As has been expected by watchers of Coda Automotive, parent company Coda Holdings announced on Wednesday that it is seeking bankruptcy protection as it shuts down Coda Automotive and restructures to focus on Coda Energy. Coda Energy is the successful sister company that develops energy storage systems for the smart grid, and had also developed the battery pack for the Coda electric car.
The Los Angeles based electric car maker began facing troubles last summer. Weak sales, an unsatisfactory crash safety rating, and a safety recall appeared to dry up sales. In December and January the company first laid off employees then conducted a furlough, to preserve resources as the management reviewed their business options. Later, Coda’s drive train supplier, UQM, disclosed in an SEC filing that they’d written off the debt owed them by Coda Automotive after Coda failed to pay UQM for parts. The lawsuits have been piling up as well from other unpaid creditors.
Coda Holdings is the parent of both Coda Automotive and Coda Energy. Coda Automotive focuses on the automotive market, and Coda Energy focuses on the energy storage market. Coda Energy was formed when they bought EnergyCS. At that time many questioned whether this was a move to allow Coda Holdings to eventually shift from making cars to making energy storage products. An idea that has now been proved to be true.
The key technology Coda brought to the table is their battery pack, battery management, and thermal management technologies. That is in part due to their joint venture with Chinese battery cell maker Tianjin Lishen. The car and most other parts are sourced from parts makers, most of which come from China. Final assembly occurs at a facility in Benicia CA.
The energy storage systems market is growing and is a closer match to Coda’s core technology. Their Coda Energy business has a growing customer base and existing installations in the field.
Coda had raised over $200 million in investment capital the last chunk of which came just prior to launching production in early 2012.
To restructure operations, FCO MA CODA Holdings LLC, an affiliate of Fortress Investment Group, will be leading a consortium of lenders intending to provide debtor-in-possession (DIP) financing. That company is also expecting to buy out the existing Coda Holdings. All of this is subject to approval by the bankruptcy court, and the process is expected to take 45 days.
Additionally the press release said they will seek to monetize the value of the Automotive business. In short, that means selling off the technology. One part of that technology should be the plan to co-develop an inexpensive electric car with Great Wall Motors.
Coda Automotive had partnered with Better Place to launch an electric taxi service in the San Francisco Bay Area some time in 2013. Coda was to supply cars for the pilot project which was to be managed by Better Place. However, between Better Place shutting down North America operations and Coda abandoning the automobile business, that project is clearly gone.
“After concluding a comprehensive review of our strategic options, the Board of Directors, management team and senior lending group have concluded that focusing on the Company’s energy storage business presents the best opportunity moving forward,” said Phil Murtaugh, Chief Executive Officer, CODA Holdings, Inc. “We believe the restructuring process that we have entered into today will enable the Company to complete a sale and confirm a Plan that maximizes the value of its assets, serving the best interests of our stakeholders.”