Lordstown Motors, the troubled electric vehicle company that bought a shuttered General Motors factory in Ohio with grand plans to create the Tesla of pickup trucks, filed for bankruptcy protection on Tuesday. Once hailed by former President Donald J. Trump for preserving manufacturing jobs, the company struggled with a series of development setbacks and frequent management changes, and managed to make and sell only a handful of trucks.
The Chapter 11 bankruptcy filing, in federal court in Delaware, was prompted by a dispute with a major investor, Foxconn, the contract manufacturer that is based in Taiwan. Foxconn said Lordstown had breached their investment agreement because its stock had fallen below $1 a share. Lordstown said on Tuesday that it had filed a lawsuit asserting that Foxconn failed to honor its agreement to invest more money in the company.
Lordstown said in a statement that it was starting a “a strategic restructuring process” that was likely to involve selling its remaining assets, such as the technology and intellectual property it developed for its Endurance pickup truck. “We will vigorously pursue our litigation claims against Foxconn accordingly,” Lordstown’s chief executive, Edward Hightower, said. Foxconn — whose formal name is Hon Hai Technology Group — said in a statement that it had hoped to negotiate a solution to Lordstown’s financial troubles but that the two sides had failed to reach an agreement.
Lordstown “has continuously attempted to mislead the public, and has been reluctant to perform the investment agreement between the two parties in accordance with its terms,” Foxconn said. Lordstown is one of several electric vehicle start-ups that have run into trouble over the last couple of years. Rivian, which is backed by Amazon, has suffered production delays and produced far fewer sport utility vehicles, pickups and delivery vans than it had expected.
Other companies that have struggled to start or increase production include Arrival, Canoo, Lucid and Nikola. Arrival, Canoo, Lordstown, Lucid and Nikola gained stock listings by merging with special purpose acquisition companies, taking advantage of a Wall Street to take businesses public without going through the more rigorous and regulated process of selling shares through initial public offerings. Erik Gordon, a business professor at the University of Michigan who follows the auto industry, said Lordstown’s repeated production delays and quality problems had hurt its credibility with investors and potential customers.
“Given the problems other E. V. start-ups are facing, the liquidation value of Lordstown is going to be low,” he said.
The factory deal promoted by Mr. Trump never quite lived up to expectations. At its peak in 2021, Lordstown Motors employed about 600 people, fewer than half the 1,400 people G.
M. employed when it halted production of the Chevrolet Cruze at the Ohio factory in 2019. Almost all of G.
M. ’s workers in Lordstown, which is between Cleveland and Pittsburgh, accepted retirement packages or transferred to the company’s other plants. G.
M. has built a new battery factory near its former Lordstown car plant that employs about 1,100 people. Lordstown Motors was founded in 2018 by Steve Burns, the former chief executive of Workhorse Group, a small producer of commercial vehicles.
At Workhorse, Mr. Burns came up with a concept for an electric pickup truck but lacked the resources to produce it. He saw an opportunity when G.
M. announced that it was closing the Lordstown plant. Mr.
Trump put immense pressure on G. M. and its chief executive, Mary T.
Barra, to find a buyer for the factory, and the automaker began negotiating with Mr. Burns. Mr.
Trump promoted the deal on Twitter even before an agreement was signed — and even before Mr. Burns had financing or a name for his new company. Lordstown had hoped to produce an innovative truck with electric motors on each of its wheel hubs, but struggled to turn its idea into a vehicle that it could mass produce.
In 2021, Mr. Burns and Lordstown were accused of exaggerating how many orders the company had for its truck , a small investment firm. Mr.
Burns resigned. Lawyers for Mr. Burns did not respond to requests for comment.
Lordstown was burning through cash and sold its factory to Foxconn, which is best known for assembling Apple’s iPhones at factories in China. In exchange for the plant, Foxconn invested millions into Lordstown and was supposed to manufacture the Endurance pickup. But the truck was plagued with problems.
One test vehicle caught fire in Michigan. Production finally started last year, but only 31 trucks were built in the last three months of 2022. In the first three months of this year, Lordstown delivered two trucks to customers, generated revenue of just $189,000 and reported a loss of $171 million.
In March, when Lordstown’s stock fell below the $1 minimum required for a Nasdaq listing, Foxconn informed the company that it was backing out of plans to invest in it further. Shares of Lordstown closed down 17 percent on Tuesday, to $2. 29.
They had traded at around $400, adjusted for a reverse stock split this spring, in early 2021. Lordstown listed its shares in October 2020 by merging with DiamondPeak Holdings. .
From: nytimes
URL: https://www.nytimes.com/2023/06/27/business/lordstown-motors-bankruptcy-foxconn.html
