Lordstown Motors on Monday warned that Taiwan’s Foxconn may be looking to back out of a crucial funding deal that would keep the electric truck maker running—and that it might go bankrupt if the issue isn’t resolved.
In a regulatory filing first reported by CNBC, Lordstown said it received a letter from Foxconn on April 21 alleging that the would-be truckmaker was in breach of a funding deal because its stock had fallen under $1 per share for 30 consecutive trading days, triggering a delisting notice from NASDAQ (shares were trading at 30 cents on Monday). Lordstown reported that the companies remain in talks.
Created to take over a former General Motors factory in its namesake Ohio town to build electric trucks, Lordstown sold the factory to Taiwanese contact manufacturer Foxconn last year. After that deal closed in May 2022, the two companies agreed to a second deal in which Foxconn would invest up to $170 million in Lordstown, which CNBC calculated as a 19.3% stake in the U.S. company.
Foxconn paid the first $52.7 million due under the funding deal last year, but hasn’t made additional payments, according to CNBC. Under the terms of the deal, Foxconn is supposed to invest an additional $47.3 million within 10 days of regulatory approval by the Committee on Foreign Investment in the United States. That approval was granted April 25, Lordstown told CNBC, meaning Foxconn is obliged to release the money by May 8.
Foxconn is probably best known as the contract manufacturer for Apple iPhones, but lately the company has tried to expand into EV production. The Lordstown affair has made for an inauspicious start.
Last year when it took charge of the plant and manufacturing, Foxconn said the Lordstown Endurance pickup truck would be delivered later in 2022. Soon it became clear that Lordstown still didn’t have enough cash to produce more than an introductory few hundred trucks, if that, due to the lack of high-volume production equipment. The factory has since made about 30 trucks, but production has been effectively stalled.
In its fourth-quarter 2022 financial results, Lordstown indicated it would shift focus from the Endurance to a new EV likely using Foxconn-sourced components, and likely built at the same Ohio plant. Lordstown and Foxconn had agreed to finalize a plan for joint development of a new EV by May 7, after which Foxconn would invest an additional $70 million, but that plan hasn’t been finalized, CNBC reported.
Foxconn meanwhile has been pivoting to making its own EVs, including some under the new Foxtron brand that may not be destined for the U.S. The company also has contract-manufacturing deals with other automotive startups, including plans to build the $29,900 Fisker Pear EV at the same ex-Lordstown factory in Ohio.