new York The US electric car manufacturer Lordstown Motors has filed for bankruptcy. The company announced this on Tuesday. The list of companies in the industry that have to give up is getting longer. According to the announcement, Lordstown is up for sale. Previously, it had not been possible to resolve a dispute with the Taiwanese investor Foxconn over promised investment funds.
Company boss Edward Hightower stated that Lordstown had developed “an innovative and high-performance electric car with significant commercial potential” with the pickup Endurance. Despite “our sincere commitment to the partnership, Foxconn has willfully and repeatedly failed to implement the agreed strategy.”
Therefore, only a creditor protection procedure under Chapter 11 of the US bankruptcy law remains, in which the company should be restructured. Lordstown has filed a lawsuit against Foxconn and continues to hope to find a buyer for the company.
The stock fell more than 37 percent to about $1.72 by midday Tuesday (local time). Shortly after the 2020 IPO, it was $400. Other once hyped electric start-ups have already had to give up, including the van company Electric Last Mile.
Hightower was still combative in an interview with the Handelsblatt in the spring: the challenges will be mastered, Lordstown has “capital until the end of the year,” said the company boss at the time.
Lordstown accuses Foxconn of fraudulent behavior
“Lordstown’s bankruptcy signals that the days of successful electric start-ups are numbered,” said Thomas Hayes of the Reuters hedge fund Great Hill Capital. “Going forward, Tesla and the traditional incumbents will compete for market share.”
In its lawsuit, Lordstown accuses Foxconn of fraudulent behavior and a series of broken promises. The Taiwanese group did not stick to an agreement to invest up to 170 million dollars in the electric car manufacturer. Foxconn has displayed a “pattern of bad faith”.
The Apple supplier Foxconn had taken over the former GM factory as part of an investment agreement.
(Photo: Reuters)
Foxconn joined Lordstown in November 2021 and took over the Ohio plant. The Apple supplier had already invested 52 million dollars in the company – the company currently holds a share of a good eight percent. Lordstown now claims that Foxconn is refusing to buy additional shares as promised and accuses the Taiwanese of deceiving the electric car maker about collaborating on vehicle development.
Industry insiders believe Foxconn has its own plans for the Lordstown factory. Several top managers in the US auto industry have confirmed to the Handelsblatt in recent months that Foxconn is bringing the plant into play as a possible production location for other electric start-ups and car manufacturers.
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Foxconn, in turn, said on Tuesday that Lordstown had violated the investment agreement. A positive attitude was maintained in conducting constructive negotiations with Lordstown. However, the US company was not willing to fulfill the agreement according to the terms.
Should Lordstown fail to find a buyer willing to resume production of the Endurance, the Ohio plant could become a gateway for foreign automakers looking to start production in the United States in the short term. Numerous subsidies from the US government’s “Inflation Reduction Act” support package beckon from Washington.
“The Lordstown case shows how difficult it is for a start-up without a well-known brand to have sufficient financing and established supplier relationships,” says car expert Christian Koenig, who runs an electromobility consultancy in Atlanta. “The bankruptcy does not come as a complete surprise; it was to be expected that not all start-ups would pass the acid test of the market.”
Founded in 2019 in Lordstown, Ohio on the site of a former GM factory, the start-up wanted to break into the most popular segment of the US car market: pickup trucks. The company did not want to produce lifestyle products for millionaires like its competitor Rivian, but a real workhorse.
Donald Trump praised the endurance truck
A large, heavy-duty truck, the Endurance was designed to convert plumbers, roofers and other hard-working Americans who depend on a large truck bed to electric mobility. In 2020, the company went public with the help of a so-called spac deal. Lordstown raised $675 million.
In September 2020, founder Steve Burns introduced the Endurance to the White House. Then-US President Donald Trump hailed the car as “an incredible piece of science and technology.” Lordstown was seen as a beacon of hope. After all, Burns had promised to save jobs in Ohio’s impoverished industrial region. It was an ambitious plan. Then a lot went wrong.
In March 2021, the analysis house Hindenburg, which was betting on a stock crash, published a devastating report. Hindenburg accused Lordstown of having lied to investors about the number of pre-orders and the state of its own technology. The SEC determined.
Lordstown initially denied all allegations, but had to admit in June 2021 that they did not have enough cash to start production and might be facing bankruptcy. Two months later, Burns left the company and Edward Hightower took over, first as President and then as CEO in July 2022.
“The allegations are a thing of the past,” Hightower told the Handelsblatt in the spring. Previous plans would not have worked. “Now we are concentrating on the future and the implementation.”
In 2022, only 31 trucks left the factory, some of which were handcrafted. Lordstown made a loss with every vehicle. If the start-up does not find a buyer quickly, Tuesday’s announcement should have been the last milestone in the company’s history.
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