Electric truck maker lauded by Trump as saving Ohio town files for bankruptcy
Lordstown Motors, the US electric truck manufacturer once lauded by former president Donald Trump as the savior of a depressed Ohio town, filed for bankruptcy protection on Tuesday.
The automaker, named after the town where it is based, filed for Chapter 11 protection in Delaware and put itself up for sale after failing to resolve a dispute over a promised investment from Taiwan’s Foxconn. It simultaneously took legal action against Foxconn.
The Lordstown factory in northeast Ohio was formerly a GM small-car factory that GM decided to close in 2018 in a move that was described as a “kick in the stomach” by local workers.
Trump and other Ohio political leaders pressured the GM CEO, Mary Barra, to reverse the decision or find a buyer. GM agreed to sell the plant to a newly formed entity called Lordstown Motors founded by the former top executive at an electric truck maker called Workhorse Group.
The company claimed it would be making 100,000 cars a year once it got started and Trump lauded the company and said the area was “booming” after the sale.
In a complaint filed in bankruptcy court, Lordstown accused Foxconn of fraudulent conduct and a series of broken promises in failing to abide by an agreement to invest up to $170m in the electric vehicle manufacturer.
Foxconn previously invested about $52.7m in Lordstown as part of the agreement, and currently holds an almost 8.4% stake in the EV maker. Lordstown contends Foxconn is balking at purchasing additional shares of its stock as promised and misled the EV maker about collaborating on vehicle development plans.
Foxconn, formally called Hon Hai Precision Industry and best known for assembling Apple’s iPhones, has said Lordstown breached the investment agreement when the automaker’s stock fell below $1 per share.
The Taiwanese company said on Tuesday that it had maintained “a positive attitude in conducting constructive negotiations with Lordstown” but said the US firm had been reluctant to perform the investment agreement in accordance with its terms. It said the company was suspending negotiations with Lordstown and reserved the right to pursue legal action.
The twin filings by Lordstown set up an international business clash that could intensify scrutiny of Foxconn’s EV ambitions and partnerships, not only with Lordstown but also other automakers.
The lawsuit portrays Foxconn as consistently shifting goalposts in its collaboration with Lordstown on the automaker’s future vehicles, which included failing to meet funding commitments and refusing to engage with the company on initiatives Foxconn allegedly directed and purported to support.
Lordstown, a startup launched in 2018, said in a regulatory filing earlier this month that it had planned to sue Foxconn after receiving a letter from the company that led Lordstown to believe Foxconn was unlikely to make its additional expected investment.
Lordstown accused Foxconn in that regulatory filing of engaging in a “pattern of bad faith” that caused “material and irreparable harm” to the company.
The automaker’s main product is the Endurance electric pickup truck, which is built at a former General Motors small-car factory in Lordstown for commercial customers such as local governments. Lordstown sold the plant to Foxconn in 2022.
Lordstown paused production of the Endurance earlier this year and since April has resumed building the trucks at a low rate after resolving quality issues with suppliers.
Should Lordstown fail to find a rescuer willing to restart full production of the Endurance, the Ohio factory could be a draw for overseas automakers looking for a quick way to build vehicles in the US.
Lordstown filed for bankruptcy with plans to seek a buyer. It does not have an initial offer in hand, known in bankruptcy parlance as a stalking-horse bidder, which sets a minimum price other suitors can top in an auction.
The Lordstown CEO, Edward Hightower, told Reuters the Endurance business could prove attractive to another automaker looking for a fast entry into the EV market at a time the Biden administration’s policies are attempting to move away from gasoline-powered cars.
Lordstown’s bankruptcy is not the first among the crop of EV startups that went public during the pandemic-era Spac boom. But Lordstown was a highprofile member of that class because it was challenging the core of the legacy
Detroit automakers’ business of highmargin pickup trucks, and because of its location.
Like several others, including the truck maker Nikola, Lordstown, which went public in 2020, has struggled to live up to the high expectations of early investors. In 2021, its chief executive and founder, Stephen Burns, resigned after the automaker acknowledged it had overstated pre-orders for its electric trucks.