Lordstown Motors Corp. shares plummeted after the electric-vehicle maker once hailed by former US President Donald Trump for saving automaking jobs filed for bankruptcy.
The move to seek Chapter 11 protection from creditors follows a protracted dispute with iPhone maker Foxconn Technology Group over a deal to make pickup trucks for Lordstown at an assembly plant in Ohio. The Taiwanese manufacturer had said it was prepared to pull out of their production partnership, prompting the EV startup to warn it could fail if it was unable to resolve the conflict.
Lordstown shares declined as much as 67% in US premarket trading after closing Monday at $2.77, valuing the company at just $44 million. The stock traded at more than $400 as recently as early 2021.
The troubled EV manufacturer also sued Foxconn on Tuesday for breach of contract. In its complaint, Lordstown alleged Foxconn consistently failed to honor its agreements and forced it into bankruptcy.
“After getting the valuable assets it desired upfront, it then sabotaged the Debtors’ business, starving it of cash and causing it to fail. Instead of building a thriving business for the benefit of all Lordstown’s stakeholders, Foxconn maliciously and in bad faith destroyed that business, costing Lordstown’s creditors and shareholders billions,” it wrote in the complaint.
Foxconn in a statement rejected Lordstown’s claims and said it “reserves the right to pursue legal actions and also suspends subsequent good faith negotiations.”
Lordstown’s demise caps several torrid years for EV startups that reached sky-high valuations following reverse mergers, only to fall victim to brutal corrections. In its filing, Lordstown listed as much as $500 million of both assets and liabilities.
Foxconn agreed in November to invest as much as $170 million in Lordstown and take two board seats. The deal gave the EV maker much-needed capital while offering the Taiwanese manufacturer a firmer foothold in automotive production.
As part of the deal, Foxconn bought the former General Motors Co. factory in Lordstown, Ohio, from the startup, and planned to make the startup’s Endurance pickup under a contract agreement. The arrangement began to unravel in January, when Lordstown asked Foxconn to suspend production because the cost of making the truck exceeded its targeted sale price of $65,000, and said it would need another partner to share costs.
Foxconn has suspended talks with Lordstown, it said Tuesday, labeling comments by the US company false and malicious. The Apple Inc. supplier said it had tried to help Lordstown with its financial difficulties but ultimately the carmaker hadn’t fulfilled its part of their investment agreement.
The bankruptcy filing follows Lordstown going through several crises, including fighting off short-seller claims and a Securities and Exchange Commission inquiry about inflated vehicle pre-orders.
The Ohio plant also became the scene of a political standoff after GM’s decision in 2018 to cease production there. The move was a blow to then-President Trump, who a year earlier discouraged rally-goers from selling their homes in the area because of all the jobs he said he would bring back. Democrats seized on the development as a symbol of unfulfilled promises made to voters in a key battleground state.
While Lordstown’s bankruptcy may mean Foxconn loses one customer, the company still owns the manufacturing facility that will help with its ambition to offer EV manufacturing services in North America. Foxconn has targeted a 5% share of the global EV market by 2025.
(With assistance from Allison McNeely, Sean O'Kane, Janine Phakdeetham and Claire Boston.)
