GM, Nikola Scale Back Deal that Included Ultium Batteries
Monday morning, the companies announced a scaled-back deal that allows Nikola to use Ultium batteries – which will be made in Lordstown – but scraps GM’s equity stake in the startup and plans for GM to build Nikola’s pickup truck.
“We are excited to take this important step with GM, which provides an opportunity to leverage the resources, strengths and talent of both companies,” said Mark Russell, CEO of Nikola, in his company’s statement. “Heavy trucks remain our core business and we are 100% focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market. We believe fuel-cells will become increasingly important to the semi-truck market, as they are more efficient than gas or diesel and are lightweight compared to batteries for long hauls. By working with GM, we are reinforcing our companies’ shared commitment to a zero-emission future.”
In early September, the two automakers announced a partnership where GM would supply Ultium batteries, fuel cell systems, chassis architecture and a factory for Nikola and its Badger pickup. In return, GM would take an 11% stake in the company and $700 million.
“This supply agreement recognizes our leading fuel cell technology expertise and development,” said Doug Parks, said GM’s vice president of global product development, purchasing and supply chain. “Providing our Hydrotec fuel cell systems to the heavy-duty class of commercial vehicles is an important part of our growth strategy and reinforces our commitment toward an all-electric, zero-emissions future.”
With the agreement to build the Badger gone, Nikola says it will refund deposits made on the truck.
“In a nutshell, the signing of GM as a partner is a positive but ultimately no ownership/equity stake in Nikola and the billions of R&D potentially now off the table is a major negative blow to the Nikola story,” Wedbush analyst Dan Ives told the Associated Press. “This went from a game changer deal for Nikola to a good supply partnership but nothing to write home about.”
The announcement sent Nikola’s stock price tumbling, falling to $20.74 as of 11 a.m., down 25% since the opening bell.
Since announcing the partnership Sept. 8, Nikola has had its hands full outside developing electric vehicles. Both the company and founder Trevor Milton received grand jury subpoenas from the Department of Justice after a short-seller accused the company of fraud. Milton resigned as chairman shortly after the accusations were first made.
Hindenburg Research claims that Nikola has conducted “intricate fraud,” including a video showing a truck rolling downhill to give the impression it was cruising on a highway, and stenciling the words “hydrogen electric” on the side of a vehicle that was actually powered by natural gas, according to the Associated Press.
Nikola, meanwhile, denies the allegations and calls them misleading.
“Our counsel has been in close contact with the SEC and the Department of Justice, and we are fully cooperating with both in their requests for information and documents,” Russell said on Nikola’s most recent earnings call, according to The Detroit News. “We remain focused on achieving our stated milestones and in continuing to drive our business forward and create value for our shareholders.”
Pictured: The Nikola Badger, which will be powered by GM’s Ultium batteries.
The Associated Press contributed to this story.
Copyright 2021 The Business Journal, Youngstown, Ohio.