Lordstown Motors Seals the Deal with Foxconn
LORDSTOWN, Ohio – As the clock ticked to yet another deadline to seal the deal, Lordstown Motors Corp. reported about 5 p.m. Wednesday that it has closed on an asset purchase agreement, a contract manufacturing agreement and joint venture partnership with Foxconn worth a combined $380 million.
Executives had initially targeted April 30 to get the deal done, but moved the deadline back twice, most recently to May 18.
The extensions proved more than enough time for the parties to arrive at a complex, but comprehensive agreement that ensures the survival of Lordstown Motors, an electric-vehicle manufacturer that is in the process of launching its first product, the Endurance pickup.
Total proceeds to Lordstown Motors are $230 million, plus the reimbursement of approximately $27 million in operating and expansion costs, the company reported. In addition, Foxconn had previously purchased $50 million of Lordstown Class A common stock directly from the company.
Concurrent with the closing, Foxconn and Lordstown Motors have entered into a manufacturing supply agreement for the Endurance. Start of commercial production of the Endurance is targeted for the third quarter of this year, with the first commercial deliveries expected in fourth quarter.
In a separate announcement, Hon Hai Technology Group, called the agreement “a key milestone.”
Hon Hai, based in Taipei, Taiwan, was established in 1974. It does business as Foxconn and is the world’s largest manufacturer of electronics.
“The collaboration between Hon Hai and Lordstown is a classic example of joint effort between startup electronic vehicle manufacturer and information and communications service provider,” the company said. “In the future, Ohio will be Hon Hai’s important electric vehicle manufacturing hub in North America,.”
Foxconn will assume manufacturing operations at the Lordstown plant immediately with no interruption, the companies said. Approximately 400 skilled and talented LMC employees will transition to employment with Foxconn.
Lordstown Motors will retain a presence in Lordstown along with engineering and technical centers, as well as corporate staff, in Farmington Hills, Mich., and Irvine, Calif.
In connection with the closing of the asset purchase agreement (APA), Foxconn and Lordstown Motors also entered into a joint venture agreement to co-develop EV programs using Foxconn’s Mobility-in-Harmony open-source platform.
The new joint venture will be called MIH EV Design LLC. Foxconn will own 55% of the JV and Lordstown 45%, the company said.
Foxconn is committing $100 million towards the new joint venture, including a loan to Lordstown for $45 million to support its initial capital commitment.
“The closing of the Foxconn APA and the completion of a joint venture agreement for the development of new electric vehicles using Foxconn’s MIH platform are important milestones for LMC,” said Daniel Ninivaggi, CEO of Lordstown Motors, in a statement. “Our strategic partnership with Foxconn provides LMC with a flexible and less capital-intensive business model, access to broad supply chain and software capabilities and an effective vehicle development platform to bring EVs to market faster and more efficiently. I have always been a strong believer in what Foxconn is doing to accelerate the adoption of electric vehicles and we are proud to be their partner.”
The joint venture creates a business model whereby the two parties would jointly develop new electric vehicles, utilizing the MIH platform, for Lordstown Motors in the North American commercial vehicle market and for other OEMs internationally, the company said.
Vehicles developed by MIH EV Design would be built for North America at the Lordstown plant, and at other Foxconn contract-manufacturing locations around the world.
The objective is for OEM users of Foxconn’s flexible MIH platform, manufacturing footprint, and supply chain to achieve production scale at lower volumes and with a shorter time to market, according to the announcement. The joint venture also leverages Lordstown Motors’ engineering and product development capabilities globally and provides the company a scalable vehicle development platform in North America. This accelerates EV development, reduces product development costs, and increases the breadth of Lordstown Motors’ product portfolio over time, the company said.
“The creation of the MIH EV Design LLC joint venture between Lordstown Motors and Foxconn supports the EV ambitions of both companies,” said Edward T. Hightower, Lordstown Motors president. “The MIH shared EV architecture will create synergies in vehicle design, engineering, development, testing, sourcing, and manufacturing. This will enable us to create innovative and winning products for our customers, while optimizing costs and reducing our time to market.”
Reacting to the announcement, U.S. Rep. Tim Ryan, D-13 and the Democratic nominee for U.S. Senate, said it marked “a transformative and historic moment in our work to solidify northeast Ohio as America’s Voltage Valley.
“Foxconn knows what our Valley workforce is capable of, and I know they will help make the Mahoning Valley the North American hub for electric vehicle production. I stand ready to do everything in my power to support Foxconn in this transition,” he said.
Shares of Lordstown Motors closed Wednesday at an all time low of $1.51. As of this posting, in after-hours trading following the announcement, shares were skyrocketing.
Copyright 2023 The Business Journal, Youngstown, Ohio.