Lordstown Motors, the American manufacturer of the Endurance electric pickup, has announced it has filed for bankruptcy as part of a ‘restructuring process’ and is pursuing legal action against investor Foxconn.
Taiwanese company Foxconn, officially known as Hon Hai Precision Industry, is best known as a contract manufacturer for the likes of Apple.
The American startup had announced in 2021 it was selling its eponymous Lordstown, Ohio factory, a former General Motors facility, to Foxconn as part of a significant investment by the Taiwanese company that would see it continue to produce the Endurance.
Lordstown and Foxconn entered into a new agreement in November last year which said the latter would invest up to US$170 million (AU$258 million) and pursue a joint electric vehicle (EV) development program.
Foxconn paid an initial US$52.7 million (AU$79.8 million) of its initially promised investment but withheld further payment after claiming Lordstown was the first to breach the contract in May, as its share value has fallen below one dollar per share.
The lawsuit against Foxconn, filed in Delaware, alleges fraud, bad faith, and contractual breaches which have allegedly caused “material and irreparable harm” to Lordstown’s current and potential value.
Lordstown is filing Chapter 11 bankruptcy as part of a restructuring intended to protect its assets after Foxconn’s failed commitments. The brand was once celebrated by Donald Trump as a saviour for the Ohio town where the Endurance was to be built.
The startup described Foxconn’s actions as a “wilful and consistent failure to live up to its commercial and financial commitments to the Company.”
“(We) had subsequently engaged with Foxconn in a purposeful, strategic partnership to leverage this expertise into a broader EV development platform… We will vigorously pursue our litigation claims against Foxconn accordingly,” said Lordstown president and CEO Edward Hightower.
Mr Hightower claims that Foxconn’s failure to act on its commitments left “Chapter 11 as the only viable option to maximise the value of Lordstown’s assets for the benefit of stakeholders”.
The firm is beginning to organise its assets in preparation for the sale of the Endurance vehicle and its related intellectual property.
Lordstown is appealing to prospective buyers with the fully homologated Endurance which it says can serve as a springboard to create multiple EV variants with limited startup costs.
The partnership between Lordstown and Foxconn was intended to leverage the technology and intellectual property of Lordstown’s EV engineering with Foxconn’s supply chain capabilities.
Lordstown also expected, per the agreement, that Foxconn would continue to provide support as part of a joint vehicle development program for the Endurance and a second EV.
According to Bloomberg, Mr Hightower flew to Taiwan last year in an attempt to clear the “logjam” which was postponing the joint project, supposedly a mid-sized crossover, but was “ghosted” by the CEO of Foxtron, a company majority-owned by Foxconn and created to produce EVs.
Foxconn told the publication it had “a positive attitude in conducting constructive negotiations with Lordstown Motors and in assisting Lordstown in finding a solution to its financial difficulties.”
“However, during this time, Lordstown Motors has continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties in accordance with its terms,” Foxconn said in the statement.
It added it had “hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus.”
The inability to resolve its conflict with Foxconn is only the most recent example of organisational troubles for Lordstown.
In June 2021, it informed the US Securities and Exchange Commission (SEC) of its lack of funds, which was followed by CEO Steve Burns and CFO Julio Rodriguez resigning from their roles after allegations surfaced about pre-orders for the Endurance electric pick-up truck.
Largely catered towards commercial customers such as local governments and small fleets, the four-wheel drive Lordstown Endurance pickup features four hub motors with a combined peak output of 447kW and has a 0-60mph (0-97km/h) time of around 5.5 seconds.
As of March 2023, 31 units of the Lordstown Endurance had been produced.
Foxconn still has an agreement with another startup, Fisker, to manufacture its EVs.
The Taiwanese company hasn’t been without controversy, with the company the subject of an exposé by The Verge.
It acquired a large swath of land in Wisconsin, with numerous houses being demolished under eminent domain, to build an LCD factory and create 13,000 jobs.
Instead, after around two years its complex is mostly unfinished, producing nothing, and reportedly hiring people just to meet tax subsidy quotas.
In all, Foxconn reduced its planned investment from US$10 billion (A$13.84b) to just US$672 million (A$930m) and cut the number of jobs to 1454.
