Electric vehicle manufacturer Lordstown Motors filed for bankruptcy protections on Tuesday, June 27, after announcing that it would put itself up for sale. It filed for Chapter 11 bankruptcy protections in a bankruptcy court in Delaware.
Lordstown stated that it will be looking for potential buyers to take over its assets, including the manufacturing of the company's lone commercially-available EV, the Lordstown Endurance pickup truck. According to its recent filings, Lordstown Motors just had $108.1 million in cash available at the end of March. During the first quarter of 2023, it posted a loss of $171.1 million. (Related: Ford to lay off 1,000 employees as focus on EVs costs the company BILLIONS.)
The company's bankruptcy is not the first – and likely will not be the last – among the many EV startups that went public in the past few years.
But Lordstown's downfall is seen as a high-profile case due to the company positioning itself as being a potential competitor to the core consumers of the legacy automakers from Michigan who are relying heavily on selling high-margin pickup trucks. The Ohio-based company launched with massive fanfare and significant financial backing in 2018 after it acquired a factory from General Motors.
The company's Endurance electric pickup is built at its small-car factory in Lordstown, Ohio, and is sold primarily to commercial customers such as local governments. Lordstown CEO Edward Hightower believes the business that the Endurance could bring could prove attractive to another automaker looking for a fast entry into the EV market at a time when federal policies are providing more incentives for more EV manufacturing.
"We remain confident than an orderly, expedited sale process will maximize value for our stakeholders and enable the talent and technology behind the Endurance to find new and supportive ownership," said Hightower. "While in Chapter 11, Lordstown will continue to support our customers."
"The bankruptcy of Lordstown signals that the days of successful EV startups is in the rear-view mirror," said Thomas Hayes, chairman at the hedge fund Great Hill Capital. "Moving forward, it will be Tesla and the traditional incumbents … that will duke it out for market share."
Lordstown sues Foxconn over promised investment
Lordstown is blaming much of its financial situation on Taiwanese tech giant Foxconn, which wavered on a $170 million investment deal earlier this year that would involve Foxconn and Lordstown working together on a range of new electric vehicles.
"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," said Hightower in a statement. "We will vigorously pursue our litigation claims against Foxconn accordingly."
Lordstown is accusing Foxconn of fraud for failing to abide by the previous agreement. According to the company, Foxconn paid the first installment of the deal – $52.7 million – last year. The next payment, $47.3 million, was due within 10 days of regulatory approval by the Committee on Foreign Investment in the United States. Lordstown secured the committee's approval in late April, but Foxconn never made the payment.
Instead, Lordstown alleged that Foxconn told the company that it was in breach of the deal for allowing its stock price to fall below $1 per share for 30 days in a row. Lordstown countered by stating that Foxconn's argument has no merit and accused Foxconn of acting in "bad faith" to get control over the company without supporting its products, notably the Endurance. Nevertheless, Lordstown executed a reverse stock split to push its share price back over the $1 mark.
In a statement to media outlets, Foxconn claimed the company had maintained "a positive attitude in conducting constructive negotiations with Lordstown," but claimed that the EV company was reluctant to carry out all of the terms of their investment agreement.
"Foxconn originally hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus," said Foxconn.
In light of this litigation and what Foxconn characterized as Lordstown's attempts to "mislead the public," all further talks are suspended, and Foxconn noted that it reserves the right to take legal action of its own.
Learn more about electric cars and their manufacturers at RoboCars.news.
Watch this clip from Newsmax as Iowa Sen. Joni Ernst talks about how President Joe Biden's push for electric vehicles is unrealistic.
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