Lordstown Motors files for bankruptcy; sues Foxconn
Lordstown Motors’ worst fear has come to pass as the electric pickup truck manufacturer filed for bankruptcy on Tuesday in a move to put itself up for sale. This follows months of fighting Taiwan’s Foxconn over failing to deliver a promised investment.
The automaker, named after its Ohio hometown, filed for Chapter 11 protection in a Delaware bankruptcy court. In the complaint, Lordstown Motors accused Foxconn of fraudulent conduct and a series of broken promises, which made it impossible for Lordstown to survive.
Lordstown is now taking Foxconn to court over the charges.
However, Foxconn, formally called Hon Hai Precision Industry and best known for assembling Apple iPhones, had previously accused Lordstown of breaching the agreement first. In May, the burgeoning EV maker received a letter from Foxconn claiming that the start-up had breached the investment contract because its share value had fallen below one dollar per share for 30 consecutive trading days, triggering a delisting notification from the US stock exchange Nasdaq.
At the same time, the issue was brewing for some time. Foxconn and Lordstown had entered into an agreement in November 2022 under which Foxconn would invest up to $170 million (€154 mn) in the US startup, amounting to a nearly 20%-stake. Foxconn paid the first $52.7 million due last year. But in light of Nasdaq’s delisting notice, further Foxconn payments were never made. Although, under the terms of the original deal and according to Lordstown, Foxconn was supposed to invest the remaining $47.3 million and jointly complete a plan to develop a new electric vehicle by May 2023.
Instead, in June, Lordstown repeated its bankruptcy warnings in a SEV filing, then already threatening legal action since Foxconn continued to fail to hold up its investment commitment.
And this is where they ended at.
What will come of the Endurance pickup truck?
The future of the Endurance remains an open question, yet also Lordstown’s biggest asset.
Edward Hightower, CEO & President of Lordstown, said, “As one of the early entrants to the EV industry, we have delivered the Endurance, an innovative and highly-capable EV with significant commercial and retail potential – and had subsequently engaged with Foxconn in a purposeful, strategic partnership to leverage this expertise into a broader EV development platform. Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute the agreed-upon strategy.”
Lordstwon Motors was considered a high-profile player among the EV startups, at least for some time, because it was targeting the high-margin pickup trucks segment and because of its location. The city of Lordstown is known for General Motors’ Lordstown Assembly, an automotive plant that produced compact cars from 1966 until 2019 before the startup took over.
When Foxconn came in, Lordstown essentially agreed to divest its manufacturing facility, one of the largest in North America, along with its staff. This, Lordstown said today, was in the belief that Foxconn would support the Endurance pickup truck “in a variety of ways and follow through on a joint vehicle development program, leveraging what was purported to be Foxconn’s established and extensive EV ecosystem and meeting its commitments to the Lordstown community”.
However, in the lawsuit, Lordstown beholds that “Foxconn had no intention of living up to its commitments, particularly concerning the new vehicle development platform”. Instead, the Taiwanese company used the arrangements “as a tool to maliciously and in bad faith destroy Lordstown’s business—while leveraging resources gained through the partnership to advance its own business interests,” so the statement to shareholders.
Alleged intentions aside, Foxconn has indeed made advances in the e-mobility market on its own. So far, it has unveiled three electric cars based on its MIH platform in 2022 and announced more. Plus, in Lordstown, Foxconn is not only manufacturing the Lordstown Endurance. The Fisker Pear will also be produced at the plant in 2024. Foxconn is pursuing further plant plans in Saudi Arabia and Thailand, among other places.
Lordstown has filed motions with the Court to commence a marketing and sale process under US Bankruptcy Code. The company points out that the Endurance is a fully homologated and certified, production-launched vehicle “that can serve as a springboard for the right OEM or other strategic purchaser” to jump onto America’s truck market “at a fraction of the cost and time it would take to develop a program from the ground-up”.
It remains to be seen who may do exactly that.
Foxconn has yet to comment.
Yet, independent of the lawsuit and proceedings, the Lordstown management could do some soul-searching since operations had rarely been smooth. In 2022 alone, investor General Motors left, followed by a management shift in the summer. That had not been a major downhill from the company’s 2021 year, where an investigation was undertaken by the US Justice Department and the announcement of a serious cash flow issue, which had delayed the production launch of their vehicles as well.
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