Lordstown Motors may have to shut down as its chief partner and financier threatens to pull out of the deal.
The EV truck startup has faced hurdle after hurdle bringing its Endurance pickup truck to market. After halting operations to fix quality problems earlier this year, it just started slowly getting trucks out to a select few customers. It may all come to an end soon, however, as Taiwanese electronics giant Foxconn threatens to withhold funding for the deal, effectively forcing Lordstown into bankruptcy.
On Monday, Lordstown Motors noted the very real possibility of insolvency in a securities filing. “If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code,” the company said.
Upon news of Lordstown Motor’s dire situation, its stock prices fell 27%, trading at just 38 cents a share as of Monday morning. Nasdaq warned Lordstown last month that its stock may be delisted if it stays below the $1 minimum share level for more than 30 consecutive days.
So…what happened?
At the moment, Foxconn representatives did not make an immediate comment on the situation. The Apple iPhone manufacturer paid $230 million for the former General Motors plant in Lordstown, Ohio, while it also aimed to invest another $170 million in the startup to ramp up Endurance production. In exchange, Foxconn would claw its way into the automotive space and Lordstown Motors, for its part, would have the money it needs to continue operating.
Beyond an earlier electrical issue that hamstrung production, though, the EV startup asked Foxconn to suspend production as per-unit manufacturing costs for the Endurance exceeded the truck’s $65,000 price target, as Automotive News reports. Lordstown Motors noted it would need to bring another partner into the deal to share costs, bringing the overhead down to a point where it could profit on the vehicles it sold.
Both Lordstown and Foxconn are currently in talks to resolve their dispute, though the details of those talks are unclear for the moment. What we do know is that Foxconn informed Lordstown it could terminate its deal in 30 days, citing a breach in the two firms’ agreement.
We’ll keep a close eye on the situation and report whether Lordstown folds or if it can solve its outstanding issues with Foxconn, or find another partner to save the company from imminent bankruptcy proceedings.
