Lordstown Motors to sell former GM Ohio plant to Foxconn

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Lordstown Motors electric truck manufacturer Corp.

STROLL 8.42%

said Thursday he plans to sell its Ohio auto plant to contract assembler Foxconn Technology Group, marking a major pivot for the cash-strapped startup as it struggles to put its first pick -up in the market.

The two companies have entered into a non-binding agreement for Lordstown to sell the facility and ownership, except certain assets, for a purchase price of $ 230 million, Lordstown Motors chief executive Daniel said. Ninivaggi.

Additionally, Foxconn plans to invest $ 50 million in the Ohio-based startup through a common stock purchase. Lordstown Motors would use the Taipei-based electronic assembler to build vehicles for the company at the plant, including its first pickup, the Endurance, Ninivaggi said.

“This will open up opportunities to accelerate the speed of new vehicles and reduce costs,” he said. A definitive purchase agreement is expected to be reached by October 31 and the deal could be concluded next April, Ninivaggi added.

The purchase deal comes as Lordstown Motors was trying to raise capital, after warning earlier this year that it was burning cash faster than expected and running out of funds to increase commercial production.

The acquisition is also a milestone for Foxconn, which aims to expand into the auto industry, assembling vehicles on a contract basis, much the same way it builds iPhones for Apple. Inc.

Earlier this year, Foxconn struck a deal with another electric vehicle startup, Fisker Inc.,

together produce more than 250,000 vehicles per year. The collaboration would be for Fisker’s second model, although an exact location was not specified at the time.

Mr Ninivaggi said Foxconn would also build Fisker models at the Ohio plant, which for years had made small cars for General Motors. Co.

Foxconn would offer employment to certain agreed operating and manufacturing employees, Lordstown Motors said.

Lordstown Motors plans to use Foxconn to manufacture vehicles at the Ohio Auto Plant.


Photo:

Nate Smallwood for The Wall Street Journal

Lordstown Motors and Foxconn have also agreed to work together on the design and engineering of the Ohio startup’s future models, including a second and third model coming at an unspecified date, Ninivaggi said.

Foxconn, formerly known as Hon Hai Precision Industry Co., sought to diversify beyond its core electronics business and made several attempts to expand manufacturing into the United States. In 2017, Foxconn said it would invest $ 10 billion to build LCD displays in Wisconsin, but has since narrowed its ambitions to a smaller facility.

Lordstown Motors took over the Ohio plant two years ago from GM, which was under pressure from then-President Donald Trump and other politicians to find a new home for the assembly plant approximately 6 million square feet.

Lordstown Motors acquired the then closed facility for $ 20 million. It has been working to retool it to build zero-emission pickup trucks with the aim of launching limited production of its first model, the all-electric Endurance, by the end of September.

Mr Ninivaggi said the company plans to build pre-production Endurance trucks until late 2021 and early next year, with consumer deliveries expected in 2022. He said the company plans to provide an update on the truck’s schedule during its third quarter results. call, scheduled for mid-November.

“The facility is huge,” he says. “For us, completing the installation on our own is limited. Teaming up with Foxconn gives Lordstown Motors the ability to scale up its operations much faster than it could on its own, he said.

Lordstown Motors announced Thursday that it has hired Jefferies LLC to advise the company on its financing options. The electric vehicle maker said it had a cash balance of $ 210 million to $ 240 million as of September 30.

Lordstown Motors was one of many new electric vehicle startups to go public in the past year through reverse merger deals with specialist acquisition companies, or PSPCs. Its debut came as Wall Street’s zeal for green tech in the auto industry intensified and many investors sought to replicate Tesla’s success. Inc.

surge in shares.

The startup’s shares first erupted following its listing, but have fallen in recent months as the company has faced a number of challenges.

In March, New York-based short seller Hindenburg Research released a report questioning it could start production by September and alleging the company overestimated the strength of pre-orders for the truck.

A committee of the company’s board of directors, formed to review the short seller’s claims, found inaccuracies in the statements he had made about his pre-order book. The committee rejected other aspects of the report, such as the claim that a September launch date for Endurance was unrealistic.

In June, then founder and CEO Steve Burns resigned, shortly after the company revealed that the Securities and Exchange Commission was investigating its activities.

Lordstown Motors has said it is cooperating with this investigation, as well as a Justice Department investigation.

In August, he hired Mr. Ninivaggi, a former lieutenant of activist investor Carl Icahn, as chief executive. Mr. Ninivaggi, who previously helped run Mr. Icahn’s auto-related businesses, stressed the importance of bringing the truck to market and the need for additional financing.

Building a salable truck is essential for Lordstown Motors as it has yet to generate revenue from its manufacturing operations. This summer, the company included a going concern notice in its financial documents, a sign that it was skeptical about being able to maintain operations in the coming year.

Its emission-free Endurance truck, expected to start at $ 52,500, is aimed at operators of commercial fleets where battery-powered vehicles can reduce expected fuel and maintenance costs.

The competitive race between electric vehicle startups intensifies, with its competitors Lucid Group Inc.

and Rivian Automotive having recently started production of their first models.

Ford engine Co.

said earlier this year that he plans to release a battery-powered version of his best-selling F-150 pickup next year and with a lower starting price than the Endurance.

Write to Christina Rogers at [email protected] and Ben Foldy at [email protected]

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