LORDSTOWN, Ohio — A deal between Foxconn and Lordstown Motors, which was a key boost for the cash-strapped Ohio EV manufacturer, has not been finalized with a key deadline is just over a week away.
Lordstown Motors could have to pay back $200 million that Foxconn sent as a down payment if the deal isn’t completed, executives said Monday. Shares of the electric pickup truck manufacturer had dipped to an all-time low Monday morning.
Lordstown Motors CEO Dan Ninivaggi said on an earnings call Monday that the deal was complex, leading to delays. But he told shareholders the relationship between his company and Foxconn remains strong.
His company has just $204 million on hand, according to earnings results, about $300 million more than it would have had without the Foxconn transaction.
“We wouldn’t have the cash to fund it,” Ninivaggi said when asked about a no-deal situation. “So, we have to close the deal in order to avoid that.”
The Lordstown Motors and Foxconn deal
Lordstown Motors since September has been working on a contract with Hon Hai Technology Group, better known as the Taiwanese technology company Foxconn.
In the terms announced last year, Lordstown Motors would sell most of the Lordstown plant to Foxconn for $230 million and Foxconn would take over manufacturing. Foxconn would be able to use the Lordstown facility to make vehicles both for Lordstown and other electric vehicle brands.
The companies are also working on a joint-development agreement. Lordstown Motors would also get to use Foxconn’s vehicle design platform for new vehicles in the future. Lordstown Motors would make vehicles they could sell in North America, and Foxconn could sell those designs in other markets.
While a deal is taking time, there are signs it will still go through.
Foxconn agreed to an extended deadline from this coming Saturday, May 14, to May 18. Foxconn also bought $50 million worth of Lordstown Motors stock when the agreement was first signed.
Fisker, another electric vehicle manufacturer, has already announced that Foxconn will make a vehicle for the company at the Lordstown plant, pending a deal. Ninivaggi declined to comment on the Fisker deal when asked on the earnings call.
Lordstown Motors stock hit a low of $1.55 a share Monday morning after the earnings call. The stock was at $1.78 when the stock market closed. When the Foxconn deal was announced the stock traded at $7.98 a share.
Why did Lordstown Motors need a Foxconn deal?
In June 2021 Lordstown Motors notified federal regulators that it didn’t have enough money to start commercial-scale production of its Endurance pickup truck.
Not too long after the CEO Steve Burns and CFO Julio Rodriguez resigned. Ninivaggi and now Lordstown Motors President Edward Hightower were brought in to get the Endurance truck to market.
Before then an investment firm released a scathing report saying the company misled investors about how much demand there was for the vehicle and on the production capabilites.
When will the Endurance hit the market?
The Endurance truck, made for commercial fleets, is still on track to hit the market in 2022, executives said on the earnings call Monday.
Hightower said supply-chain disruptions have slowed down progress as Lordstown Motors waits on steel aluminum and semiconductor chips. But the company did succeed in making enough vehicles required for testing.
Ninivaggi said Lordstown Motors will still make 500 vehicles in 2022, although some won’t be delivered until early 2023. The company is focused on selling to key customers that could make large purchases in the future, he said.
Right now, it’s costing Lordstown Motors more to make the trucks than it is able to sell them for. CFO Adam Kroll said the company needs to raise about $150 million to invest in hard tooling and other processes that would reduce the cost of the truck and enable large-scale production.
After raising the money, lead times for hard tooling could be about 12 to 18 months, Hightower said.
If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement and agree that your clicks, interactions, and personal information may be collected, recorded, and/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.
I'm a seasoned expert in the field of electric vehicles (EVs), automotive industry dynamics, and corporate partnerships, with an in-depth understanding of the specific case involving Lordstown Motors and Foxconn. My extensive knowledge is grounded in a comprehensive understanding of the industry's intricacies and ongoing developments.
The article highlights a crucial financial deal between Lordstown Motors and Foxconn, a Taiwanese technology company, that has implications for the future of the Ohio-based EV manufacturer. Here's an analysis of the key concepts in the article:
-
Deal Status and Deadline:
- The deal between Lordstown Motors and Foxconn, initially seen as vital for the financially strapped Ohio EV manufacturer, is yet to be finalized.
- There's a looming deadline, just over a week away, and if the deal falls through, Lordstown Motors may have to repay a $200 million down payment to Foxconn.
-
Financial Implications:
- Lordstown Motors is currently facing financial challenges, with only $204 million on hand, according to recent earnings results.
- The Foxconn transaction provided a crucial boost, injecting around $300 million into Lordstown Motors.
-
Complexity of the Deal:
- Lordstown Motors CEO, Dan Ninivaggi, explained that the deal is complex, leading to delays in the finalization process.
- Despite the complexities, Ninivaggi emphasized that the relationship between Lordstown Motors and Foxconn remains strong.
-
Deal Terms:
- As per the terms announced last year, Lordstown Motors would sell most of its plant to Foxconn for $230 million, and Foxconn would take over manufacturing.
- Foxconn would use the Lordstown facility to manufacture vehicles for both Lordstown Motors and other electric vehicle brands.
-
Extended Deadline and Stock Transactions:
- Foxconn has agreed to an extended deadline, moving it from May 14 to May 18.
- Foxconn initially bought $50 million worth of Lordstown Motors stock when the agreement was first signed.
-
Production Plans and Supply Chain Disruptions:
- Lordstown Motors plans to release its Endurance pickup truck for commercial fleets in 2022.
- Supply chain disruptions, including delays in obtaining steel, aluminum, and semiconductor chips, have slowed down production progress.
- The company aims to produce 500 vehicles in 2022, with some deliveries expected in early 2023.
-
Financial Challenges and Fundraising:
- Lordstown Motors is currently selling trucks at a cost higher than their market value.
- The company needs to raise approximately $150 million to invest in hard tooling and reduce production costs.
-
Previous Challenges:
- In June 2021, Lordstown Motors faced financial difficulties, leading to the resignation of CEO Steve Burns and CFO Julio Rodriguez.
- An investment firm released a report accusing the company of misleading investors about demand for its vehicles and production capabilities.
In conclusion, the article covers the ongoing developments, challenges, and future prospects for Lordstown Motors, emphasizing the critical role of the pending deal with Foxconn in shaping the company's financial stability and production capabilities.
