Struggling California-based electric carmaker Faraday Future said on Monday it would implement a 20 per cent salary cut across the board and start laying off staff, as a dispute with largest shareholder Evergrande Health Industry Group over withheld investment rumbles on.
The company said all employees would see their annual base pay cut by 20 per cent with immediate effect, and that it would start laying off staff members to shore up finances. It did not say how many people would be laid off.
Faraday Future accuses Evergrande of deliberately holding back funding to gain control of electric car start-up
“The founder and global CEO Jia Yueting has reduced his annual salary down to US$1 from October 16,” the company said. “Members of senior management have volunteered to take a further reduced salary, beyond the 20 per cent.”
Faraday, which was founded in Los Angeles in 2014 by Chinese entrepreneur Jia Yueting, said the measures were temporary, and that it was hopeful all staff benefits would be restored after the company had successfully completed a new round of funding.
It blamed Evergrande Health, a unit of Chinese real estate giant China Evergrande Group, for its financial struggles and said it had “no other way” but to take such measures.
The development is the latest in the dispute between Faraday and Evergrande Health. It started this month, four months after the two companies teamed up with the aim of bringing Faraday’s high-end electric cars to the market.
Founder and global CEO Jia Yueting has reduced his annual salary down to US$1
On October 3, Jia sought arbitration and the termination of a deal to sell a 45 per cent stake to Evergrande Health at the Hong Kong International Arbitration Centre.
On October 7, in a filing to the Hong Kong stock exchange, Evergrande said Faraday had demanded another US$700 million in July after spending an initial investment of US$800 million, following which it had signed another agreement with Faraday, to make the US$700 million investment under certain “payment conditions”.
While these payment conditions had not been fulfilled, Jia had “manipulated” his majority position on Faraday’s board to begin the arbitration against Evergrande Health, the filing said.
Evergrande Health said it had already fulfilled its obligations under relevant agreements, and that the arbitration had severely damaged its rights and interests.
Faraday denied that either Jia or anyone else had manipulated the board, as well as other accusations, the following day. It also accused the Chinese company of preventing it from receiving new financing.
Also in the statement on October 8, the California-based company said Evergrande Health was holding payments back “to try to gain control and ownership over FF China and all of FF’s intellectual property”.
Faraday said Evergrande Health had a full understanding of why and when it needed the additional US$700 million, which was needed to achieve production and delivery of its FF91 model in 2019.
Faraday shut its operations in Nevada in 2017 as Jia struggled to keep afloat his cash-strapped business empire LeEco. In June 2018, however, the electric car manufacturer set off again following the investment by Evergrande Health.
As part of the deal, Evergrande Health fully acquired Season Smart, which owns 45 per cent of the joint venture that controls Faraday. Through Season Smart, Evergrande Health made an initial investment of US$800 million, and is to pay another US$1.2 billion in two equal instalments, in 2019 and 2020, respectively.
In August, Evergrande Health said Faraday had started assembling its first high-end FF91 cars at its US production base. The same month, Faraday said it planned to expand its network to 100 centres in five years, with the aim of serving a million customers.