Rick Dauch isn’t fooling around.
The new CEO at Workhorse Group is halting sales of the company’s long-delayed and production-challenged electric delivery vans because customers want more cargo capacity and a better design.
And Workhorse (NASDAQ: WKHS) is recalling 41 vans already in customer possession because it cannot vouch for their safety. The company said it has not received any customer complaints about safety but it is alerting the Securities and Exchange Commission about the issue.
“The new leadership team has determined that additional testing and modifications to existing vehicles are required to certify the C-1000 vehicles under Federal Motor Vehicle Safety Standards (FMVSS),” Workhorse said in a press release Wednesday.
The company filed a report with the National Highway Traffic Safety Administration regarding the need for NHTSA-coordinated additional testing and vehicle modifications to certify the C-1000 vehicle.
‘Decisive and necessary actions’
Dauch, who replaced ousted CEO Duane Hughes on July 29, said the company is taking “decisive and necessary actions as we conduct our comprehensive operational review of the business. We have identified a number of opportunities to improve our C-1000 series vehicles and are committed to getting these previously delivered vehicles back on the road.”
The former CEO of Delphi Technologies, Dauch also has ended a long-shot attempt to reverse a contract award for new U.S. Postal Service mail trucks. Workhorse lost out on the multibillion-dollar contract in February when it was awarded to defense contractor Oshkosh Truck Corp. (NYSE: OSK).
While at Delphi Technologies, Dauch prepared the automotive supplier for its eventual $3.3 billion sale to BorgWarner Inc. (NYSE: BWA).
First mover advantage eroding
Workhorse is living on money borrowed from a hedge fund pegged to stock appreciation and is at risk of missing some loan covenants. It has continuously fallen short of production targets for the composite body C-Series vans.
Workhorse’s first mover advantage in the electric delivery van space is eroding as Amazon-backed startup Rivian has begun delivering electric vans. It faces additional competition from BrightDrop, a General Motors subsidiary that will begin delivering Class 3 electric vans to FedEx Ground before the end of the year.
Wednesday’s revelations follow a short seller’s report on Sept. 1 that accused Workhorse of fabricating preorders, accounting fraud and hiding an SEC investigation.
Workhorse shares closed 9.52% lower Wednesday at $7.41 on the Nasdaq.
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