Long, Bumpy Road for Lordstown Motors

LORDSTOWN, Ohio – As far as acceleration and performance goes, Lordstown Motors Corp.’s Endurance packs plenty of power and maneuverability, as many reporters, analysts, investors and potential customers discovered after test rides in beta versions of the new all-electric pickup.

They also saw progress underway at the EV startup’s plant – the former General Motors Lordstown complex that is today being retooled to produce the new truck.

But is it enough to restore investor confidence in the startup?

Dubbed “Lordstown Motors Week,” the event held June 21 through June 25 was the most transparent and aggressive effort the company has made yet to demonstrate that it’s a viable and potential player in the ultra-competitive EV market.  

Those analysts taking part found some positive attributes, such as the value of the plant and the performance of the Endurance. But these pluses were muted after weighing the financial pressures and volatility facing the company.

“While we largely note constructive takeaways from the event, we still express the same concerns as before regarding liquidity, path to scale and especially the commercialization of the in-hub motors,” Morgan Stanley analyst Adam Jonas wrote in a note to investors. “With the company still searching for additional capital, coupled with our fundamental concerns, we see a wide range of volatile outcomes.” 

Hanging over the entire week was a rash of bad news that began to unfold June 8, when the company announced in a regulatory filing that it might not have enough cash to remain in business through 2022.

Then, on June 14, in a stunning development, Lordstown Motors announced the exit of its founder and CEO Steve Burns and its chief financial officer, Julio Rodriguez.

Meanwhile, the company is cooperating with an investigation by the U.S. Securities and Exchange Commission that has requested documents related to the merger of Lordstown Motors with DiamondPeak Holdings Corp. The regulatory agency is also seeking information related to preorders for the Endurance.

Angela Strand, the new executive chairwoman appointed to replace Burns, told reporters attending the June 21 session that the company is on the hunt to raise additional capital to fund its launch of the Endurance, scheduled for late September.

“We are seeking additional funding to scale up our capacity and further automation of our manufacturing processes in order to complete our ramp up,” Strand said. “We are evaluating multiple sources of funding in addition to evaluating strategic partners.”

Strand did not take questions from the media nor did President Rich Schmidt, another top executive.

Finished beta models of the all-electric Endurance pickup are lined up outside the Lordstown Motors plant, ready for test rides during Lordstown Week. 

On June 15, one day following the executive shakeup, Schmidt told reporters during a panel event hosted by the Automotive Press Association that the company had “essentially binding” orders of the Endurance to cover production of 15,000 vehicles through May 2022.

Two days later, the company, in a regulatory filing, walked back on Schmidt’s statements, clarifying that the company had no binding orders for the pickup.

Meanwhile, Lordstown Motors spent that week shoring up its new executive team.

According to recent regulatory filings, Strand will be paid $100,000 per month over five months during which the company will search for a new CEO.  In addition, Strand will also receive 50,000 restricted shares of stock. 

The company also named Becky Roof as its interim chief financial officer and Jane Ritson-Parsons as chief operating officer.  

The executive shakeup includes the retention of AP Services, a subsidiary of turnaround firm AlixPartners, to manage operations at the company.

Roof, managing director of AP Services, will be paid $1,200 an hour, while Ritson-Parsons is to be paid $400,000 a year and receive stock options totaling 350,000 shares.

Lordstown Motors President Schmidt will receive a base salary of $400,000 a year, plus options to buy up to 500,000 shares, according to regulatory filings.

His new pay package comes after The Wall Street Journal published a story June 21 noting that Schmidt sold off $4.6 million worth of his stock in February, shortly before the SEC began its inquiry and the release of a poor first-quarter report in March.

New ground broken in that story was the revelation that Schmidt sold his shares to fund expansion of a turkey-hunting farm he owns in Tennessee. According to the story, Schmidt’s wife operates the farm.  

Other executives also cashed in. Records show that the vice president of propulsion, John Vo unloaded more than $3.1 million in company stock between Dec. 14, 2020 and Feb. 2, 2021; chief production officer Shane Brown cashed in shares totaling $458,315 on Feb. 4, 2021, and the vice president of engineering, Darren Post, sold off $272,100 worth of stock on Feb. 8, 2021.

The Business Journal first reported the transactions in April, while the insider deals were also mentioned in a report published March 12 by Hindenburg Research. That report alleged executives misled investors through public statements that boasted the company had 100,000 preorders for the vehicle when it did not.

A subsequent internal report from the company, released June 14, found that executives did indeed make inaccurate public statements related to preorders.  It refuted other allegations in the Hindenburg Report, such as the viability of the company’s wheel-hub technology and its plans to begin production by September.

Shares of Lordstown Motors, which trades under RIDE, were up 7.75% over five days, closing at $10.98 per share June 24. Shares of RIDE are down about 47% so far this year.

Michael Fabian, director of stamping, and Darren Post, vice president of engineering, discuss the manufacturing process for the Endurance. 

Lordstown Motors Week was announced more than a month before the executive shakeup, and the new management team carried out the positive agenda.

For reporters, the event provided access to the automaker’s manufacturing processes and for the first time, a public glimpse into its battery pack production lines and its electric wheel-hub manufacturing space.

Much of the hub-motor space, freshly painted with new epoxy on its cement floors, is nevertheless still empty. Production managers are on a tight timeline to install and test the equipment to meet the limited launch of the Endurance by late September.

“Our plan is that by August, we’ll be starting up this line, which will be ready for production,” said Rajeev Lamba, director of hub motors.

About 400,000 square feet of the plant is reserved for hub motor production. Lamba said the equipment has undergone critical testing in Malaysia and is in transit to Lordstown.

“One month is sufficient,” he insisted, to install and test the new equipment inside the plant.

Lordstown Motors’ hub motor technology – licensed from the Slovenia-based company Elaphe – is what sets it apart from other EV manufacturers, the company has said. 

Instead of a single combustion engine under the hood of the truck, the Endurance is propelled by individual electric motors in each wheel. The company said this architecture and design reduces the cost of maintenance and it reduces the cost of production.

Once finished, Lordstown Motors says it will have the largest hub-motor production line in the world.

“We’re applying an equal amount of torque to provide straightway control,” said Darren Post, vice president of engineering.  A vehicle-control unit measures and monitors wheel speed and ensures equal distribution.  

“This is the first time ever using it in a major vehicle,” he said. “We can change torque instantly.”

A ride in a beta version of the Endurance – Lordstown Motors is slated to produce a total of 57 of these test vehicles – demonstrates quick acceleration and agility negotiating tight corners.  The new vehicle moves from 0 to 60 mph in 5.5 seconds, a strong performance for a full-size pickup.

This is in part because of the vehicle’s low center of gravity and the position of its battery. Unlike an internal combustion engine, the battery is placed low and center between the truck’s frame rails.

“It all starts right here with this cell,” said Dan Tasiemsky, director of battery manufacturing, as he held a small cylinder – one of 6,048 cells installed in each battery pack. 

Small robotic carriers known as Automated Guided Vehicles, or AGVs, are used to transport components to the manufacturing line.  

Reporters were not allowed to film or photograph the hub motor-space or the battery production division as part of the tightly controlled event.

“We’re going to let the truck do the talking,” said Ryan Hallet, spokesman for Lordstown Motors.

Pictured at top: Production workers tend to a frame of a beta model of the Endurance at the Lordstown Motors plant.