future always lacked. The startup spent its first three years without a publicly appointed CEO (although several names went through the role on official paper, such as The edge Previously reported). Even when Jia came in, he had no real automotive experience to talk about. Breitfeld not only has a deep source of experience from his time at BMW, but he probably also has a significant Rolodex from the two decades he spent there.

He is also familiar with startup chaos. After leaving BMW in 2015, he helped co-founded the Chinese EV startup Byton, who himself is developing a similar technical electric SUV. (Breitfeld left Byton abruptly earlier this year and said on the media day that he was not satisfied with the level of Chinese government involvement after taking investments from a Chinese state-owned company.)

But expertise can only get you as far as you are dealing with someone like Jia, who is encouraged to keep control of his company, as the two former high-level employees claim, and blinded by the same ego that forced him to to make a music video. One of them even went so far as to say that Breitfeld & # 39; s recruitment is "a scam to make people think he stepped aside." Jia "stabs Carsten in the back and uses him like a puppet," said this person.

"This comment is without merit and is unfounded," says Schilling in reply. "Carsten has been on board here for almost two months now and has taken many strategic steps in his short term to get (Faraday Future) back on track."

Anyway, Faraday Future is burdened with debts and has exhausted almost all resources. The company must now somehow turn into a luxury car manufacturer (or an industry-disruptive force, if Breitfeld's vision is to be believed). Even if Breitfeld or Jia has a fairy who can magically make money, Faraday Future still needs $ 850 million to get the FF91 into production, according to both Breitfeld and Jia & # 39; s bankruptcy petition. It will then have to find even more money to feed the greater ambitions that Breitfeld developed in September, which the startup plans to generate by becoming public.

Some Faraday Future money is doing now comes from movements that do not inspire confidence. There is the $ 10 million loan from the breakup of Evergrande, which Faraday Future is already paying late. The startup sold its headquarters in Los Angeles in March to generate some money in the short term and has since let it from the new owners. On September 23, Faraday Future sold the land in Nevada, where it was once planned to build that $ 1 billion plant. The transaction price was $ 16.9 million – $ 23.1 million less than the original asking price of $ 40 million. With reference to the broker of the deal, the Las Vegas Review Journal reported that "multiple potential buyers" were looking at the site, but "Faraday wanted to close the sale quickly, which led to a lower price."

Like its founder, Faraday Future has continued to accumulate debts. It has borrowed $ 15 million from Birch Lake restructuring company earlier this year, which it has repaid according to Jia's bankruptcy. But according to the same request, Faraday Future also took out a second $ 45 million loan in late October in Birch Lake – an expiration date that the startup is trying to extend because it cannot make the payment. According to the submission, Faraday Future has $ 801 million in total commitments.

From June 30, Faraday Future even owed $ 4.4 million to Ocean View Drive, the shell company that Jia used to buy its mansions. In fact, Jia & # 39; s bankruptcy petition reveals some new details such as this. He borrowed $ 12 million from Faraday Future in 2014 to purchase one of the mansions and a number of adjacent properties. He bought another one in 2015 with $ 7.5 million that he borrowed from Lesoar Holdings, the holding he used to make LeEco & # 39; s investment in Lucid Motors.

In addition to his salary, Jia also receives $ 43,000 per month rent in his mansions by a company founded by his vice president. Jia even bought a new $ 3 million home in August – a month before Breitfeld was announced as CEO – with a shell company founded by his vice president, according to a person familiar with sales and property records viewed by The edge. The 3,300 square foot home is just up the hill on the Palos Verdes peninsula from the coastal mansions that he already owns.

Jia & # 39; s habit of incurring debts and then leaving them behind, along with his tendency to dubious transactions, has already caused lawyers of one of his many creditors to bankrupt his "sham" and "blatantly abusing call US bankruptcy law.

The lawyers, from the powerful international law firm Kobre & Kim, represent a Chinese asset management company called Shanghai Lan Cai; Jia owes the company about $ 11 million. In an official answer on Jia's bankruptcy, they told the court that they believe that Jia is hiding assets from creditors who use shell companies and other means of embezzlement.

Ze beweren ook dat sommige van de schuldeisers die Jia in zijn aanvraag heeft vermeld, bedrijven zijn die verbonden zijn aan of gecontroleerd worden door de tycoon. De advocaten beweren dat de juridische ontdekking die ze na hun arrest van april hebben uitgevoerd, aantoonde dat Jia "ten minste één van zijn bankrekeningen leegde en het saldo overdroeg aan een directeur personeelszaken bij Faraday Future" kort nadat ze oorspronkelijk een rechtszaak hadden aangespannen in de VS.

De advocaten beweren ook dat het plan dat Jia in zijn faillissementsaanvraag heeft uiteengezet, niet veel meer is dan een list om zich van aansprakelijkheid te ontdoen, een manier die hem de weg zou kunnen effenen om de controle over Faraday Future te behouden. (Advocaten voor Jia reageerden niet op een verzoek om commentaar.)

"We zijn sceptisch over de verklaarde intenties van Jia Yueting om 'af te treden' of anderszins zijn controle over Faraday Future los te laten, aangezien zijn voorgestelde plan niets zegt over wie het bedrijf in de toekomst zal controleren," zeiden Kobre & Kim-advocaat Chris Cogburn in een verklaring naar De rand. "Dit plan sluit niet aan bij Jia's garanties over het beperken van zijn rol in de toekomst van het bedrijf, die gewoon een andere tactiek lijken te zijn geweest voor het troosten van beleggers die terecht op zijn hoede zijn voor zijn staat van dienst van wanbeheer."

Een van de voormalige werknemers van Faraday Future op hoog niveau was het daarmee eens en noemde het faillissement “een pistool op het hoofd van de schuldeisers”.

Het voortbestaan ​​van Faraday Future hangt af van het vermogen van Breitfeld om investeerders na te jagen, leveranciers te kalmeren, maar bovenal, Jia onder controle te houden – geen van deze wordt gegeven. Eén ding was echter zeker op de mediadag van Faraday Future: in al zijn ups en downs was er geen tekort aan ideeën, iets dat wordt versterkt door de presentatie van ontwerpdirecteur Page Beermann.

Gekleed in Nike-sneakers, jeans, een zwart jasje en een designer-T-shirt waarop, onder andere, 'waan' was gedrukt, liet Beermann de leden van de media door een waslijst van voorheen geheime ideeën lopen die hij en anderen de afgelopen jaren zijn gekookt. Dit omvatte alles van het verwachte, zoals weergaven van een Faraday Future coupé en roadster, tot het bizarre, zoals een Faraday Future helikopter en jacht. Hij liet zelfs een mockup van een lounge stoel zien, gemodelleerd naar de relaxte achterstoelen in de FF91.

Aan het begin van zijn presentatie las Beermann – die ook afkomstig is van BMW en sinds 2015 vasthoudt aan Faraday Future – een citaat van theoretisch fysicus Freeman Dyson: “Het is onze taak, zowel in de wetenschap als in de samenleving in het algemeen, om de conventionele wijsheid verkeerd, en om onze onvoorspelbare dromen waar te maken. "

"Daarom is werken bij Faraday een droomjob," zei Beermann.

Jia was absent from the media day, but this presentation felt like the kind of thing the tycoon would appreciate. As he sang to his employees in the 2017 internal music video: “(To) the people who understand me the most, thank you for silently accompanying me, and giving me a good story to tell.”