Lordstown Motors issued a warning on Monday that the electric vehicle (EV) manufacturer may go bankrupt if Taiwan’s Foxconn decided to pull out of a vital funding contract.
According to a filing with the Securities and Exchange Commission obtained by CNBC, on April 21, Lordstown received a letter from Foxconn alleging that the would-be truckmaker was in breach of a funding deal because its stock had fallen below $1 per share for 30 consecutive trading days, triggering a delisting notice from NASDAQ (shares were trading at 30 cents on Monday). The corporations, according to Lordstown, are still talking.
Originally founded to purchase a defunct GM plant in its namesake Ohio town and convert it into an electric truck manufacturing facility, Lordstown has since sold the site to Foxconn, a Taiwanese electronics manufacturer. A second agreement was reached between the two firms in May 2022, with Foxconn investing up to $170 million in Lordstown, which CNBC determined to be a 19.3% interest in the American firm.
According to CNBC, Foxconn paid the initial $52.7 million installment of the funding agreement last year but has not made any further payments since then. Foxconn has 10 days from the time the Committee on Foreign Investment in the United States approves the contract to make an additional investment of $47.3 million. Lordstown told CNBC on April 25 that the approval had been given, therefore Foxconn would have to pay up by May 8.
What is Foxconn known for?
Foxconn is best known as Apple’s contract manufacturer, but the business has recently made attempts to enter the electric vehicle (EV) market. The Lordstown incident has gotten off to a shaky start.
Foxconn promised delivery of the Lordstown Endurance pickup truck in late 2022 when it took over operations at the plant and factory last year. It became quickly apparent that Lordstown still lacked the financial resources to mass-produce more than a few hundred trucks during the initial phase. Since then, the plant has produced around 30 trucks before effectively stopping.
Lordstown announced in its financial results for the fourth quarter of 2022 that it would be shifting its attention from Endurance to a new electric vehicle (EV) constructed at the same Ohio plant and presumably using components obtained from Foxconn. According to CNBC, Lordstown and Foxconn had planned to finalize their joint creation of a new electric vehicle by May 7, after which Foxconn would invest an extra $70 million. However, no such plan has been finalized.
Meanwhile, Foxconn has been shifting its focus to producing its own electric vehicles (EVs), some of which may be destined for markets outside of the United States under the new Foxtron brand. The firm has contract-manufacturing agreements with other automakers, such as the $29,900 Fisker Pear EV, which will be produced in the same ex-Lordstown factory in Ohio.