Lordstown Motors has reached an agreement in principle to sell its massive Ohio assembly plant to iPhone maker Foxconn for $ 230 million, the companies said late Thursday.
Under the agreement, the Taiwan-based electronics contract manufacturer will assemble Lordstown Motors’ first product, an all-electric pickup truck called Endurance, which the company plans to manufacture and sell starting next year.
The sale of the plant to Foxconn, also known as Hon Hai Technology Group, will provide capital for the start-up of electric vehicles, while also providing Foxconn with jump-start support for electric vehicle production. Foxconn also has a contract with start-up Fisker to produce electric vehicles in the coming years.
“The partnership would allow Lordstown Motors to benefit from Foxconn’s extensive manufacturing expertise and cost-effective supply chain, while Lordstown Motors can focus on bringing the endurance to market, developing service offerings for our fleet customers and developing innovative new models,” said Lordstown- CEO Daniel Ninivaggi in a statement.
Bloomberg reported for the first time that companies were “near an agreement” earlier in the day, adding up to 21% in Lordstown stock on Thursday before pulling back and closing at $ 7.98, up of 8.4%. In after-hours trading, the share gained a further 7.4%.
As part of the proposed transaction, Foxconn will also acquire approximately $ 50 million in Lordstown common stock. The EV start-up plans to then sign a long-term lease agreement for part of the former General Motors plant, and Foxconn will offer jobs to Lordstown’s operations and manufacturing staff.
“In addition to moving forward with our schedule of building electric vehicle manufacturing capacity in North America, it also reflects Foxconn’s flexibility in providing design and manufacturing services to various EV customers,” said Young Liu, Chairman of the Hon Hai Technology Group in a statement.
Lordstown is running out of money trying to begin production of the Endurance. The company said in June that there were “significant doubts” about its ability to continue the business next year due to problems financing production of the Endurance.
While Taiwan-based electronics contract manufacturer Foxconn is best known for its iPhone production, it is trying to expand its production to include electric vehicles.
Workers install door hinges on the body of a prototype endurance electric pickup truck at the Lordstown Motors assembly plant in Ohio on June 21, 2021.
Michael Wayland / CNBC
The EV start-up bought the 6.2 million square foot facility in Lordstown, Ohio, in 2019 from General Motors, which ceased operations at the facility as part of a restructuring plan. The startup reportedly bought the facility for $ 20 million, a fraction of its total value, and GM has provided the company with both financial and operational support with suppliers.
GM owns 7.5 million Class A common shares of Lordstown. It received the shares in EV company for an equity value of $ 75 million, most of which were in kind and related to the sale of the property.
Aside from its financial troubles, Lordstown is under investigation by the Securities and Exchange Commission and the Justice Department for its IPO and possible false or misleading statements by former management including company founder and ex-CEO Steve Burns.
Burns and his CFO left the SPAC-backed company in June after an internal investigation found “issues related to the accuracy of certain statements” regarding Lordstown’s pre-orders, specifically the seriousness of the orders and who placed them.
In May, short seller Hindenburg Research said the company misled investors, including using “fake” orders to raise capital for its Endurance electric pickup truck. The short seller also said the pickup was years away from production. Lordstown has stayed on course to start manufacturing the vehicle in September.
Lordstown previously said the internal investigation found that Hindenburg’s report was “fundamentally incorrect and misleading”.