The U.S. Department of Justice has determined that Fisker, the bankrupt electric vehicle (EV) startup, cannot require owners to pay for labor costs associated with recall repairs, according to a recent filing. This ruling follows Fisker’s attempt to shift the costs of multiple recalls onto vehicle owners, a move that the DOJ says violates federal law.
In a filing submitted to Fisker’s bankruptcy docket, the DOJ, on behalf of the National Highway Traffic Safety Administration (NHTSA), stated that Fisker’s plan to make owners cover labor expenses tied to the recalls is illegal under the National Traffic and Motor Vehicle Safety Act. The NHTSA strongly opposes Fisker’s proposed settlement plan, which outlines the company’s liquidation process and is set for a potential judicial confirmation this Wednesday.
Fisker’s bankruptcy case has recently seen several significant developments. The U.S. Securities and Exchange Commission (SEC) disclosed its investigation into the company, noting that it has issued multiple subpoenas and expressed concerns over the EV maker’s efforts to retain necessary company records. In addition, the landlord of Fisker’s last corporate headquarters submitted a claim, alleging that the company left the premises in a state of disorder.
The recall dispute arose after Fisker announced in mid-September that it would charge owners for labor costs linked to two recalls:
- One recall involves faulty door handles on the Ocean SUV.
- The second recall addresses a malfunctioning water pump that could result in a power loss.
While Fisker initially walked back the decision, the company reverted in late September, again placing the labor cost burden on owners.
DOJ and NHTSA Push Back on Settlement Plan
In response, the NHTSA engaged with Fisker’s legal team, creditors, and representatives from the U.S. Trustee’s office, proposing revisions to the plan to address its legal objections. Fisker’s current settlement plan allocates a maximum of $750,000 for the parts required to fix the two recalls. However, the company estimates that the total parts cost may reach nearly double that amount, leaving no budget for labor expenses.
The NHTSA has made it clear in its filing that separating labor and parts costs carries “no legal significance” in relation to compliance with the Safety Act. The DOJ, representing the NHTSA, emphasized that the law mandates manufacturers to cover all costs—both labor and parts—associated with rectifying defective or noncompliant vehicles.
According to the DOJ’s filing, Fisker’s proposal to cap funds for recall remedies “lacks any basis in law” and directly contravenes the Safety Act. The DOJ further highlighted that bankruptcy, whether under chapter 7 or chapter 11, does not absolve Fisker of its legal obligation to cover all recall-related expenses.
Additionally, the DOJ objected to a portion of Fisker’s settlement plan that outlines potential reimbursement for labor costs through the Fisker Owners Association, contingent on the association’s claim in the bankruptcy being paid. The DOJ argued that this approach also violates the Safety Act, which requires manufacturers, not vehicle owners, to bear all costs for necessary repairs.
Some Fisker owners have already paid for the labor costs out of pocket, according to the filing. The DOJ has indicated that while these customers should not have incurred such expenses, it does not object to them being reimbursed for the work they had to pay for.
Featured Image courtesy of Jay L. Clendenin/Getty Images
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