Fisker’s recall funding plan challenged by NHTSA in bankruptcy court

On October 7, 2024, the United States, through the National Highway Traffic Safety Administration (NHTSA), filed an objection to the First Amended Combined Disclosure Statement and Chapter 11 Plan of Liquidation for Fisker Inc. and its affiliates. The objection was filed in the United States Bankruptcy Court for the District of Delaware, where Fisker and its affiliates are undergoing Chapter 11 bankruptcy proceedings.

Fisker, an electric vehicle manufacturer, filed for Chapter 11 bankruptcy in June 2024. As part of the liquidation process, the company proposed a plan to liquidate its assets and address outstanding claims. However, the U.S. government has raised concerns over specific aspects of the plan, particularly as they relate to Fisker’s obligations under the National Traffic and Motor Vehicle Safety Act (Safety Act).

The Safety Act mandates that manufacturers must remedy vehicle defects or noncompliance issues at no charge to the consumer. Fisker had previously issued five recalls related to vehicle defects, including door handles and electric water pumps. The government argues that Fisker’s plan inadequately addresses these recalls. Specifically, the plan caps the amount of funding available to remedy these defects at $750,000, which NHTSA argues is insufficient and violates the Safety Act.

The plan also proposes that vehicle owners pay for recall-related labor costs upfront, with the possibility of reimbursement at a later date, depending on the outcome of litigation. The U.S. government contends that this approach violates the requirement that manufacturers cover all recall-related expenses. In addition, the government objects to certain non-debtor releases and the plan’s lack of provisions for the government’s setoff and recoupment rights.

NHTSA’s objection requests that the court revise the liquidation plan to ensure Fisker complies with the Safety Act and adequately funds the necessary vehicle recalls. The United States has also reserved its right to file additional claims if Fisker fails to meet its obligations.