Lordstown Motors Corp. has sold a former General Motors plant it essentially got for free, netting about $257 million to keep its commercial electric pickup truck production on track. But the new plant owner — Taiwan electronics maker Foxconn — will build the trucks as part of the deal.
The clock was ticking against a Saturday deadline that would have forced LMC to forfeit most of its assets to repay $200 million Foxconn advanced on the plant purchase.
The cash infusion clears some of the rocks from a path for the beleaguered startup LMC to stay in business. A notice of going concern the company filed with the Securities and Exchange Commission 11 months ago remains in effect.
Known as Foxconn, Hon Hai Technology Group is a multinational electronics contract manufacturer of Apple iPhones. It plans to recruit other electric vehicle makers to fill the 6.2 million-square-foot assembly complex in northeast Ohio that GM ran from 1966 to 2019.
Foxconn earlier bought $50 million in LMC stock (NASDAQ: RIDE) directly from the company. It was part of an asset purchase agreement signed in November 2021.
Endurance production on track
The first product is the light-duty Endurance electric pickup aimed at commercial fleets. Foxconn is hiring about 400 LMC workers to keep production on track for Q3 and some deliveries in Q4.
LMC will keep a presence in Lordstown. Engineering and technical centers and corporate staff will be based in Farmington Hills, Michigan, and Irvine, California.
As part of the closing announcement late Wednesday, LMC formed a joint venture with Foxconn affiliates to create MIH EV Design LLC. The JV will develop electric vehicles for the global market using Foxconn’s Mobility-in-Harmony (MIH) open-source EV platform.
Foxconn is fronting the $100 million and will own 55% of the JV. It is lending $45 million to cash-starved LMC to cover its 45% stake.
“The closing of the Foxconn APA and the completion of a joint venture agreement for the development of new electric vehicles using Foxconn’s MIH platform are important milestones for LMC,” Daniel Ninivaggi, Lordstown Motors’ CEO, said in a press release.
“Our strategic partnership with Foxconn provides LMC with a flexible and less capital-intensive business model, access to broad supply chain and software capabilities and an effective vehicle development platform to bring EVs to market faster and more efficiently.”
LMC’s battered shares traded at $1.61 intraday Thursday, up about 6% on the sale news.
Lordstown Motors’ long, strange trip
The white knight role played by Foxconn is the latest twist in LMC’s relatively short life.
The company was the brainchild of serial entrepreneur Steve Burns, the former CEO of Workhorse Group. He quietly approached GM in February 2019 about acquiring the Lordstown plant. GM had said it planned to idle the 53-year-old facility in March 2019.
GM’s plan to walk away from Lordstown led to angry tweets from then-President Donald Trump urging GM CEO Mary Barra to find a new product or a buyer for the plant. Trump carried Ohio in the 2016 election in part because of strong support in the Mahoning Valley where the plant resides.
GM in Lordstown Motors, then out
Ultimately, GM agreed to sell the plant to Burns. It loaned him $20 million for a mortgage and $20 million for retooling. Burns conducted a PR campaign to win over area officials. Former Vice President Mike Pence participated in the reveal of the Endurance in June 2020. Trump appeared with an Endurance prototype displayed outside the White House in September 2020.
With little money to keep going, Burns took advantage of the SPAC frenzy in August 2020 to merge with DiamondPeak Investment Corp. A lightning-fast 11-week business combination closed in October. That brought LMC about $780 million before expenses.
GM even invested $25 million cash in LMC despite working on its own electric pickup expected to debut in 2024.
In March 2021, short seller Hindenburg Research issued a blistering report claiming LMC fabricated orders and misled investors about its progress and prospects. The allegations led to probes by the SEC and the Justice Department. Burns and his chief financial officer resigned under pressure in June 2021.
The company told the SEC in a June 2021 notice of going concern filing that it could run out of money within a year.
Enter new leadership
Ninivaggi, who oversaw automotive supply businesses for activist investor Carl Iachn, became CEO in August 2021. He fired most remaining executives, replacing them with trusted associates including former GM manufacturing executive Ed Hightower as president.
GM sold its LMC investment in Q4 of 2021. Workhorse, which had acquired 10% of LMC in exchange for a lease of intellectual property, sold off 72% of its stake after veteran automotive supplier executive Rich Dauch became its CEO in July 2021.
In September, Ninivaggi announced a possible sale of the plant to Foxconn, which was looking for a place to build a future Fisker electric vehicle as a contract manufacturer. In order for the sale to go through, Foxconn said it wanted to manufacture the Endurance.
The Committee on Foreign Investment in the United States — which looks into major deals like the Foxconn purchase of Lordstown — approved the deal in April. Months of negotiations resulted in the deal closing on terms close to what Ninivaggi laid out last year.