Lordstown Motors warns of bankruptcy as Foxconn deal unravels

Lordstown Motors Corp. may be forced to cease operations and file for bankruptcy if it can’t come to terms with partner Foxconn or find alternate financing.

The EV startup’s deal with Foxconn Technology Group could unravel after the large Taiwanese company threatened to withhold funding, something that could force Lordstown into insolvency, the company warned in a securities filing on Monday.

“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,” Lordstown said in the filing.

Last year, Foxconn had said it planned to invest as much as $170 million in the startup.

Shares of Lordstown plunged 27 percent to 38 cents in morning trading in New York.

Representatives for Foxconn could not be reached for immediate comment.

The filing underscores the speed at which the partnership has become destabilized amid turmoil in the EV market. Just about six months ago, Foxconn agreed to invest as much as $170 million in Lordstown and take two board seats.

The deal gave the EV maker much-needed capital while offering Foxconn, the Taiwanese manufacturer best known as the maker of Apple Inc.’s iPhone, a firmer foothold in automotive production.

Foxconn also paid $230 million for a former General Motors factory in Lordstown, Ohio, where it planned to make Lordstown’s debut vehicle under contract. But in January, Lordstown asked Foxconn to suspend production because the cost of making the Endurance battery-powered pickup exceeded the targeted sale price of $65,000 — and said it would need another partner beyond Foxconn share costs.

The EV company said last month that production of the truck had resumed “at a very low pace.”

The two companies are in talks to find a resolution after Foxconn notified Lordstown that it could terminate its investment in as little as 30 days, citing what it claimed was a breach in their agreement, the filing said. Foxconn’s move was precipitated by a Nasdaq warning last month to Lordstown that its stock may be delisted after falling below a minimum $1 per share level for 30 consecutive days.