GM Loans EV Startup Lordstown Motors $40 Million to buy its Shuttered Ohio Factory
【Summary】In an unprecedented series of events, U.S. automaker General Motors announced that it loaned electric truck startup Lordstown Motors $40 million to buy its shuttered factory in Lordstown, Ohio. GM closed the plant earlier this year after the automaker discontinued the Chevy Cruze sedan, which was built there.
In an unprecedented series of events, U.S. automaker General Motors announced that it loaned electric truck startup Lordstown Motors $40 million to buy its shuttered factory in Lordstown, Ohio, Reuters reports.
The loan agreement, which was reported on Monday by the Business Journal in Youngstown, was filed in Trumbull County, Ohio last week.
"We structured the sales agreement to help support Lordstown Motors' launch plans for the Endurance pickup," GM spokesman Jim Cain said to Reuters. Cain added it "allows them to take possession of the plant and to cover some operating expenses while they undertake their capital raise."
GM itself is not investing in the venture with Lordstown Motor Corp, but Cain said to Reuters GM's financing could increase to $50 million. GM closed the plant earlier this year after the automaker axed the poor-selling Chevy Cruze sedan, which was built there.
The closing of the plant made headlines earlier this year with President Trump publicly criticizing GM for off laying off over 4,000 workers. After the announcement, President Trump accused GM of letting the U.S. down and claimed that "other much better car companies" are coming to the United States "in droves."
Trump was possibly referring to Toyota's March announcement that it would make a $750 million investment in five of its existing U.S. factories. Trump demanding that GM either reopen or sell the Lordstown assembly plant. He also urged the automaker to close a factory in China or Mexico instead of closing the Lordstown factory.
In May, Trump prematurely tweeted that Workhorse was buying the former GM plant, although its hasn't been confirmed by either Workhorse or GM.
Lordstown Motors Corp, which is 10% owned by Workhorse Group Inc, bought the plant and equipment for $20 million last month as part of its plan to begin building commercial electric trucks at the former GM plant by the end of 2020.
Lordstown Motors has been working on the engineering of the new truck called the "Endurance", and the company hired Rich Schmidt, a former director of manufacturing at Tesla Inc, as chief production officer.
Lordstown CEO Steve Burns told Reuters last month he hopes to start building pre-production prototypes at the plant by April 2020 and to start production by November of next year, with an initial workforce of 400 hourly workers.
Burns said last month the company hopes to raise more than $300 million, the Business Journal reported. Burns told Reuters it retained Ohio investment bank Brown Gibbons Lang & Co in its capital fundraising effort.
In addition to Lordstown, GM also closed its Oshawa Assembly plant and planned to close its Detroit-Hamtramck facility in a cost cutting move as the automaker shifts towards developing more electric vehicles. However, the Detroit-Hamtramck facility was saved, at least for now, after last minute negotiations between the UAW and GM in October, a month after GM workers went on strike.
GM builds the Cadillac CTS at the Detroit-Hamtramck but production of the sedan will end in January. Detroit news outlet WXYZ said that workers are being told that GM plans to build electric vehicles there once production of the CTS ends.
Last week, GM and South Koreaan battery maker LG Chem announced the formation of a $2.3 billion joint venture to build an electric vehicle battery cell plant in Ohio, which will be one of the world's largest battery facilities, even rivaling Tesla's Nevada gigafactory.
The plant, to be built near the Lordstown complex, will employ more than 1,100 people, the companies said last week.
As part of the Lordstown sale, GM has the option to lease land near the assembly plant that it could use for the battery plant.
GM announced a restructuring plan in November 2018 with plans to cut 15% of its global workforce (equal to around 14,000 workers), in a cost cutting move designed to save the company $6 billion in annual costs in a shift towards building more electric models, crossovers and SUVs.
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