Workhorse Group’s second-quarter revenue of $12,600 looks like a typo. But the maker of medium-duty electric delivery vans and chassis needs to put up with snickers and head-scratching for a while longer.
After gains in nine of the last 10 Wall Street sessions, Workhorse (NASDAQ: WKHS) shares fell 24.16% Tuesday to close at $3.39. Senate passage of the Inflation Reduction Act that includes significant money for electric vehicles and infrastructure fueled much of the stock’s run up.
The Sharonville, Ohio-based company is undergoing a top-to-bottom restructuring under CEO Rick Dauch. He is leaving practically nothing the way he found it when he joined the company a year ago.
Among Dauch’s actions:
- Replacing and expanding top leadership in manufacturing, supply chain, quality, materials and logistics and product development with automotive and supplier executives with decades of experience.
- Withdrawing a challenge to the awarding of a contract for the Next Generation Delivery Vehicle for the U.S. Postal Service. Prospects of Workhorse winning the contract led retail investor enthusiasm. When Oshkosh Corp. won the contract in February 2021, Workhorse shares took a hit from which they have yet to recover.
- Developing a three-year product plan for a range of Class 3-6 medium-duty trucks by the end of 2024. That started with grounding, recalling and redesigning the C1000 electric delivery van. The company is repairing them and expects to sell 161 of the vans and use leftover parts to build 50 to 70 more before canceling the product at the end of this year.
‘One-trick pony’
“While painful, these were the right decisions to make for our company,” Dauch said Tuesday on a call with analysts. “When I got to Workhorse, we were a one-trick pony from a product perspective. The only vehicle we could offer customers was the unprofitable C1000.”
Workhorse has prospective customers for the C1000 vans it is repairing beginning in September. Having already written down the value of the 161 vans, proceeds from their sale will be recorded as cash gains, CFO Bob Ginnan said.
“Over the past nine months, we have redesigned over 26% of the parts on the C1000,” Dauch said. “This took a bit longer than we expected. As my old man would say, ‘Don’t give me your excuses, just deliver results.’ We’re going to make up that production and get it done.”
Workhorse plans to assemble 50 to 70 more C1000s from leftover parts before retiring the van at the end of the year, Dauch said. Service will be available on all C1000 vans, he said..
Workhorse a ‘fundamentally different company’
“Make no mistake,” Dauch said. “Workhorse is a fundamentally different company today than it was a year ago.”
To cover the gap until its ground-up W56 and E34 purpose-built electric chassis are ready for production in 2023 and 2024, Workhorse is purchasing Class 4 electric vehicles from GreenPower Motor Co. that it will rebrand as the W4 chassis cab and W750 step van.
The W4, which has a segment-leading 5,000-pound cargo capacity, begins production this quarter. The W750 goes into production in Q4. GreenPower has shipped 17 vehicles to Workhorse so far.
Workhorse lost $21.2 million in Q2 compared to $43.6 million in the same period last year. Loss from operations for the second quarter was $22.1 million compared to $22.7 million in the same period last year.
If current supply chain lead times remain unchanged, Workhorse expects to manufacture and sell 150-250 vehicles and generate between $15 million to $25 million in revenue for calendar year 2022.
Workhorse Ranch rising
Workhorse modernized equipment, expanded production space and christened its Union City, Indiana, plant as Workhorse Ranch, which Dauch said is “fast becoming a world-class manufacturing complex.
“I’ve met with staff members that have returned after being away from the plant for several years. They cannot believe this is the same facility,” Dauch said. The company expects to hire 100 to 150 hourly workers there in 2023 and 2024. About 80 production workers are employed today.
Workhorse signed a three-year agreement to contract manufacture up to 2,000 small sub-Class 1 trucks a year for Silicon Valley-based Tropos Technologies. Tropos makes electric low-speed utility vehicles and trucks for corporate, fleet, first-responder, agriculture, last-mile delivery and construction industries.
“It’s a truck that we want to exercise our muscles [on],” Dauch said. “Our people have been sitting idle basically, cleaning up the facility, rehabbing the facility. It’s been a long time since we turned a torque wrench or assembled things. We want to do some of that this year.”
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