Lordstown CEO Claims Foxconn Ignored Him Before Collapse
With the Lordstown Motors Corp. bankruptcy now official, everyone is trying to figure out what exactly happened. This includes CEO Ed Hightower, who is now claiming that the executive leadership at Foxtron — a subsidiary of Foxconn Technology Group focused on electric vehicles — refused to meet with him in 2022.
Frankly, it seems like everyone is playing the blame game right now. Lordstown is keen to place some heat on the Taiwanese partner it sold its factory to and Foxconn isn’t interested in taking the fall. But let’s see what can be gleaned from Hightower’s interview.
Speaking with Bloomberg, the CEO recounted a trip to Asia he assumed would result in the companies starting development on a new vehicle.
“I made the trip to Taiwan to break the logjam,” said Hightower, who was Lordstown’s president at the time of the trip and is now its CEO. “A lot of times it is about relationships,” Hightower said, but in this case, “I was not able to meet my objective.”
Hightower spent three days in isolation due to Covid-19 protocols before he could meet with the Taiwanese executives. He got face time with Young Liu, Foxconn’s chairman, and some of his lieutenants. But the crucial work was to be done with Foxtron, which Foxconn majority owns. The idea was to partner on a mid-size crossover SUV that would be built in the Lordstown, Ohio, plant formerly occupied by General Motors.
The Foxtron boss refused to meet, Hightower said in an interview. Hightower couldn’t get engineering drawings, data and essential licensing agreements needed to get the project going. Liu was chair of both companies, but said he couldn’t compel Foxtron to meet with Hightower. After almost two weeks, the American executive said he gave up and flew home.
Automotive News described the incident as an early sign that trouble was on the horizon. But it’s not as if Lordstown was not already struggling by that point. Former CEO Steven Burns was lambasted by Hindenburg Research and accused of being generally dishonest after it was brought to light that the company had misrepresented its vehicle orders.
Many were also annoyed that the company had been supported by the Trump administration, which embraced General Motors selling its Ohio-based Cruze plant to Lordstown as a way to retain domestic jobs. While your author isn’t interested in championing the role any presidential administration has played in regard to the automotive sector, modern politicking created additional problems for a brand that already seemed to have its fill.
While a reverse merger with DiamondPeak Holdings (one of those suspect special purpose acquisition companies) raised $675 million to develop the Endurance pickup in 2020, previous SPAC-reliant EV companies had already gone bust and the public was losing faith in startups over-promising on undelivered products.
That’s not to downplay how overwhelmingly difficult it is to start a car company. Legacy manufacturers are going to do everything in their power to ensure you don’t exist and simply getting a singular model off the ground requires an insane amount of capital. But SPAC-based deals were starting to look like a scam to investors and Lordstown needed to have more to show for itself to assuage mounting concerns.
The rest you already know. Lordstown’s stock valuation began to collapse in 2021 and it sought out a partnership with Foxconn after its former CEO jumped ship and began offloading shares.
That’s when Dan Ninivaggi entered the scene. The former deputy of billionaire investor Carl Icahn came on as CEO to clean up the mess Burns left.
Ninivaggi reached an agreement in late 2021 to sell the plant to Foxconn in a $280 million deal that included an equity investment from the Taiwanese company. He’d hatched plans to not only build the Endurance, but also use the company’s engineers to develop EVs for any carmaker using Foxconn’s EV platform and production capabilities.
Late last year, Foxconn replaced the initial agreement with Lordstown with a new deal and investment in the company. It still looked like Foxconn was all-in when it agreed to buy an 18 percent stake and some preferred stock for $170 million. Lordstown shares initially jumped 29 percent on the news.
For what it’s worth, Foxconn has maintained that it had entered into the deal with the best of intentions and earnestly believed it could find a way to help the startup solve its financial difficulties. But, as things started to look worse, it sounds as though the Taiwanese firm developed some doubts and is now being sued by Lordstown for allegedly failing to live up to its end of the agreement.
“However, during this time, Lordstown Motors has continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties in accordance with its terms,” Foxconn said in a statement. “[Foxconn] 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.”
With the lawsuit now on, Lordstown obviously wants to create a case that Foxconn blew things. Leadership has claimed that its would-be partner gave assurances that it would support the Endurance pickup and future projects in exchange for the factory in Ohio. But has suggested Lordstown Motors was ultimately simply being strung along so that “Foxconn could starve it out of existence.”
The company alleges that Foxconn failed to make payments toward the development of certain vehicles and refused to answer repeated requests from Lordstown for access to the engineering drawings and vehicle designs from Foxtron, which is what precipitated Hightower’s trip to Taiwan last summer.
With the whole thing looking bad from the start, it’s hard not to feel like the entire project was a just shell game to extract some investment funds. Loads of cash went into Lordstown and the Ohio factory was sold for just a fraction of its value and backed by government praise. Yet the business never seemed to have enough money, nor did it become capable of sustained production of pickup based heavily on a vehicle that had already been developed — the failed Workhorse W-15.
My guess is that we’re going to see a lot of accusations thrown around while the lawsuit is in play. Nobody wants to be caught holding the bag and Lordstown would like to recoup some of the money it now owes investors. While the company is also reportedly still seeking partners who might actually want to build the Endurance (or something based on it), the odds of that happening seem relatively low at this point.
[Image: Lordstown Motor Corp.]
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