Things don't seem to be looking up for cash-strapped electric vehicle startup Lordstown Motors (RIDE)
They even seem to be getting worse: GM (GM), whose presence as a shareholder could ease investors' concerns, has just withdrawn.
The owner of the Chevrolet and Cadillac brands has sold its remaining stake in Lordstown Motors, a spokesman, Jim Cain, confirmed to TheStreet.
"We did sell our 7.5-million-share stake during the fourth quarter," Cain said in an email statement, confirming a report from the Detroit Free Press.
This participation amounted to less than 5% of Lordstown. The initial equity value was $75 million.
"You’ll recall, we made a small investment to facilitate the sale of our former assembly plant and help the plant resume production," Cain added.
The supply agreements between Lordstown and GM remain intact. GM in 2020 agreed to provide Lordstown with airbags, steering columns and steering wheels, according to a company filing.
Lordstown Needs More Money
GM is exiting as the Lordstown, Ohio, startup once again finds itself in a very fragile position. Lordstown, which still hasn't produced a vehicle, is financially drained.
The company needs to raise an additional $250 million to build the first 500 units of its Endurance electric pickups, its executives have said.
"There's obviously levers we can pull. And conserve liquidity, which always come with significant tradeoffs, like we talked about the impact on piece price. But to execute our operating plan for the year we need to raise it in the range of $250 million," Chief Financial Officer Adam Kroll told analysts during the fourth-quarter-earnings call on Feb 28.
The company has slashed its ambitious production targets.
It expects commercial production and sales of the Endurance, its first electric pickup, of some 500 units in 2022, growing to as many as 2,500 in 2023. In the runup to its IPO, Lordstown had said it wanted to produce 2,000 Endurance pickups in its first year, followed by 32,000 units during the first full year of production.
"We exercised discipline in our spending activity, made substantial progress towards the launch of the Endurance, and invested in our people, processes and technologies. However, we understand that raising additional capital in the near term is critical to the successful launch of the Endurance and the execution of our operating plan," Kroll explained.
Lordstown
Production Targets Lowered Again
Lordstown also cast doubt on the factory deal, unveiled last September, with Foxconn, saying it was not as advanced as expected. It is mainly on this agreement that the survival of the car manufacturer depends.
"We're not giving up, obviously, on the Endurance. We need to get that into production. Full-size pickup truck is going to be a unique product out there, and we think that there could be derivatives in future vehicles built off that platform as well," Chief Executive Daniel Ninivaggi told analysts.
He added: "The relationship with Foxconn is very positive and the discussions are ongoing. But we need to bring that to a conclusion, and I'm hopeful that we'll get there."
Emmanuel Rosner, analyst at Deutsche Bank Securities, asked for more clarity.
"And just to understand I guess what is already agreed upon and what is being discussed: So the part that is agreed upon is essentially a contract manufacturing for the pickup and the part that isn't is an agreement on utilizing their platform for future vehicles," Rosner said.
"That's right, and an appropriate funding arrangement around that," Ninivaggi responded.
CFO Kroll then said: "To be clear – sorry, Emmanuel, the contract manufacturing agreement is not finalized."
Ninivaggi concluded: "We've made significant progress. We filed a draft with CFIUS, but it's not yet final," he said, referring to the Committee on Foreign Investment in the U.S.
Lordstown Motors' history began in 2018 when GM said it wanted to close production sites including its plant in Lordstown, Ohio. President Donald Trump, who had made Made in America one of his campaign slogans, asked CEO Mary Barra to reconsider her decision.
In May 2019, GM had agreed to sell the factory to electric-truck manufacturer Workhorse.
"GREAT NEWS FOR OHIO! Just spoke to Mary Barra, CEO of General Motors, who informed me that, subject to a UAW agreement etc., GM will be selling their beautiful Lordstown Plant to Workhorse, where they plan to build Electric Trucks. GM will also be spending $700,000,000 in Ohio..." the former president posted on Twitter on May 8, 2019.
A Turbulent History
Steve Burns, the former CEO of Workhorse, founded a new company, Lordstown Motors, in which GM invested.
The firm spent some $240 million to renovate the factory so it can produce its first vehicle, the Endurance electric pickup.
In October 2020, Lordstown went public via a special purpose acquisition company. Such deals speed new companies to the public markets outside the more complicated initial public offering process.
The transaction enabled Lordstown to raise $675 million to get the Endurance into production. The company plan was to begin producing the pickup in early 2021, while deliveries were expected to begin in late summer of that year.
But Lordstown ran into operational difficulties. The startup said it was running short of money to develop the Endurance.
In March 2021, the short-seller Hindenburg Research accused Lordstown of lying about its production capacities, the demand for its product, and its revenue.
The Securities and Exchange Commission (SEC) then opened an investigation.
And Burns was forced out in June.
Lordstown also said it had made "inaccurate" statements on certain preorders, and the company delayed the launch of the pickup.
In September, the company announced the sale of its assembly plant to Taiwanese electronics giant Foxconn. (FXCOF) The deal, valued at $230 million, was a joint venture between the two companies that hoped to eventually see production of the all-electric Endurance pickup.
Foxconn, notably known for making Apple (AAPL) iPhones, also said it would invest $50 million in the American startup's shares.
The Taipei-based company also committed to employing Lordstown workers in production and operations departments.
Foxconn also intended to develop vehicles in the Ohio plant for Fisker, (FSR) another specialist in electric vehicles with which the group is working.
