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Electric TrucksNewsTop StoriesTrucking

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

Foxconn also could build Fisker electric cars and be the Ohio community’s ‘white knight’

Taiwan’s Foxconn would pay Lordstown Motors Corp. $230 million to purchase the massive 6.2 million-square-foot assembly complex it acquired from General Motors if LMC agrees to make Foxconn the contract manufacturer of its electric pickup truck.

The nonbinding agreement was announced late Thursday. A definitive agreement is expected by Oct. 31, according to The Wall Street Journal. It would allow LMC to keep certain components and intellectual property while the companies work together on the Endurance and future electric vehicle programs.

Foxconn also would purchase $50 million in Lordstown (NASDAQ: RIDE) shares directly from the company at $6.89 per share. Shares closed Thursday 8.42% higher at $7.98. They were up an additional 7% in after-hours trading.

If the deal closes as expected next April, Lordstown Motors would issue warrants for 1.7 million additional shares to Foxconn that it could exercise over the next three years at $10.50 per share. LMC would sign a long-term lease for the portion of the plant it uses. Foxconn would employ the manufacturing and hourly employees.

Major supplier to Apple

Foxconn is the trading name of Tucheng, New Taipei City, Taiwan-based Hon Hai Precision Industry Co. Ltd. It is best known as a contract manufacturer of cellphones, including being a major supplier to Apple Inc..

It is expanding into electric vehicles and has a deal with Fisker Inc. (NYSE: FSR) to build the startup’s second luxury electric car, which Foxconn hinted would be built in Lordstown.

“We have high expectations through this partnership that we will be able to successfully integrate our resources with Lordstown Motors,” Young Liu, chairman of Hon Hai Technology Group, said in a press release. “This mutually beneficial relationship is an important milestone for Foxconn’s EV business and our transformation strategy.”

Lordstown Motors CEO Daniel Ninivaggi, who made finding a tenant for the plant a priority, said “joining forces with a world-class smart manufacturer like Foxconn … would provide operational, technology and supply chain benefits to our company and accelerate overall scaled vehicle production and increase employment in the Lordstown facility.

Politicized plant

In acquiring the Lordstown property, Foxconn is the latest to tread on manufacturing ground heavily politicized during Donald Trump’s presidency. Foxconn is familiar with Trump, having announced a $10 billion plant in Mount Pleasant, Wisconsin, that the former president pointed to as an example of onshoring new manufacturing jobs.

Four years later, it is an unfinished construction site.

In northeast Ohio, General Motors opened its Lordstown plant in 1966 and shut it down in March 2019 after production of the Chevrolet Cruze compact sedan ended. Trump railed at GM CEO Mary Barra, urging her to find a new product for the plant.

GM (NYSE: GM) instead sold the plant to startup LMC in November 2019 for $20 million, which the automaker held as a mortgage, and lent LMC $20 million for retooling.

Lordstown’s troubles

LMC, founded by former Workhorse Group CEO Steve Burns, plans to make a commercial battery-powered pickup truck called Endurance. LMC merged with special purpose acquisition company DiamondPeak Holdings Corp. and received about $675 million in October 2020.

As part of the SPAC business combination, GM made the plant an in-kind contribution and invested $25 million in cash in LMC.  

That effectively made it an LMC asset to do with it as it wished, As the startup costs proved too great and LMC ran low on money, it filed a notice of going concern with the Securities and Exchange Commission in June, suggesting it might be out of business within a year if it did not get more funding.

A three-year equity line of credit for up to $400 million was 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.

But LMC did not retract the going concern notice. It plans to begin limited production of the Endurance before the end of the year.

The Hindenburg factor

Meanwhile, Burns and Chief Financial Officer Julio Gonzaelz were ousted in 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 are investigating LMC. No charges have been filed against the company or any individuals.

A sale of the plant to Foxconn “potentially gives Lordstown some more financial runway before they run out of cash,” Sam Abuelsamid, principal analyst at Guidehouse, told FreightWaves before the tentative agreement was announced.. “On the flip side, though, they still have that truck, which it doesn’t appear that anybody might want to buy.”

Though it has marketed the Endurance as a commercial truck for construction, utility and other uses, the $52,500 price tag after a federal electric vehicle tax credit is thousands more than the Ford F-150 Lightning electric pickup coming in 2022. 

“I remain skeptical,” Abuelsamid said. “I think they are going to have a very difficult time competing with Ford and with GM and Stellantis when they launch their work truck.”

Stellantis is the name of the Amsterdam-based merging earlier this year of the Italian-American conglomerate Fiat Chrysler Automobiles and the French PSA Group.

Fisker to the rescue?

But Abuelsamid sees an upside. 

“This could actually be good for the Lordstown community because if Foxconn does end up building vehicles for Fisker there, at least it brings back some of the jobs that they lost,” he said, referring to the 1,400 hourly and salaried layoffs when GM closed Lordstown.

“Lordstown Motors never really had the resources to execute, and they didn’t really have the right product,” he said. “Fisker now has a much better chance of being a white knight for the Lordstown community.”

Electric pickup truck maker Lordstown Motors taps former Icahn executive as CEO

Lordstown Motors: Limited production of electric pickups starting in September

Reports: Justice Department investigating Lordstown Motors

Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is a Detroit-based award-winning journalist who worked for The Associated Press, the Detroit Free Press and most recently as Detroit Bureau Chief for Trucks.com. He also spent two decades in domestic and international media relations and executive communications with General Motors.

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