Ten years ago, Norwegian musical comedians Ylvis had just about everyone on the internet asking “What did the fox say?” A decade on, we have a suggestion for a lyrical rewrite centered on a slightly different question: “Good Lordstown, where the Foxconn did all our money go?”
The “Lordstown” I’m alluding to there is the American electric truck start-up, which late June announced it has filed for bankruptcy and is seeking Chapter 11 protection from creditors, resulting in shares dropping by up to 67 per cent, to US$2.77 as of Monday, June 26, reports Bloomberg. It’s quite the fall: in 2021, stocks in the company were worth over US$400.
Lordstown Motors – named after the location of its HQ, in Lordstown, Ohio – had been ramping up truck production as part of a planned joint venture with Taiwan’s Foxconn, the world’s largest technology manufacturer, renowned for building Apple iPhones. But Foxconn recently said it was ready to pull the plug on the partnership, something Lordstown predicted could bring down the automaker if both sides couldn’t come to terms. It is, as a result, also filing a lawsuit against Foxconn.
In the bankruptcy filing, Lordstown indicated it had as much as US$500 million of both assets and liabilities, and zero debt. So what happened?
Let’s go back a few months. In November 2022, Foxconn agreed to sink as much as US$170 million into Lordstown and occupy two of its board seats, giving Lordstown desperately needed capital and giving Foxconn a larger presence in the automotive industry. Foxconn would also buy the old General Motors factory in Lordstown, Ohio from Lordstown, and make the company’s Endurance EV pickup truck there. January 2023 comes around, and things get messy as Lordstown asks Foxconn to halt production, since manufacturing costs were exceeding the already overly-ambitious retail price of US$65,000. Lordstown wanted a lifeline in the form of another partner to divvy up costs.
What did the Foxconn say do in response? It stopped talks with Lordstown, alleging the automaker had not fulfilled its share of the investment agreement. Deep pockets and short arms do not a good pair make.
The episode marks the latest in crisis-trends for the EV almost-maker, as it’s been hit with short-seller claims and a Securities and Exchange Commission (SEC) inquiry about inaccurate pre-orders. Exaggerating size never works, amirite?
Remember that Foxconn owns the manufacturing plant, and still wants to itself become an EV manufacturer in North America. The Taiwanese juggernaut is looking to plug into the global EV market and wants about five per cent of it by 2025—a figure they it won’t reach while carpooling with Lordstown.
Keyword: EV start-up Lordstown files for bankruptcy, sues Foxconn