GM backs out of stake in Nikola, cancels plan for ‘Badger’ electric pickup

General Motors and Nikola Corp. have a deal, though it’s a much smaller one compared with the one first struck in September.

In a non-binding memo of understanding signed by GM and Nikola on Monday, GM will now supply the fuelcell technology to make commercial long-haul trucks for Nikola and nothing more — with no equity stake in Nikola as previously proposed.

This pending transaction comes after controversies that swamped Nikola since the original deal was announced Sept. 8 in which GM would have gotten 11% equity in the company to build an electric heavy-duty pickup for Nikola called the Badger.

In this new deal, which remains subject to final negotiation, GM will be paid for its Hydrotec fuel-cell technology that goes into Nikola’s commercial zero-emission semi-trucks for use in the medium- and long-haul trucking sectors.

The deal is similar to a standard supplier agreement where GM, in this case, is the supplier to Nikola.

GM declined to comment on how much the deal could be worth for it financially. The benefit comes in the supply agreement validating GM’S fuel cell technology “expertise and development,” said Doug Parks, GM executive vice president of Global Product Development, Purchasing and Supply Chain, in a statement.

“Providing our Hydrotec fuel cell systems to the heavy-duty class of commercial vehicles is an important part of our growth strategy and reinforces our commitment toward an allelectric, zero-emissions future,” Parks said.

The 11% stake in the previous tentative deal would have been worth about $2 billion to GM in exchange for building the Badger, which had been planned to go on sale in 2022.

But shortly after that deal was announced, a short-sellers report accused Nikola of “intricate fraud.” Nikola’s stock price plummeted on that news followed by the resignation of its founder Trevor Milton, eroding GM’S potential value in the company.

The deal was put on hold and GM and Nikola went back to the bargaining table with a Dec. 3 deadline to either make a deal or call it off.

In this pending arrangement, plans for the Badger are canceled. “Nikola is going to focus on its core business and therefore, no Badger,” said Nikola spokeswoman Colleen Robar.

The Badger program was dependent on a partnership with an automaker, so Nikola said it will refund all previously submitted order deposits for the pickup.

“Heavy trucks remain our core business and we are 100% focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Mark Russell, CEO of Nikola, said in a statement. “We believe fuel-cells will become increasingly important to the semi-truck market, as they are more efficient than gas or diesel and are lightweight compared to batteries for long hauls. By working with GM, we are reinforcing our companies’ shared commitment to a zero-emission future.”

Nikola said it will begin testing production-engineered prototypes of its hydrogen fuel-cell powered trucks by the end of next year, with testing for the beta prototypes to begin in the first half of 2022.

But Nikola and GM said they will discuss possibly using GM’S Ultium battery system in Nikola’s commercial trucks. Ultium is GM’S proprietary battery system that it will use to power the 30 electric passenger vehicles it plans to bring to market by 2025.

Under the potential agreement, GM would engineer its Hydrotec fuel cell system to the specifications the companies agree to, GM said in a news release. The companies will discuss the “appropriate scope of services that GM would provide for the integration of the fuel cell system into Nikola’s vehicles,” GM’S release said.

GM expects the potential arrangement would be “cost plus, and that Nikola would pay upfront for the capital investment for the capacity.”

In a research note Monday, analyst Dan Ives of Wedbush wrote: “The headline from today’s announcement is that surprisingly GM will not be taking an equity/ownership stake in Nikola as previously planned which will be viewed as a clear negative to the Street hoping this piece of the original deal stayed on course.”

In pre-market trading, Nikola stock was down 16.36% to $27.93. GM stock was down 0.24% to $45.06.

GM’S Hydrotec fuel cell system will be engineered at GM’S technical facilities in Pontiac and Warren and manufactured at its Brownstown Charter Township battery assembly plant.