Burns Out at Lordstown Motors, Company Releases Its Answer to Hindenburg Research Report
UPDATED 9:01 a.m.
LORDSTOWN, Ohio — Lordstown Motors Corp. announced at 7:03 a.m. Monday that Steve Burns has resigned as CEO of the electric vehicle startup company and that Julio Rodriguez has resigned as chief financial officer.
The resignations were portrayed by the company in terms of a transition “from the R&D and early production phase to the commercial production phase” of its business.
Lead independent director Angela Strand has been named executive chairwoman of the company and will oversee the transition until a permanent CEO is identified. Becky Roof will serve as interim chief financial officer.
“Lordstown Motors has achieved significant milestones on the path to developing the first and best full-size all-electric pickup truck, the Lordstown Endurance,” the company said in a news release.
“We thank Steve Burns for his passion and commitment to the company. As we transition to the commercial stage of our business – with planned commencement of limited production in late-September – we have to put in place a seasoned management team with deep experience leading and operating publicly-listed OEM companies. We have complete confidence in Angela and Becky, and our expanded leadership team, to effectively guide the company during this interim period.”
Two minutes before announcing the leadership changes, Lordstown Motors released the results of its special committee investigation into the scathing report published March 12 by short-seller Hindenburg Research.
“The special committee’s investigation concluded that the Hindenburg Report is, in significant respects, false and misleading. In particular, its challenges to the viability of Lordstown Motors’ technology and timeline to start of production are not accurate. The investigation did, however, identify issues regarding the accuracy of certain statements regarding the company’s preorders,” the company said.
The members of the committee are David T. Hamamoto, Jane Reiss, and Dale Spencer. Sullivan & Cromwell LLP conducted the investigation and “was assisted by technical experts from a leading automotive consulting firm,” the company said.
Regarding pre-orders of its Endurance pickup truck, the special committee’s report emphasized that “Lordstown Motors has repeatedly disclosed that its pre-orders are non-binding, and it has highlighted the risk that pre-orders may not be converted to actual orders. The company did obtain “tens of thousands of from fleets, fleet management companies, or other end users. If converted to orders, this demand will comprise substantially all of expected production volume through 2022.”
Nevertheless, the report admitted, “Lordstown Motors made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate:
- “Lordstown Motors has stated on several occasions that its pre-orders were from, or primarily from commercial fleets. In fact, many pre-orders were obtained from (i) fleet management companies or other end users that indicated interest in purchasing Endurance trucks, similar to commercial fleets, and (ii) so-called influencers or other potential strategic partners that committed to attempt to secure pre-orders from other entities, but did not intend to purchase Endurance trucks directly.
- “One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks. Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed.”
The committee report also affirmed the viability of hub motor technology, which the Hindenburg Report disputed; and clarified the Jan. 12, 2021, incident when an Endurance prototype caught fire during a test drive.
Regarding Hindenburg’s claim that the plan to start production in September is unrealistic, the special committee stipulated “various factors could lead to delays” but the target date “remains achievable.” Battery cells have been sourced, “and initial battery pack assembly equipment has been received and is being installed, with remaining equipment due to arrive in advance of the projected start of production date,” the company said.
“Lordstown Motors currently expects to produce hub motors in part using manual processes while the automated hub motor production line is installed over the next few months. It expects this process to provide sufficient hub motor production capacity to support expected production volumes in 2021 and 2022.”
The committee report concluded by addressing the stacks of litigation filed against Lordstown Motors:
“First, although not in a position to assess ongoing litigation with Karma Motors, the special committee notes that Lordstown Motors has denied the allegations against it and is contesting both liability and damages. Second, as described in various Form 4 filings in the months following the DiamondPeak transaction, certain Lordstown Motors directors and executives have sold or transferred shares in the company. Each of those transactions were made for reasons unrelated to the performance of the company or viability of the Endurance, and each such director and executive retained substantial Lordstown Motors equity holdings in the form of shares and options following the sales and transfers described in the company’s public filings.”
Karma’s lawsuit claims Lordstown Motors stole trade secrets.
A rash of class-action lawsuits also have been filed against the company, its former CEO and former directors of its predecessor, Diamond Peak Holdings Corp. All center on allegations that pre-orders were inflated.
In its separate news release announcing the management transition, Strand, the new executive chairwoman, was identified as managing director of Strand Strategy.
“She is considered a thought leader and expert in the commercial electric vehicle sector, with a decade of real-world executive and advisory experience working with fleets, fleet management companies, OEMs, utilities, financing and infrastructure solutions providers to successfully launch and deploy electric trucks and end-to-end infrastructure solutions,” the company stated.
Said Strand in a statement, “We remain committed to delivering on our production and commercialization objectives, holding ourselves to the highest standards of operation and performance and creating value for shareholders. I am excited to lead the passionate and dedicated team of Lordstown employees and to work with our valued customers, suppliers, investors and partners and to hosting Lordstown Week, which commences on June 21st.”
Roof, the interim CFO, is a CPA who has served as interim CFO “at numerous companies including Eastman Kodak, Hudson’s Bay Company, Saks Fifth Avenue and Aceto Corp.,” the company said.
Key individuals remaining with the company include:
- Rich Schmidt, president of Lordstown Motors, will continue to oversee all day-to-day operations, including manufacturing and engineering. Schmidt was promoted to president in November having previously served as Lordstown’s Chief Production Officer. He has over 30 years of automotive industry expertise, including experiences at Toyota and Nissan, Hyundai, Volkswagen, J.D. Power and Tesla Motors.
- Jane Ritson-Parsons, formerly interim chief brand officer, has been appointed chief operating officer.
- Carter Driscoll, formerly head of investor relations, has been promoted to vice president, corporate development, capital markets and investor relations.
- Tom Canepa, general counsel; Shane Brown, chief production officer; Darren Post, vice president of engineering; John Vo, vice president of propulsion, will all remain in their current roles.
Editor’s Note: This is a developing story. The Business Journal will have an update at midday and a follow-up report Tuesday morning.
Copyright 2021 The Business Journal, Youngstown, Ohio.