News is only just beginning to come out about GM selling its shares of Lordstown Motors, the floundering EV truck startup. However, even before GM’s latest EV truck, the 2024 Chevrolet Silverado EV broke into view, the sale of GM’s 7.5 million shares of Lordstown had already been completed. While some are focusing on the money GM lost in this misadventure, the reality is that the investment was less about getting Lordstown Motors going, and more about offloading the plant for a variety of reasons. It sounds weird, we know, but here’s how it all worked out.
A Timeline Of Events
This story really begins around November of 2018, when GM announced that production of several vehicles was coming to a close and a few of its plants were being un-allocated. The one crucial to our story is the Lordstown, Ohio plant where the Chevrolet Cruze was produced for the U.S. At the time, there was significant political pressure to keep the plant open.
The good news for GM, however, was that around that same time, the company that would become Lordstown Motors, founded by Workhorse’s ex-CEO Steve Burns, began to form—a process that would continue into early 2019. The plan was to license an EV pickup truck platform developed by Workhorse called the W-15. This platform, as used by Lordstown, would later become the Endurance—but first, it needed a plant to manufacture it. By the later 2019, Lordstown and GM would come to an agreement and transfer ownership of the Lordstown, Ohio plant to its namesake company.
This agreement saw no significant funds exchanged. All GM did was sign over the mortgage and help fund some of the operating costs and other expenses while Lordstown was busy raising money to get off the ground. In return, what GM gained were positive press for selling the deallocated plant to an American startup rather than closing it entirely, as well as clearing its books of a large property that wasn’t in use.
About a year later, Lordstown Motors merged with a Special Purpose Acquisition Company (SPAC). SPACs raise money from other investors with the intention of merging with an existing company or startup. This typically happens with startups more than other existing companies. The key here was that this SPAC was already a publicly traded company, which meant that Lordstown Motors went from privately owned to publicly traded “overnight.” As part of the initial public offering (IPO) process, GM contributed $25 million in cash and $50 million in-kind—which was the handover of the plant, its equipment, and GM’s help with operational costs—and received 7.5 million shares in Lordstown Motors.
Finally, in the fourth quarter of 2021, GM sold its shares into the open market in a series of trades, ending their investment into Lordstown Motors. GM didn’t make a fuss, nor did it release a statement when it happened. It didn’t even make a filing of its divestment of its Lordstown shares because those 7.5 million shares only equated to 5 percent or less of a stake in Lordstown Motors. The sale, and the loss, also wasn’t filed in the sale of its shares, which did occur in the open market, as the result of the sales were “immaterial to GM’s financial results.” On or around March 1, 2022, the Detroit Free Press asked about the status of GM’s investment after Lordstown reported their quarterly financial results. When it reported on this news, it was a shock as there was no hubbub or even a mention of it when GM released its Q4 report earlier in 2021.
Lordstown, in the meantime, has struggled mightily. Unable to produce its Endurance pickup itself at the Lordstown plant, it cut a deal with Taiwanese manufacturer Foxconn to buy the plant, with Foxconn stepping in to provide contract manufacturing. What this means for Lordstowns’ viability is anyone’s guess, as Foxconn infamously upended a deal it had to build a large electronics plant in Wisconsin.
What Was Lordstown to GM, Anyways?
It seems clear that GM’s Lordstown investment was more about getting rid of a problem rather than investing in the hope of getting a return. While the loss GM took seems large, in reality it represents just a small portion of Lordstown Motors’ overall shares.
To put the size of GM’s investment into perspective, Ford’s $1.2 billion dollar stake in Rivian, when it did own the shares, was only a 12 percent ownership of the rival EV pickup company. GM only invested $75 million (again, $25 million in a cash investment, $50 million towards the mortgage and operational costs of the plant) in exchange for 7.5 million in shares of Lordstown Motors just to get rid of an unused plant. As Jim Cain, Executive Director, Finance, Sales and Corporate Development Communications at GM stated, “We invested in Lordstown Motors to help them complete the purchase of our former assembly plant and return it to vehicle production. We sold our small stake in the company in the fourth quarter of 2021.”
And the sale of the plant arguably allowed GM to relieve itself of some political pressure after the closure of the Lordstown plant in 2019; with new owners and GM’s help, the idea was, jobs would come back to Ohio. How it all played out was mostly out of GM’s hands. What was out of the company’s hands was ownership of the problems that Lordstown Motors encountered.
GM Wasn’t Getting Out While The Getting Was Good
While GM’s investment lost value on this sale, as shares of Lordstown Motors have dropped since GM acquired those shares, the automaker still received a non-zero amount in selling its small stake and off-loading a huge car plant. It also was able to leverage optics of bringing jobs back to a plant that it had otherwise closed. GM’s small stake, and its relatively tiny cash outlay as part of its Lordstown arrangement, meant it wasn’t overly exposed. Despite the losses, and the troubles encountered by Lordstown Motors in the deal’s wake, GM seems to have made out all right.
Keyword: What GM's Divestment Of Lordstown Motors Shares Really Means