Electric startup Lordstown is reportedly low on cash — and this deal could prop up its efforts to launch the Endurance this year.
UPDATE: Lordstown officially announced its plan to partner with Foxconn Technology Group in a $280 million deal Thursday. The company will sell its plant for $230 million, while Foxconn will acquire $50 million in common stock in its new partner, and will assemble the Endurance pickup. The two sides are still working out a manufacturing agreement, but Foxconn plans to start Endurance production at the Ohio plant in April 2022.
Lordstown will keep its assembly lines to build the hub-mounted electric motors and the Endurance’s battery pack as part of the arrangement.
Of the sale, new Lordstown Motors CEO Dan Ninivaggi said, “It’s less about a facility sale than a strategic partnership. You have to find a way to get scale in the auto industry. Foxconn has a vision. They’ve got enormous capabilities in manufacturing and they will be able to fill that plant faster than we could.”
Lordstown Motors announced to a deal with Taiwanese electronic manufacturer Foxconn, after an earlier Bloomberg report reported the pending sale through unnamed sources. The news comes as the fledgling automaker suffered serious stumbles earlier this year, including earlier calls that it needed more capital to launch its Endurance truck, and former CEO Steve Burns’ resignation amid explosive claims by Hindenburg Research, a short-seller. Now, the company is working out a deal to sell its northeast Ohio assembly plant to Foxconn in order to raise more cash.
Lordstown Motors bought the plant and its equipment, valued at $20 million, from General Motors in 2019. On top of that, GM also aided Lordstown financially, in exchange for 7.5 million shares of Class A common stock. At this moment, it’s not clear under what circumstances the company will build its truck should it sell the factory to Foxconn (UPDATE: Yesterday’s announcement added more clarity on the manufacturing part of the deal.) However, Reuters points out that the company was in talks to build vehicles for other companies, or lease space in the factory. Presently, Lordstown Motors only uses 30% of the 6.2 million square feet facility.
Per Bloomberg’s report:
“Lordstown Motors Corp., the electric-truck maker running low on cash, is near an agreement to sell its highly politicized Ohio factory to Taiwan’s Foxconn Technology Group, people familiar with the matter told Bloomberg.
The companies are set to announce the pact as soon as Thursday, said the people, who asked not to be named as the plan isn’t yet public. They didn’t disclose the value of the transaction. Lordstown Motors struck a deal with General Motors in late 2019 to buy the plant the automaker opened in 1966.”
Why Foxconn?
The iPhone manufacturer has been gunning for the EV business. It finalized a deal to work with Fisker Inc. to build its cars, and that hasn’t been their first foray into building out its automotive presence. Foxconn also made the contentious decision to announce a $10 billion plan in a Wisconsin plant — a move that never came to fruition.
There are still plenty of questions surrounding Lordstown Motors moving forward. The firm does still face regulatory scrutiny from federal prosecutors and the U.S. Securities and Exchange Commission for allegedly false statements regarding preorders as put forth by Hindenburg Research. Congressional lawmakers from the state of Ohio are also closely watching the supposed sale, and aim to meet with Lordstown to figure out what this sale means for their constituencies, according to Business Journal Daily.
“I expect to meet with LMC and hear their plans in the coming days,” said U.S. Senator Sherrod Brown. “There are two key questions for LMC and Foxconn: What does this mean for jobs in Lordstown? What are their plans to ensure that the Mahoning Valley is the leader in electric vehicle production?”
