Lordstown seeks buyer amid Foxconn fiasco; no takers so far

Lordstown Motors, an electric pickup startup that has faced down fraud allegations, leadership shake-ups, cash shortages and recalls in a yearslong game of whack-a-mole, is trying to extinguish its most formidable opponent yet — bankruptcy.

The company is seeking a buyer for its Endurance pickup and related assets. So far, automakers have expressed little interest in the technology, but Edward Hightower, Lordstown CEO and unfettered optimist, told Automotive News that the renewed spotlight on the company and the tidying of past legal liabilities might entice them.

"We're going to do a better job of promoting that story now going forward," he said. "I think the Chapter 11 process and the fact that it expedites everything will get interested parties" to take a look.

Lordstown's survival thus far conjures the improbable and repeated resurrection of Wile E. Coyote. When one anvil is removed — such as the resignation of a former CEO after the company acknowledged it had overstated preorders during his tenure — another drops from the heavens. The latest challenge, according to Lordstown, is the result of what it calls a conspiracy hatched by its onetime savior, Foxconn, also known as Hon Hai Technology Group.

Lordstown's adversary complaint, part of its bankruptcy court docket, reads like a John le Carre novel. Lordstown alleges that Foxconn, despite making agreements to share technology and partner on future vehicle designs, was instead plotting sabotage.

Foxconn "had no intent of doing anything to achieve these initiatives; they were just promises designed to string the Company along so that Foxconn could starve it out of existence," according to the complaint, filed Tuesday in U.S. Bankruptcy Court for the District of Delaware.

Foxconn is based in Taiwan and is the contract manufacturer of Apple's iPhone. Lordstown alleges Foxconn intended to sell its own vehicles "directly into the United States in direct competition with the Company," one purported betrayal of many for which Lordstown is seeking damages in an amount it hopes will be determined at trial.

In a statement, Foxconn said it "reserves the right to pursue legal actions and also suspends subsequent good faith negotiations" as a result of what it characterized as Lordstown's "false comments and malicious attack." Foxconn has previously said that Lordstown broke promises regarding the maintenance of its stock price.

In a hearing Wednesday, Foxconn called Lordstown's allegations "baseless."

This may be Lordstown's last stand.

Lordstown Motors' inception was prophetically chaotic. It was created for the purpose of buying the shuttered General Motors assembly plant in Lordstown, Ohio. The deal was prematurely announced by then-President Donald Trump on Twitter in May 2019, but he incorrectly named Workhorse Group as the buyer.

"GREAT NEWS FOR OHIO!" Trump tweeted.

At the helm was Steve Burns, founder of Workhorse, an electric delivery van company with its own struggles getting products to market. At that point, Workhorse exchanged intellectual property for its W-15 electric pickup for 10 percent of Lordstown Motors.

Lordstown revealed an updated prototype of the truck, the Endurance. It then went public through a merger with a special purpose acquisition company in 2020. Lordstown joined a class of electric vehicle startups such as Nikola Corp. and Fisker Inc. that did the same amidst a flurry of investor excitement during the pandemic.

In 2021, the short-seller research firm Hindenburg Research published a report about Lordstown that alleged that the company had "misled investors on both its demand and production capabilities," with orders that were "largely fictitious" and customers that "disclaim any intent to actually purchase vehicles."

The Securities and Exchange Commission asked for more information regarding Hindenburg's claims, Burns and then-CFO Julio Rodriguez resigned, and the company's board found that preorder agreements were in fact exaggerated. An investigation found that some entities included in the preorder count "provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed."

While it contested Hindenburg's findings related to Lordstown's technology and production timeline, the automaker did "identify issues regarding the accuracy of certain statements regarding the Company's pre-orders," it said in a statement at the time.

In August 2021, with about $366 million in cash on hand and $171 million in operating expenses for the first half of the year, the company reported "substantial doubt" regarding its ability to continue as a going concern. Foxconn and Lordstown announced an "agreement in principle" the following month.

The payoff: an influx of cash and a partnership with a consumer electronics manufacturing giant.

Hightower, who joined as Lordstown's president in November 2021, considered the Foxconn deal a new dawn for Lordstown.

"All the stuff that happened before that was not important," he said. "What I saw is an opportunity. I saw the company looking to pivot to a more asset-light business model, and I'd heard about Foxconn's desire to grow into the EV space, having succeeded with consumer electronics."

Hightower was named CEO in July 2022. Previously, he held several engineering, strategy, brand marketing and senior executive roles for GM, Ford and BMW.

Foxconn had a checkered history of manufacturing in the U.S., most notably a failure to deliver on promises at an electronics display manufacturing plant in Wisconsin.

"We did hear about some of their historical items, but we took them at their word, and we took them at the agreements that we structured and they signed," Hightower said.

Still, Hightower said he began to worry when Foxconn was, "for lack of a better description, dragging their feet" on structuring a vehicle development agreement before Foxconn bought Lordstown's plant.

Lordstown received criticism from experts such as Adam Jonas, Morgan Stanley autos analyst, in the fall of 2021 for the projected sale price of the plant. He said at the time that the "agreed plant value is roughly one-fifth the value we had assumed in our prior price target."

But Lordstown continued down the path with Foxconn. It closed the deal in May 2022, and Foxconn bought the Lordstown plant for $230 million.

According to Hightower and the complaint, the problems mounted. Delays and uncertainty plagued the formation of a joint venture. Lordstown said it could not get budgets approved and that it never received vehicle development data it was promised.

"When you look at all of the different occurrences in retrospect or when you look back on them, there's a pattern there," said Hightower. "There's a pattern."

Sam Abuelsamid, principal analyst for e-mobility at Guidehouse Insights, said the dispute might have less to do with deliberate obstruction of the venture and more to do with Foxconn's lack of confidence in Lordstown.

Perhaps "they just decided not to throw good money after bad to try to save Lordstown because they figured it was just probably not worth the effort," he said.

As Lordstown was privately navigating the Foxconn deal, it was publicly pausing production and deliveries of the Endurance and recalling 19 pickups, both in customer hands and in use internally, for an electrical connection defect. As of January, the company had assembled 31 Endurance pickups and delivered six vehicles.

In May, a "non-salable" vehicle in storage apparently used in crash tests caught fire, an echo of an Endurance road test in 2021, which resulted in a fire that the company attributed to human error.

Before the bankruptcy put its legal troubles on hold, Lordstown was fighting a lawsuit from Karma Automotive, which alleges that Lordstown poached Karma employees and stole trade secrets. It also faced shareholder lawsuits and received two subpoenas from the SEC regarding preorders of vehicles, according to the company's regulatory filings and the hearing this week.

The hearing also revealed that Lordstown has had confidential settlement talks with the SEC.

Abuelsamid said the Endurance also has a more straightforward problem — it's simply not competitive. Its range and payload are below the industry standard. The 2023 Endurance gets 174 miles of range compared with the 2023 Ford F-150 Lightning 4WD's 240 miles, according to the EPA, and the Endurance has a targeted maximum payload of 1,100 pounds compared with 2,000 pounds for the Lightning.

Its stated competitive advantage, wheel-hub motors that are meant to increase maneuverability, rely on wiring subject to intensive wear and tear, Abuelsamid said.

Lordstown has also been undercut by legacy players such as Ford and GM, which have dealership and service networks catering to commercial customers.

Commercial customers "need vehicles that are reliable, and when there is an issue, they need a support network that can quickly get the trucks fixed and back on the road," said Abuelsamid.

"This is a new manufacturer with no experience, no history — to the degree that there is a history, going back to Workhorse Group, it has been a pretty bad history in terms of reliability."

Now, the company's future hinges on the sale of that vehicle technology.

Whether any automaker will buy the Endurance and its assets, which Lordstown says is "a fully homologated and certified, production-launched vehicle that can serve as a springboard," remains to be seen, but Hightower appears undeterred.

"You look at any company or any organization that has a long history, you'll find periods of ups and downs," he said. But Lordstown has "really focused on building a culture around integrity, discipline and collaboration."

"Foxconn not living up to their agreement has really stymied or stifled that work," he added.

Reuters contributed to this report.