02:27 - Source: CNN Business
After 52 years, Lordstown must face life after GM
CNN  — 

Lordstown Motors filed for bankruptcy protection Tuesday, put itself up for sale, and announced a lawsuit against Foxconn, accusing its biggest shareholder and former partner of setting out to “destroy” its business.

The electric vehicle maker, which specializes in pick-up trucks, made a Chapter 11 filing in a Delaware court while simultaneously starting legal action against Foxconn.

In a statement, the company said it was left with no choice after a high-profile tie-up with Foxconn, one of the world’s biggest electronics manufacturers, fell apart. It accused the Taiwanese tech firm of fraud and failing to follow through on promises to invest in the company.

“Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option,” Lordstown CEO Edward Hightower said in the statement. “We will vigorously pursue our litigation claims against Foxconn accordingly.”

In a statement to CNN, Foxconn dismissed the suit as meritless, saying Lordstown had made “false comments and malicious attacks.” Foxconn said it had been trying to have “constructive negotiations” with Lordstown to help “in finding a solution to its financial difficulties.”

“However, during this time, [Lordstown] has continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties,” it said, without specifying how.

“Foxconn originally hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus,” it said, adding it reserved the right to pursue its own legal action.

Foxconn shares in Taipei closed down 1.3% Tuesday. Lordstown’s shares tanked 61% in premarket trading, adding to a nearly 84% plunge in its stock price so far this year.

Officially called Hon Hai Technology Group, Foxconn is best known for making iPhones for Apple (AAPL), but has recently made moves toward building electric vehicles. In 2021, it purchased an Ohio factory that Lordstown Motors had itself bought from General Motors in 2019.

Foxconn also agreed to handle the manufacturing of Lordstown’s Endurance electric pick-ups at the site, and to make further investments provided certain milestones were met.

But the partnership appeared to break down earlier this year. In May, Lordstown disclosed that Foxconn said it wanted to back out of making further investments over claims that the automaker had not upheld its end of the agreement.

That impasse left the already struggling automaker on even shakier financial ground. Lordstown warned last month that it could face bankruptcy.

Dustin Franz/Bloomberg/Getty Images
Lordstown Motors headquarters seen in Lordstown, Ohio in 2021.

Now, the company is looking for a buyer. In its statement Tuesday, the company said another automaker could benefit from its expertise, saying its flagship truck could “serve as a springboard” for the right manufacturer “at a fraction of the cost and time it would take to develop a program from the ground-up.”

A buyer could also use the startup’s vehicle development platform to create other types of electric cars, it added.

Financial woes

Lordstown takes its name from the industrial Ohio town where it’s based. The factory it bought from GM in 2019 used to produce small cars for America’s top automaker, and was considered the lifeblood of the local economy as an employer of more than 1,600.

As of December, Lordstown Motors had just a fraction of that headcount, with 260 full-time employees, according to its latest annual report. But its debut revived some optimism about job opportunities at a gloomy time for the community.

However, Lordstown has long been dogged by financial challenges. In 2021, just a few years after launching, it warned that it could go out of business, citing cash flow issues that were preventing it from starting commercial manufacturing.

Since then, the company has delivered just 18 trucks to customers, and built 56 vehicles since beginning commercial production, according to a regulatory filing last month.

The company’s pick-up truck caters to business users. One advantage of the Endurance is that it contains fewer moving parts than other traditional commercial vehicles, leading to lower maintenance costs, according to the startup.

But Lordstown has faced stiff competition from other larger players that have unveiled their own electric pick-ups in recent years, such as Ford (F), which sells to both fleet and retail customers.

Foxconn is Lordstown’s biggest shareholder, with a stake of about 8.4%.

But eager to make a splash in the auto world, the Taiwanese firm has brokered arrangements with other electric carmakers in recent years. It’s teamed up with Fisker, a California startup, to build a small, affordable car called the Pear at the Lordstown factory.

Another California-based startup, Indi EV, has also agreed to have Foxconn build its car, the Indi One, there.

The campus is billed as one of the largest car plants in North America, with a production capacity of 400,000 vehicles a year.