Lordstown Motors, the electric vehicle (EV) startup that went public in 2020 filed for bankruptcy and filed a complaint against Foxconn.
We learn in a press release that Lordstown's move comes after the company failed to resolve a dispute with Foxconn over a previously agreed-upon investment.
Lordstown accuses Foxconn of fraudulent conduct and breaking commitments related to the investment agreement.
A Tough Time for Lordstown
In 2021, Foxconn purchased Lordstown's Ohio manufacturing facility for $230 million and agreed to buy 10% of shares. However, Lordstown's stock plummeted, leading to a delisting warning from Nasdaq and putting the company in breach of its agreement with Foxconn.
Foxconn threatened to terminate the investment agreement unless Lordstown regained compliance. Lordstown attempted a reverse stock split as a last-ditch effort, but it was not enough to prevent bankruptcy.
Lordstown's complaint alleges that Foxconn misled the EV maker and pretended to support vehicle development plans to secure ownership of the manufacturing plant and poach skilled employees.
The complaint accuses Foxconn of failing to fulfill its obligations, causing Lordstown to allocate significant resources. Lordstown believes Foxconn's actions have severely damaged the company's business.
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What the Lordstown Motors Bankruptcy Underlines
As TechCrunch explains, Lordstown's bankruptcy puts Foxconn's ownership of the Ohio factory under the spotlight. If Lordstown fails to find a buyer, Foxconn could use the facility to build EVs for overseas automakers taking advantage of incentives for producing EVs in the United States.
Lordstown intends to seek a buyer but does not have an initial offer. The company plans to hold an auction with a minimum bid price. It aims to maximize the value of its assets, including the Endurance all-electric pickup truck and related intellectual property.
Lordstown's bankruptcy follows a series of challenges, including fighting off short-seller claims and facing an inquiry from the Securities and Exchange Commission regarding inflated vehicle pre-orders.
The Ohio plant also became politically contentious after General Motors decided to cease production there, which was seen as a broken promise to bring back jobs.
What's Next?
While Foxconn may lose Lordstown as a customer, the company still owns the manufacturing facility, which aligns with its ambition to offer EV manufacturing services in North America.
Foxconn aims to capture a 5% share of the global EV market by 2025.
Lordstown's CEO and President, Edward Hightower, stated that the company pursued bankruptcy as the only viable option to maximize the value of its assets after Foxconn failed to fulfill its commitments. Lordstown plans to vigorously pursue litigation against Foxconn.
In the bankruptcy process, Lordstown intends to conduct a comprehensive marketing and sale process to find a buyer for its Endurance vehicle and related assets.
The company believes that the Endurance, as a fully homologated and certified production-launched vehicle, can be a springboard for an original equipment manufacturer (OEM) or other strategic purchasers to enter the North American EV full-size truck market at a fraction of the cost and time required for developing a program from scratch.
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