Lordstown Motorsthe 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 investors Foxconn.
Taiwanese company Foxconn, officially known as Hon Hai Precision Industry, is best known as a contract manufacturer for companies such as Apple.
The American startup has announced in 2021 that it is selling its Lordstown, Ohio plant, a former General Motors facility, to Foxconn as part of a major investment by the Taiwanese company that will see it continue to produce the Endurance.
Lordstown and Foxconn signed a new agreement in November last year that said the two would invest up to US$170 million (AU$258 million) and continue a joint electric vehicle (EV) development program.
Foxconn paid an early US$52.7 million (AU$79.8 million) of the initially promised investment but withheld further payments after claiming Lordstown was the first to breach the contract in May, as the value of its shares had fallen below a dollar a share.
The lawsuit against Foxconn, filed in Delaware, alleges fraud, bad faith, and alleged breach of contract has caused “material and irreparable harm” to Lordstown’s current and potential value.
Lordstown filed for Chapter 11 bankruptcy as part of a restructuring aimed at protecting its assets after the failed Foxconn commitment.
The startup described Foxconn’s actions as “a willful and consistent failure to meet its commercial and financial commitments to the Company.”
“(We) have subsequently engaged with Foxconn in a strategic partnership aimed at leveraging this expertise into a broader EV development platform… We will pursue our litigation claims against Foxconn accordingly,” said Lordstown president and CEO Edward Hightower.
Mr Hightower claimed that Foxconn’s failure to act on its commitments left “Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of stakeholders”.
The firm began structuring its assets in preparation for the sale of the Endurance vehicle and related intellectual property.
Lordstown is appealing to potential buyers with a fully homologated Endurance that it says could serve as a springboard to create multiple EV variants with limited initial cost.
The partnership between Lordstown and Foxconn aims to leverage Lordstown’s EV engineering technology and intellectual property with Foxconn’s supply chain capabilities.
Lordstown also expects, per the agreement, that Foxconn will continue to provide support as part of a joint vehicle development program for Endurance and a second EV.
follow BloombergMr. Hightower flew to Taiwan last year in an attempt to clear a “logjam” delaying the joint project, which was supposedly a mid-size crossover, but was “ghosted” by the CEO of Foxtron, a company majority-owned by Foxconn and created to produce EVs.
Foxconn told the publication that it has a “positive attitude in conducting constructive negotiations with Lordstown Motors and in assisting Lordstown in finding a solution to its financial problems.”
“However, at this time, Lordstown Motors is continuously trying to mislead the public and refuses to implement the investment agreement between the two parties according to its terms,” Foxconn said in the statement.
It added it “hopes to continue discussions and reach a solution that can satisfy all stakeholders, without resorting to groundless legal action, but so far the two sides have not reached a consensus.”
The inability to resolve its conflict with Foxconn is just the latest example of organizational problems for Lordstown.
In June 2021, it notified the US Securities and Exchange Commission (SEC) of a lack of funds, which was followed by CEO Steve Burns and CFO Julio Rodriguez resigning from their roles after allegations emerged of pre-orders for the electric Endurance pickup truck.
Mainly serving commercial customers such as local government and small fleets, the Lordstown Endurance four-wheel drive 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 have been produced.
Foxconn still has an agreement with another startup, Fisker, to manufacture its EVs.
The Taiwanese company has never been without controversy, with the company being the subject of an exposé by The Verge.
It acquired a large tract of land in Wisconsin, with many homes demolished under eminent domain, to build an LCD factory and create 13,000 jobs.
Instead, after about two years the complex was mostly unfinished, producing nothing, and reportedly hiring people just to meet tax subsidy quotas.
Overall, Foxconn cut its planned investment from US$10 billion (A$13.84b) to just US$672 million (A$930 million) and cut the number of jobs to 1454.