Ailing commercial electric pickup truck maker Lordstown Motors on Tuesday filed for Chapter 11 bankruptcy protection, put itself up for sale and sued former partner Foxconn, alleging fraud and failure to live up to its financial commitments.
Lordstown had been struggling in the past couple of years. It was able to hold on financially for a while because it sold its Lordstown, Ohio, plant to Foxconn, a Taiwanese electronic components maker, for $230 million a year ago and agreed to let Foxconn become the contract assembler of the Endurance commercial electric pickup truck. Lordstown production employees became Foxconn employees.
In court filings, one of Foxconn’s affiliates later agreed to invest approximately $170 million “of additional equity capital in the business and to work closely with Lordstown on a new vehicle development platform.”
Slow commercial production resumed after quality issues led to two safety recalls of early units. Production resumed in April. The company completed 56 light-duty Endurance vehicles and delivered 18 to customers, a dozen since resuming builds.
The slow ramp-up allowed Lordstown to preserve cash. It reportedly burned through $11 million in April. That left approximately $165 million as of April 30.
But Lordstown, in its lawsuit filed in a Delaware court, claims “Foxconn had no intention of living up to its commitments, particularly with respect to the new vehicle development platform. … Foxconn simply used its variety of contractual arrangements with the Company as a tool.”
In a statement Tuesday, Lordstown CEO and President Edward Hightower, said: “Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly.”
Foxconn told CNBC it had hoped to continue discussions to reach a solution that would “satisfy all stakeholders” without “resorting to baseless legal actions.” Known as Foxconn, Hon Hai Technology Group is a multinational electronics contract manufacturer of Apple iPhones.
Lordstown, founded by Steve Burns in 2019 with the cash-free purchase of the former General Motors assembly complex in northeast Ohio, filed a “notice of going concern” with the Securities and Exchange Commission two years ago. Burns, who resigned as CEO in June 2021 amid allegations of inflating orders, once held 26% of the company’s shares.
Burns had sold about $63 million of Lordstown stock since his lockup expired in October 2021. In the past couple of weeks, he sold the remainder.
This is a developing story.