Cash-starved Lordstown Motors missed its deadline for closing the sale of its plant to Taiwan’s Foxconn EV Technology Inc., a deal critical to the startup’s execution of electric light-duty trucks focused on commercial fleets.
The two agreed to an asset purchase agreement (APA) in November 2021. Under the deal, Foxconn would purchase the 6.2 million-square-foot Lordstown complex from LMC for $230 million.
The deal was supposed to close Friday. But is being held up by details of a contract manufacturing agreement under which Foxconn would build LMC’s Endurance pickup truck. It also would seek other projects to fill the massive Lordstown complex.
Foxconn has advanced $200 million to LMC, which must be repaid by May 14 if a deal is not reached. LMC does not have the money for the repayment. Foxconn could get most of LMC’s assets if it cannot pay, LMC said in a press release Friday.
The payments from Foxconn to LMC were cleared by the Committee on Foreign Investment in the United States (CFIUS) on April 9. CFIUS is an inter-agency government committee that reviews the national security implications of foreign investments in U.S. companies or operations.
Joint venture possible but unsettled
Under the purchase agreement, Foxconn and LMC agreed to a joint venture agreement to design, engineer, develop, validate and launch commercial vehicles for North America. They would use Foxconn’s Mobility-in-Harmony platform. Discussions are continuing.
Neither the plant sale nor the joint venture is a sure thing, LMC said.
The company, which was brought public in October 2020 in a merger with special purpose acquisition company DiamondPeak Holdings, filed a “notice of going concern” with the Securities and Exchange Commission last June. It said it might run out of money to continue operating within the next year.
Former CEO Steve Burns founded LMC in February 2020 after General Motors Co. agreed to sell the plant it had operated since 1966. GM held a $20 million mortgage and loaned $20 million for tooling to LMC. It later invested $35 million in cash at the time of the SPAC merger. GM has since unwound its investment.
“It would not be a great surprise to me that Lordstown failed to make it because they had both the wrong product and a very tough market,” Sam Abuelsamid, principal analyst for Guidehouse insights, told FreightWaves.
“The product that they were trying to sell that they wanted to build was always a dubious prospect at best. Doing a commercial pickup truck with hub motors just never seemed like a viable product from an engineering standpoint.”
Hub motors subject usually static high-voltage wiring that runs from the battery or power electronics to a lot of motion as the wheel moves up and down. That could create durability issues, Abuelsamid said.
“Commercial customers rely on their trucks,” he said “They tend to be dubious about going with unknown companies for a product like this. At best, they might buy a few to try out, but they rarely ever result in huge orders. Most of the time, these commercial fleets end up going with established players in the business.”