After failing to resolve a Foxconn investment dispute, Lordstown Motors (RIDE.O) filed for bankruptcy and put itself up for sale on Tuesday.
Lordstown fell 35.6% pre-market. The automaker, named for its Ohio hometown, filed for bankruptcy in Delaware and sued Foxconn.
Lordstown filed a bankruptcy complaint accusing the electronics business of fraud and violating commitments in failing to invest up to $170 million in the electric-vehicle manufacturer.
Foxconn spent $52.7 million in Lordstown as part of the arrangement and owned 8.4% of the E.V. maker. Lordstown claims Foxconn is not buying more of its stock as promised and deceived the E.V. producer on vehicle development.
Foxconn, widely known for producing Apple (AAPL.O) iPhones, claims Lordstown broke the investment agreement when the automaker’s stock fell below $1 per share. Foxconn did not immediately comment.
The dueling filings set up an international commercial conflict that might raise scrutiny of Foxconn’s E.V. ambitions and collaborations with Lordstown and other automakers.
According to the lawsuit, Foxconn failed to meet financing promises and refused to engage with Lordstown on projects that Foxconn allegedly directed and supported in its work with the automaker on future vehicles.
In a regulatory filing earlier this month, 2018 startup Lordstown claimed it planned to sue Foxconn after receiving a letter that caused Lordstown to assume Foxconn would not make its promised investment.
That regulatory filing accused Foxconn of a “pattern of bad faith” that caused “material and irreparable harm” to Lordstown. Lordstown warned in May that Foxconn’s uncertainty might cause bankruptcy.
The automaker’s top product, the Endurance electric pickup truck, is made at a former General Motors small-car factory in Lordstown, Ohio, for commercial customers, including municipal governments. Foxconn bought Lordstown’s facility in 2022.
After overcoming supplier quality difficulties, Lordstown began Endurance manufacturing in April. Since February, automobile shares have fallen below $3.
If Lordstown can’t find a buyer to restart Endurance production, Foxconn’s Ohio factory might attract foreign automakers eager to build cars in the U.S quickly.
Lordstown declared bankruptcy to sell. It lacks a stalking horse bidder, establishing a minimum price in an auction.
Lordstown Chief Executive Edward Hightower told Reuters the Endurance company might be attractive to another automaker eager to enter the E.V. market quickly during the Biden administration’s push away from gasoline-powered automobiles.
Lordstown isn’t the only SPAC-era EV startup to fail. Lordstown was a notable member of that class because of its location and its challenge to the heritage Detroit manufacturers’ high-margin pickup truck market.
G.M. (GM.N) closed its Northeast Ohio Lordstown small-car facility in November 2018. President Donald Trump and other Ohio politicians pressured GM CEO Mary Barra to reverse the decision or sell. Lordstown Motors, founded by the former Workhorse Group CEO, bought the factory from G.M.
Lordstown joined a group of E.V. companies that went public through reverse mergers with DiamondPeak Holdings in October 2020.
Like Nikola (NKLA.O), Lordstown has failed to meet investors’ high expectations. After admitting to overstating electric truck pre-orders, its CEO and creator, Stephen Burns, resigned in 2021.
Lordstown’s finance chief also quit. A June regulatory filing shows Burns sold his Lordstown investment.
Ford Motor (F.N.) launched its electrified F-150 Lightning pickup truck for commercial customers in 2021 and 2022 while regulators and the Justice Department investigated Lordstown.
Rivian’s 2022 luxury electric truck debuted. G.M. and Stellantis plan electric pickups. Tesla (TSLA.O) will start making its Cybertruck late this year.
Lordstown said it struggled to increase Endurance truck manufacturing during the previous six months due to the Foxconn conflict, market conditions, and its cost-intensive industry.
Lordstown said their few trucks had “substantially higher” material costs in a May regulatory filing.
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