Lordstown Motors, the troubled electrical automobile firm that purchased a shuttered General Motors manufacturing unit in Ohio with grand plans to create the Tesla of pickup vehicles, filed for chapter safety on Tuesday.
Once hailed by former President Donald J. Trump for preserving manufacturing jobs, the corporate struggled with a sequence of improvement setbacks and frequent administration adjustments, and managed to make and promote solely a handful of vehicles.
The Chapter 11 chapter submitting, in federal court docket in Delaware, was prompted by a dispute with a significant investor, Foxconn, the contract producer that’s primarily based in Taiwan. Foxconn mentioned Lordstown had breached their funding settlement as a result of its inventory had fallen under $1 a share. Lordstown mentioned on Tuesday that it had filed a lawsuit asserting that Foxconn did not honor its settlement to take a position extra money within the firm.
Lordstown mentioned in a press release that it was beginning a “a strategic restructuring process” that was more likely to contain promoting its remaining property, such because the expertise and mental property it developed for its Endurance pickup truck.
“We will vigorously pursue our litigation claims against Foxconn accordingly,” Lordstown’s chief government, Edward Hightower, mentioned.
Foxconn — whose formal identify is Hon Hai Technology Group — mentioned in a press release that it had hoped to barter an answer to Lordstown’s monetary troubles however that the 2 sides had failed to achieve an settlement. Lordstown “has continuously attempted to mislead the public, and has been reluctant to perform the investment agreement between the two parties in accordance with its terms,” Foxconn mentioned.
Lordstown is one in every of a number of electrical automobile start-ups which have run into bother during the last couple of years. Rivian, which is backed by Amazon, has suffered manufacturing delays and produced far fewer sport utility automobiles, pickups and supply vans than it had anticipated. Other firms which have struggled to start out or improve manufacturing embrace Arrival, Canoo, Lucid and Nikola.
Arrival, Canoo, Lordstown, Lucid and Nikola gained inventory listings by merging with particular objective acquisition firms, benefiting from a Wall Street craze that allowed company executives and buyers to take companies public with out going via the extra rigorous and controlled strategy of promoting shares via preliminary public choices.
Erik Gordon, a business professor on the University of Michigan who follows the auto business, mentioned Lordstown’s repeated manufacturing delays and high quality issues had harm its credibility with buyers and potential clients.
“Given the problems other E.V. start-ups are facing, the liquidation value of Lordstown is going to be low,” he mentioned.
The manufacturing unit deal promoted by Mr. Trump by no means fairly lived as much as expectations. At its peak in 2021, Lordstown Motors employed about 600 individuals, fewer than half the 1,400 individuals G.M. employed when it halted manufacturing of the Chevrolet Cruze on the Ohio manufacturing unit in 2019.
Almost all of G.M.’s staff in Lordstown, which is between Cleveland and Pittsburgh, accepted retirement packages or transferred to the corporate’s different crops. G.M. has constructed a brand new battery manufacturing unit close to its former Lordstown automobile plant that employs about 1,100 individuals.
Lordstown Motors was based in 2018 by Steve Burns, the previous chief government of Workhorse Group, a small producer of economic automobiles. At Workhorse, Mr. Burns got here up with an idea for an electrical pickup truck however lacked the assets to supply it. He noticed a chance when G.M. introduced that it was closing the Lordstown plant.
Mr. Trump put immense stress on G.M. and its chief government, Mary T. Barra, to discover a purchaser for the manufacturing unit, and the automaker started negotiating with Mr. Burns. Mr. Trump promoted the deal on Twitter even earlier than an settlement was signed — and even earlier than Mr. Burns had financing or a reputation for his new firm.
Lordstown had hoped to supply an revolutionary truck with electrical motors on every of its wheel hubs, however struggled to show its concept right into a automobile that it may mass produce.
In 2021, Mr. Burns and Lordstown had been accused of exaggerating what number of orders the corporate had for its truck by Hindenburg Research, a small funding agency. Mr. Burns resigned.
Lawyers for Mr. Burns didn’t reply to requests for remark.
Lordstown was burning via money and offered its manufacturing unit to Foxconn, which is finest recognized for assembling Apple’s iPhones at factories in China. In alternate for the plant, Foxconn invested thousands and thousands into Lordstown and was speculated to manufacture the Endurance pickup.
But the truck was plagued with issues. One take a look at automobile caught fireplace in Michigan. Production lastly began final yr, however solely 31 vehicles had been constructed within the final three months of 2022. In the primary three months of this yr, Lordstown delivered two vehicles to clients, generated income of simply $189,000 and reported a lack of $171 million.
In March, when Lordstown’s inventory fell under the $1 minimal required for a Nasdaq itemizing, Foxconn knowledgeable the corporate that it was backing out of plans to spend money on it additional.
Shares of Lordstown closed down 17 % on Tuesday, to $2.29. They had traded at round $400, adjusted for a reverse inventory cut up this spring, in early 2021. Lordstown listed its shares in October 2020 by merging with DiamondPeak Holdings.
Source: www.nytimes.com