Foxconn and Lordstown Plant Positioned for EV Future
LORDSTOWN, Ohio – The CEO of Lordstown Motors Corp. replied with a succinct answer when asked about additional vehicles that would follow the company’s all-electric Endurance pickup, scheduled for production in September.
“More to come,” Daniel Ninivaggi said with a laugh without disclosing what lay ahead.
Now that a deal between the electric-vehicle startup and Foxconn is sewn up, Ninivaggi says the future of the company and its collaboration with the Taiwan-based technology giant opens up a host of new opportunities.
“We’re going to be one big happy family for quite some time,” Ninivaggi says of the Foxconn deal. “We’re thrilled about that.”
Lordstown Motors announced Wednesday that it had sold its plant to Foxconn for $230 million and successfully closed on critical contract manufacturing and joint venture agreements with the company.
Over the last six months, the parties have worked to close a deal that enabled Foxconn to purchase the plant, manufacture the Endurance and co-develop through a joint venture with Lordstown Motors future EV products in the North American and international markets.
Initially, principals had set a deadline of April 30 to secure the agreements. However, the date was pushed back, first to May 14 and then to May 18. It turns out the parties needed just until May 11.
Several hours after the announcement, a large vinyl sign with the Foxconn name and logo was stretched across the marquee at the plant’s main entrance, signaling the change of ownership.
“The joint venture agreement is the most complicated part of the transaction – took a little bit more time,” Ninivaggi says of the negotiations.
It was well worth the wait, since the new joint venture — called MIH EV Design LLC – is vital to developing a long-term strategy for both partners and the vitality of the Lordstown Assembly complex.
“That is really the long-term aspect of the deal in that we’ll be jointly developing vehicles with Foxconn off their MIH [Mobility-In-Harmony] platform for Lordstown and other OEMs internationally in other Foxconn facilities,” Ninivaggi says.
Foxconn, for example, last year secured a contract manufacturing agreement with Fisker Inc. to build that company’s new vehicle, the Pear. Ultimately, the company wants to produce 250,000 vehicles at the 6.2.-million square-foot Lordstown plant.
Company CEO Henrik Fisker is scheduled to visit the plant sometime today.
Foxconn committed $100 million to the JV and a vehicle development plan is underway, Ninivaggi says. “We have the team ready, and if successful, we can get the second and third vehicle into the Lordstown facility.”
Foxconn provided $55 million in direct capital funding and another $45 million loan to Lordstown Motors to initially fund that company’s capital contributions to the venture, according to a regulatory filing Wednesday. As such, Foxconn will retain 55% ownership of MIH EV and Lordstown 45%.
Under the deal, Lordstown would have the rights to the North American market and Foxconn would retain licenses for international sales.
A five-member management board will oversee the joint venture, with Foxconn initially having the right to appoint three members and Lordstown two. However, any major decision such as budgets, raising equity and incurring third-party indebtedness, for example, would require the consent of at least one Lordstown-appointed member.
The JV is critical because it allows synergies between Foxconn and Lordstown to co-develop future products on a common platform, says Edward T. Hightower, Lordstown Motors’ president.
“It will allow us to place more emphasis on our future portfolio for our Lordstown fleet customers as well as other OEMs,” he says. “That JV is our future.”
Under the agreement, Lordstown and Foxconn would share components, parts, engineering and other resources, Hightower says. Just as important, he emphasizes, is that the parties share the same manufacturing process, assembly sequence and other production-related strategies to reduce costs.
“It gives our suppliers scale and the plant scale,” he says.
Ninivaggi says the partnership allows smaller startups such as Lordstown to compete with legacy automakers such as General Motors, Ford, or Toyota.
“That’s why it’s so important to be working with them on product development,” the CEO says. “We need to connect product development to their manufacturing strategy. That’s the way to get the most value out of the partnership. That close collaboration is really positive for both sides.”
The deal also enables MIH EV to secure business with other electric-vehicle manufacturers and produce these products either at the Lordstown plant or globally, the CEO notes.
Meanwhile, Lordstown’s priority is to ensure a smooth launch of the Endurance, Hightower says. The EV pickup is slated for production in the third quarter and commercial sales are to begin in the fourth quarter targeting fleet customers.
The launch of the Endurance and subsequent production targets have not changed with the Foxconn announcement, Ninivaggi says. The company plans to manufacture 500 units this year and another 2,500 units in 2023.
What also hasn’t changed is the need for additional capital to fund the successful launch, the CEO says.
During an earnings call Monday, the company stated it would need approximately $150 million to launch the Endurance.
“The market has been very challenging for all and EV companies in particular,” Ninivaggi says. “We are managing our cash to get Endurance into production.”
Ninivaggi says once the Endurance is in the hands of customers, it should “open up more opportunities to raise capital.”
Foxconn will now produce the Endurance per the terms of the new manufacturing agreement. The agreement initially extends for 18 months beginning May 11 and allows a 12-month notice period in case one of the parties seeks to terminate the agreement, according to a regulatory filing. Should the term expire without either party cancelling the deal, it would revert to a month-to-month arrangement.
Under the deal, Foxconn would invoice Lordstown a per-vehicle fee for its manufacturing services, the filing says.
Four hundred employees at the plant are to be transferred to Foxconn’s payrolls, while 250 would remain with Lordstown.
As new products develop, so too will employment opportunities for engineers used across vehicle subsystems, software professionals, quality, sales and marketing with the company, Hightower notes.
“They’ll be growth in each of those areas,” he says. “It’s an exciting time.”
U.S. Rep. Tim Ryan, D-13, and the Democratic Party’s nominee for the U.S. Senate seat being vacated by Republican Rob Portman, says the agreements place the Mahoning Valley in the heart of an electric-vehicle revolution.
“This is transformational,” the congressman said Thursday. “I don’t think you can overstate what just happened.”
Ryan reflected that the Mahoning Valley has experienced its share of hardships, and the prospect of repurposing a plant that was once owned by General Motors is a welcome turning point.
Ryan says the most significant hurdle is providing a trained workforce in to staff the higher-end positions that would be required with the new partnership.
“We’ve got to challenge our workforce, our educational institutions about producing the workers,” Ryan says. This would mean engaging educational institutions ranging from grade schools to universities to prepare the next generation for jobs at companies such as Foxconn.
“Those are the conversations I’m going to have with Foxconn moving forward,” Ryan says. “I think for the first time in a long time, young people are going to have the choice to stay in our community,” he says, instead of searching for work outside the region.
Lordstown Mayor Arno Hill says he remained optimistic even as efforts to secure a deal dragged on.
“A week ago, I was hearing people saying that Lordstown could be on its last legs,” he says. “But, these are multimillion-dollar projects. You want to make sure it’s done correctly.”
Hightower says the Foxconn deal will yield great benefits for both companies.
“It supports their ambitions to be in the EV market after they’ve had success in the consumer electronics space,” he says. “And, it really supports the capabilities of our organization as exhibited in the development of the Endurance.”
Ninivaggi says the Foxconn deal serves as a great outcome for both companies and the Mahoning Valley.
“We wanted to do what was best for the community,” he says. “The plant and people are an important part of the deal.”
Copyright 2022 The Business Journal, Youngstown, Ohio.