General Motors Sells its Stake in Electric Truck Startup Lordstown Motors
【Summary】General Motors once had big plans for its investment in electric truck startup Lordstown Motors, but after accusations of fraud which led to the sudden departure of Lordstown Chief Executive and founder Steve Burns along with Chief Financial Officer Julio Rodriguez last year, GM is officially walking away. GM announced on Tuesday it has sold off its stake in Lordstown Motors.
U.S. automaker General Motors once had big plans for its investment in electric truck startup Lordstown Motors, but after accusations of fraud, which led to the sudden departure of Lordstown Chief Executive and founder Steve Burns along with Chief Financial Officer Julio Rodriguez last year, GM is officially walking away.
GM announced on Tuesday it has sold off its stake in Lordstown Motors but declined to disclose the total proceeds it received. As reported by Reuters, GM spokesman Jim Cain said the Detroit automaker sold its 7.5 million shares in a series of sales in the fourth quarter of 2021, but the proceeds were not material to GM's financial results.
Like electric truck maker Rivian, Lordstown Motors is one of the few EV startups with its own factory. The EV startup announced in Nov 2019 it acquired the 6.2 million square foot Lordstown assembly plant from GM.
In Nov 2018, GM announced plans to close four U.S. plants, including the Lordstown, Ohio facility, which produced the Chevy Cruze sedan. The plant's closure was part of GM's restructuring plan to trim expenses, including a shift from building sedans to more profitable SUVs and pickups.
But rather than let the factory sit idle, GM agreed to loan Lordstown Motors up to $40 million to buy the plant and retool for electric vehicle production, so the company could begin its ambitious plan of building its first vehicle, the Endurance pickup, which is targeted at commercial customers. GM also made an investment in the company.
The Endurance was engineered to be lightweight, with all-wheel drive and a low center of gravity. Lordstown also touted its lower maintenance costs compared to traditional pickup trucks. Lordstown said the battery-powered Endurance gets the gasoline equivalent of 75 mpg.
In 2019, Lordstown Motors hired Rich Schmidt, a former director of manufacturing at Tesla Inc, as its chief production officer to oversee the production of the battery powered Endurance pickup.
The Lordstown Motors Endurance electric pickup truck.
In Oct 2020, Lordstown launched its IPO in a merger deal with blank-check company Diamond Peak Holdings. The company's shares trade on the NASDAQ under the stock symbol "RIDE".
However, when Lordstown first announced plans to go public in Aug 2020, the company said it had pre-orders for its Endurance pickup truck worth about $1.4 billion. During the unveiling event for the Endurance, Burns said that it had already sold out the first production run of 14,000 Endurace pickups.
Shortly after, well known short seller Hindenburg Research accused Lordstown of misleading investors on the actual pre-orders. The company said the pre orders were non-binding and therefore Hindenburg said that Lordstown had no binding orders for the electric Endurace pickup.
Hindenburg also accused Lordstown of overstating the viability of its technology and misleading investors about production plans of the Endurance.
By March 2021, Hindenburg disclosed it had taken a short position in Lordstown shares, saying the company had misled both consumers and investors. Subsequently, the Securities and Exchange Commission (SEC) had asked the company for information related to its SPAC merger and pre-orders of its vehicles.
CEO Burns was Lordstown's largest shareholder with a stake of more than 26% when he resigned after an internal investigation into the claims of fraud.
Lordstown, which posted a bigger fourth-quarter loss, said on Monday it had expected to manufacture and sell about 500 of its Endurance electric pickup trucks this year, after previously forecasting sales of about 32,000 vehicles in the first full year of production.
As a result of accusations against Lordstown, the company stock price fell significantly and the company quickly burned through its cash reserves. Its shares are down nearly 87% since March 2021 and were trading at just $2.69 on Tuesday.
Several times last year, Lordstown warned that there was "substantial doubt" that it can continue operations without an influx of new capital, which seems increasingly unlikely to happen as major investors like GM dump their shares.
Now Lordstown is reportedly in talks to sell its Ohio EV factory to Taiwan contract manufacturer Foxconn, which is best known as the assembler of Apple's iPhone. Foxconn is seeking to set up EV manufacturing in the U.S. and will reportedly help Lordstown build the Endurance pickup.
In November, Foxconn said it will pay Lordstown $230 million for its Ohio factory and most of the equipment inside of it. The only items not included with the deal are Lordstown Motors' hub motors assembly, battery modules, and battery pack assemblies.
The deal to sell the plant will be finalized by April 30, 2022, which leaves Lordstown Motors' future unclear.
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