Beleaguered EV company Lordstown Motors seemed to have found a financial savior in Foxconn, the Taiwanese manufacturer best known for making iPhones for Apple. But now, with that relationship faltering, it appears the the road is ending for Lordstown’s Endurance EV truck and maybe even the company.
Lordstown issued a warning May 1 that it could be forced to file for bankruptcy because Foxconn may pull out of a critical funding deal. On Thursday, the company said in its first-quarter earnings report that “it anticipates production of the Endurance will cease in the near future” after repeated production delays, failing to find a strategic partner for the truck and extremely limited ability to raise capital in the current market environment.
Lordstown Motors had just $108 million in cash at the end of the first quarter, according to its earnings report.
Shares of Lordstown Motors, which hit an all-time low of $0.25 earlier this week, were trading up at $0.39 by midday.
The company, along with manufacturing partner Foxconn, started commercial production of the Endurance in the third quarter of 2022. The first three vehicles were delivered towards the end of the year. Manufacturing slowdowns coupled with quality issues discovered in the truck, which also prompted a voluntary recall, prompted the company to pause production and customer deliveries until mid-April 2023.
The situation became dire after Foxconn sent a letter April 21 to Lordstown stating the automaker was in breach of the investment agreement because its stock price fell below $1 for 30 days and was at risk of being delisted on the Nasdaq exchange. Foxconn warned it would terminate the investment agreement if the breach is not resolved within 30 days.
Buzzy beginning to failure
Lordstown has had a tumultuous run since its founding in 2019. The startup, an offshoot of another struggling EV company Workhorse Group, reached a deal in 2020 to merge with special purpose acquisition company DiamondPeak Holdings Corp., with a market value of $1.6 billion.
There was considerable attention and hype around the company, particularly in 2020 when it revealed a prototype of its Endurance EV truck. The company’s founder Steve Burns, who has since been ousted, was bullish about demand for the truck. He claimed at the time that the company had received 20,000 pre-orders for the truck, essentially its entire planned production capacity for the year. The company had planned to produce 20,000 electric commercial trucks annually, starting in 2021, at the former GM Assembly Plant in Lordstown, Ohio.
That date came and went as a string of internal scandals, an SEC investigation and financial struggles hobbled the company. In January 2021, the company’s leadership claimed the pre-orders and jumped to 100,000 vehicles. Two months later, Hindenburg Research, the short-seller firm whose report on Nikola Motor led to a Securities and Exchange Commission investigation and the resignation of its founder, said it had taken a short position on Lordstown Motors. Hindenburg said, at the time, that its short position was based on a company that has “no revenue and no sellable product, which we believe has misled investors on both its demand and production capabilities.”
Hindenburg also said that “extensive research reveals that the company’s orders appear largely fictitious and used as a prop to raise capital and confer legitimacy.”
Just two months later, Lordstown halved production volumes of the Endurance — from around 2,200 vehicles to just 1,000 — due to a lack of funding. Lordstown execs dug themselves into a deeper hole by attempting to calm investors a day after its CEO and CTO resigned with statements that they had binding orders from customers that would fund limited production of its electric pickup truck through May 2022. The company retracted those statements within days. The situation became more dire when Department of Justice and the SEC launched separate investigations into the company.