Lordstown Motors has recently filed for bankruptcy protection after failing to resolve a dispute with Taiwan's Foxconn
Lordstown Motors, a U.S. electric truck manufacturer, has recently filed for bankruptcy protection after failing to resolve a dispute with Taiwan's Foxconn over a promised investment. This development has caused a significant decline in Lordstown's stock, highlighting the challenges faced by electric vehicle (EV) startups in the current market. The bankruptcy filing marks a setback for Lordstown, as it aimed to challenge the traditional automakers' dominance in the high-margin pickup truck sector.
Lordstown Motors filed for Chapter 11 protection in a Delaware bankruptcy court, accusing Foxconn of fraudulent conduct and breaking promises regarding an agreement to invest up to $170 million in the company. Lordstown asserts that Foxconn failed to purchase additional shares of its stock as agreed and misled the automaker about collaborating on vehicle development plans. Foxconn, on the other hand, claims that Lordstown breached the investment agreement when its stock price fell below $1 per share.
The twin filings by Lordstown set the stage for an international business clash that may cast doubt on Foxconn's EV ambitions and partnerships, not only with Lordstown but also with other automakers. The lawsuit filed by Lordstown portrays Foxconn as continuously changing its commitments and failing to meet funding obligations. Lordstown claims that Foxconn refused to engage with the company on initiatives it purportedly supported, exacerbating the dispute between the two companies.
Lordstown's flagship product, the Endurance electric pickup truck, is manufactured at a former General Motors factory in Ohio. Although Lordstown sold the plant to Foxconn in 2022, it continued to produce the Endurance at a reduced rate after addressing quality issues with suppliers. However, the production of the Endurance was temporarily paused earlier this year. If Lordstown fails to secure a rescuer willing to resume full production of the Endurance, the Ohio factory could become an attractive option for overseas automakers seeking a quick entry into the U.S. market.
Lordstown filed for bankruptcy with the intention of finding a buyer. At present, the company does not have an initial offer, known as a stalking-horse bidder, which sets a minimum price for potential suitors to exceed in an auction. Lordstown's CEO, Edward Hightower, believes that the Endurance business could be appealing to another automaker seeking a swift entry into the EV market, particularly in light of the Biden administration's policies promoting the shift away from gasoline-powered vehicles.
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