Exclusive: Lordstown Motors CEO Says Foxconn Deal Enhances Company’s Future
LORDSTOWN, Ohio – The CEO of Lordstown Motors Corp. says the proposed sale of its sprawling manufacturing complex to Hon Hai Technology Group, or Foxconn, is a big win for the Mahoning Valley that will accelerate electric vehicle production and job creation.
“I said when I started that our success as a company is tied directly to the success of this plant,” Daniel Ninivaggi told the Business Journal in an interview Thursday evening. “We had to explore every opportunity to ramp it up faster. If we couldn’t do it on our own, we had to do it with others.”
Late Thursday, Lordstown Motors announced it has reached an agreement in principle with Foxconn that calls for the Taiwan-based company to purchase the Lordstown facility for $230 million and buy up to another $50 million of stock in the EV startup.
Ninivaggi, who was appointed Lordstown Motors CEO Aug. 26, says the deal only enhances the potential of the 6.2 million-square-foot plant, which was once owned by General Motors.
Indeed, he emphasizes the agreement will not only boost production of the Endurance, the all-electric pickup under development at Lordstown Motors, but also spur development of any future vehicles the company plans to manufacture.
“It’s conditioned on entering into a contract manufacturing agreement with Foxconn for the Endurance and continued partnership on new LMC programs in the future,” Ninivaggi says.
“It’s great for the Endurance, but the bigger benefit is future programs,” he says, which could be realized much faster and with less cost by working with Foxconn.
Under the tentative deal, Foxconn would provide a down payment of $100 million at the time the asset purchase agreement is signed, Ninivaggi says. The balance of $130 million would be due at closing, which the CEO says is targeted for April 30.
“I believe they’re serious about it,” he says.
Ninivaggi says it’s unclear as to how many jobs would be created under the proposed deal, but noted that “filling that plant up means more employment and faster growth.”
It also leaves open for Foxconn the ability to partner with other EV automakers, Ninivaggi says.
Foxconn is best known for manufacturing iPhones but recently has broadened its manufacturing interests to include the EV market. Earlier this year, Foxconn reached an agreement with electric-vehicle startup Fisker, and would ramp up production of its own EVs at Lordstown under the proposed agreement.
“Achieving key program objectives such as time to market, access to a well-developed supplier ecosystem and overall cost targets were all important factors in the decision to locate manufacturing in Ohio,” Fisker Chairman and CEO Henrik Fisker said in a statement Thursday. “Fisker’s commitment to volume manufacturing in the United States takes another important step forward today with the signing of this agreement.”
In May, Fisker and Foxconn partnered to develop Project PEAR — an acronym for Personal Electronic Automotive Revolution. The effort entails working on a new lightweight platform to support future electric vehicles.
“Lordstown is an amazing facility, one of the largest in North America,” Ninivaggi says. “It’s a tremendous asset if you fill it. If you can’t fill it, it’s a liability.”
The CEO says the challenge was to ascertain how to best use a factory that once produced hundreds of thousands of vehicles a year when owned by GM.
“By bringing Foxconn in and their ability to bring in other programs, they’re going to be able to fill that facility much faster than we could on our own,” Ninivaggi says.
He says the area’s workforce and talent, plus the existence of a plant that has a significant impact on the community, factored into Foxconn’s selection of Lordstown as its new manufacturing site.
“I think it’s very positive for the community,” he says. “It was a huge factor in Foxconn’s decision to locate production in Ohio.”
Previously, Foxconn contemplated establishing EV plants in Wisconsin or Mexico, Ninivaggi says. “They didn’t even mention Ohio,” he says.
What sold Foxconn on the Lordstown plant was its location, the community, the workforce, and the team at Lordstown Motors, Ninivaggi says.
Foxconn could potentially add other partners to manufacture EVs as well.
“We have high expectations through this partnership that we will be able to successfully integrate our resources with Lordstown Motors,” Foxconn Chairman Young Liu said in a statement. “In addition to achieving the goal of moving ahead our timeline to establish electric vehicle production capacity in North America, it also reflects Foxconn’s flexibility in providing design and production services for different EV customers. This mutually beneficial relationship is an important milestone for Foxconn’s EV business and our transformation strategy,” he said.
“I believe that the innovative design of the Endurance pickup truck, with its unique hub motors, delivers an advantageous user experience and has manufacturing efficiencies,” Liu continued. “It will undoubtedly thrive under our partnership and business model.”
In August, Lordstown Motors said it was in “serious discussions” with potential partners to occupy portions of the massive Lordstown plant.
Lordstown Motors’ executive chairwoman Angela Strand said Aug. 12 that the plant, plus an adjoining 650 acres, provides plenty of opportunity for another entity to produce components or vehicles at the site.
“This is a critical, strategic pivot for us,” she said. The decision to market the plant’s assets to other manufacturers creates “significant new revenue opportunities for Lordstown,” she said.
The deal with Foxconn comes as Lordstown Motors is facing a cash crunch and seeks new capital investment in order to fund the launch and production of the Endurance.
Ninivaggi says the plant is currently manufacturing pre-production models, which will continue through early next year. Commercial production isn’t projected until the second quarter of 2022. The Endurance targets the fleet market, and faces competition from rivals such as Ford Motor Co., which plans to introduce an all electric F-150 next year that serves the same segment.
Lordstown Motors stock closed Thursday up 8.4% at $7.98 per share.
Shares of Lordstown Motors continued to climb during after hours trading in the wake of the announcement Thursday evening, hitting $8.63 by 8 p.m.
Thursday’s announcement comes as a reversal of fortune for the beleaguered EV startup. In March, a short-seller’s report alleged Lordstown Motors had faked preorders and said it didn’t have enough cash to produce the Endurance pickup.
In June, former CEO and founder Steve Burns and former chief financial officer Julio Rodriguez resigned from the company after an internal investigation found that executives had made misstatements about the number of preorders for the Endurance.
The company also that month issued a going concern notice as part of an amended annual report that said it may not have enough capital to survive in business past May of 2022.
Meanwhile, the U.S. Securities and Exchange Commission and the U.S. Department of Justice announced they are investigating the company related to its preorders and its merger with DiamondPeak Holdings Corp., a blank-check company that took Lordstown Motors public in October 2020.
Lordstown Motors, founded in 2019 by former CEO Burns, purchased the plant from General Motors in November of that year for $20 million. To help facilitate the sale, GM awarded a $40 million line of credit to Lordstown Motors to acquire and retool the facility in exchange for about 5% of equity ownership of the company.
The GM factory was a lynchpin of local manufacturing for more than 50 years, at one point employing more than 13,000 at the complex. It closed in March 2019 after GM ceased production of the Chevrolet Cruze, eliminating more than 1,600 jobs.
“They’re committed to filling that plant,” Ninivaggi says of Foxconn. “This is very positive for the community. Stay tuned.”
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