Faraday Future has resorted to salary cuts and layoffs to keep the business afloat as the electric car startup battle it out in an arbitration case filed against investor Evergrande Health Industry Group Ltd owned by Chinese real estate giant Evergrande.
In an email circulated to employees, which was first reported by The Verge on Oct. 23, Faraday Future has informed workers that "effective immediately," the management is cutting 20 percent from the annual base salary of its salaried employees. The startup also decided to cut 20 percent from the hourly wages of all of their hourly employees. It also confirmed the decision to reduce headcount. The email did not specify how many workers are going to lose their jobs.
Faraday Future also stated that founder and CEO Yueting Jia volunteered to take a $1 annual salary to keep the whole company afloat. Other executives have also agreed to more than 20 percent of wage cuts up until the company's cash flow stabilized.
At the heart of the matter is an arbitration filed at the Hong Kong International Arbitration Center by Faraday Future that sought to terminate a deal involving sales of a 45 percent stake to Evergrande Health Industry Group.
Commenting about the arbitration filed early in October, Evergrande Health said it agreed to acquire Season Smart Ltd who owned the 45 percent stake of the Faraday Future for $860.2 million. As part of the whole investment deal, Evergrande Health also committed to pay an additional $1.2 billion in two installments due in 2019 and 2020.
Evergrande Health alleged that the arbitration is a way for Faraday Future to stop it from exercising its right as a shareholder. The startup reportedly does not want Evergrande making decisions on how the startup should raise its finances in the future that it would instead want to terminate all agreements.
In an official statement explaining its decision about the filing of arbitration, Faraday Future explained that Evergrande Health has been welcomed as one of its key investors in November 2017.
In exchange for the 45 percent stake in the startup, Evergrande Health committed $2 billion in funding of which it initially completed $800 million payment. The remaining $1.2 billion would be paid over time.
Faraday Future said that in July 2018, Evergrande Health agreed to pay a portion of the remaining $1.2 billion earlier than what was initially agreed; this was supposed to be on top of the $800 million initial payment for the 45 percent stake.
The investor failed to pay the agreed additional payments even after the startup has complied with their obligations and meeting all requirements, including significant improvements toward launching the FF 91 vehicle. Faraday Future completed its first pre-production of FF 91 in its Hanford factory.
Faraday Future alleged that Evergrande Health delayed payments and tried to overtake FF China and all of FF's IP. Evergrande Health has reportedly been hampering other financial investments from other sources as well.
