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Lordstown Motors faces multiple hurdles to produce electric pickup

Mismatch: Price of the truck is lower than the cost of building it

Lordstown Motors Corp. needs $250 million to make it through the year and produce 500 of its Endurance electric pickup trucks. (Photo: Lordstown Motors)

Lordstown Motors Corp. (LMC) needs $250 million to make it through the year and a blessing from a government committee that examines foreign investment in the U.S. to produce 500 Endurance electric pickup trucks beginning in Q3.

The bill of materials to make the trucks costs much more than LMC, which is under Securities and Exchange Commission investigation, can charge despite the price being raised to $63,000 from $52,500.

“We are entering a critical phase for the company,” CFO Adam Kroll told analysts on a Q4 earnings conference call.

LMC (NASDAQ: RIDE) shares tumbled after the call, falling 20.56% to close Monday at $2.55 a share. It has traded as high as $21.92 over the past year.

‘Disappointed we’re not further along’

The company reached a tentative agreement last September to sell the 6.2 million-square-foot former General Motors car manufacturing plant in northeast Ohio to Taiwan’s Foxconn Group for $230 million. The purchase is contingent on Foxconn being the contract manufacturer for the Endurance, whose final engineering design validation and testing are underway.

“We are entering a critical phase for the company.”

Adam Kroll, chief financial officeer, Lordstown Motors Corp.

The deal is still under discussion even as Foxconn plans to build the electric Fisker PEAR at the plant as a contract manufacturer. Foxconn, the trading name of Tucheng, New Taipei City, Taiwan-based Hon Hai Precision Industry Co. Ltd., is a major manufacturer of cell phones and counts Apple Inc. as a customer. It has limited experience in electric vehicles.


“I am disappointed that we’re not further along,” said Daniel Ninivaggi, who became CEO last September after spending 10 years as an operative for investor Carl Icahn. “The relationship with Foxconn is very positive and the discussions are ongoing, but we need to bring that to a conclusion. And I’m hopeful that we’ll get there.”

Ninivaggi declined to discuss what a Plan B would look like if no deal is reached with Foxconn, which already has paid LMC $150 million of the $230 million it agreed to pay for the plant, plus $50 million for LMC shares. Lordstown had $244 million in cash on its balance sheet on Dec. 31, mostly from Foxconn money. 

LMC also tapped a three-year equity line of credit arranged in July with YA II PN Ltd., a fund managed by Yorkville Advisors Global LP of New Jersey. LMC can choose when to sell company shares to the fund in exchange for cash.

The company is also waiting to hear reaction to a draft response it submitted to the Committee on Foreign Investment in the U.S., an interagency committee authorized to review certain transactions involving foreign investment.

Analysts want answers

Analysts peppered Ninivaggi with questions about the sufficiency of LMC’s plans to build 500 trucks beginning in Q3 and boosting production to 2,500 in 2023. 

The goal is making more vehicles and using more of the plant, which has four operations, including a paint shop, on the 640-acre site. Foxconn and LMC are exploring a joint venture for the development of new electric vehicles, which could fill the plant and provide ongoing funding to LMC.

“Scaling automotive manufacturing matters a lot,” Ninivaggi said. “Use of shared space, together with Mobility-in-Harmony open source platforms that Foxconn has developed, provides smaller and more specialized OEMs the opportunity to achieve the benefits of scale without being a large fully integrated automaker.“

Products like the Endurance and Fisker are just two potential plant occupants.

But the competition in the electric pickup space is fierce, with legacy automakers Ford, General Motors and Stellantis all planning high-volume products. Rivian, a well-capitalized startup backed by Amazon, is another challenger. Tesla Inc.’s polarizing Cybertruck has hundreds of thousands of reservations in advance of planned production in Texas in 2023.

“We continue to see strong interest in the commercial fleet market for electric vehicles of all types, including pickup trucks,” Ninivaggi said. “Despite the acceleration in competitors’ EV pickup truck product plans, we believe the market will be underserved for the foreseeable future and will continue to grow.”

A political football

LMC was the brainchild of founder and former CEO Steve Burns, who started the company in February 2019 and persuaded GM (NYSE: GM) to sell him the Lordstown plant for $20 million in November of that year, which the automaker held as a mortgage. It lent LMC $20 million for retooling and later invested $25 million in cash.

GM CEO Mary Barra was criticized by former President Donald Trump for idling the plant in March 2019 after building Chevrolet Cruze compact cars on three shifts as recently as 2010. That pressure, and the unhappiness of the United Auto Workers, which struck GM for 40 days in September and October 2019, helped get a sale done.

Burns had indicated one of the strengths of building in Lordstown was the presence of a skilled workforce. Ninivaggi said Monday that LMC plant workers are not unionized and the UAW has not made organizing inquires.

“We don’t have a view one way or the other towards unions,” Ninivaggi said. “It’s up to our workers to decide whether they want to be organized or not.”

Burns, who was the founder and CEO of what became Workhorse Group before starting Lordstown, merged with special purpose acquisition company DiamondPeak Acquisition Corp., receiving $780 million in SPAC proceeds in October 2020. At the time, Burns said the money was more than enough to execute the LMC launch plan.

Trouble breaks out

But the company encountered trouble on numerous fronts, including being sued by Karma Automotive in federal court for allegedly poaching key Karma employees and misappropriating Karma’s trade secrets and other confidential information. The case is scheduled for trial in California in August.

Burns and former CFO Julio Gonzaelz were ousted last June following a short seller’s report alleging fabricated preorders for the Endurance. An internal LMC investigation challenged many of the Hindenburg Report allegations but found some truth to the claims regarding phony pre-orders.

The SEC and the Department of Justice opened investigations shortly after, neither of which has concluded. Kroll said legal fees amounted to 8% or $6.8 million, of its $84.6 million in Q4 operating expenses.

“I anticipate the current level of spending to persist until we are able to resolve some of the larger matters,” Kroll said.

Lordstown Motors may sell its plant to Taiwan’s Foxconn for $230M

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Shift to reverse: Lordstown Motors backtracks (again) on electric pickup truck orders 

Click for more FreightWaves articles by Alan Adler.

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Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.