Lordstown Motors CEO: ‘More Work To Do’ Toward Foxconn Deal
LORDSTOWN, Ohio – Lordstown Motors Corp. CEO Daniel Ninivaggi said Monday he is “disappointed” at the pace of negotiations between the EV startup and Foxconn regarding their pending partnership, but says he’s confident that a deal would be reached.
“I am disappointed that we’re not further along,” Ninivaggi told analysts during a conference call discussing Lordstown Motors 2021 year-end and fourth quarter financial results. “The relationship with Foxconn is very positive and the discussions are ongoing. But we need to bring that to a conclusion.”
Lordstown Motors announced in November that it had reached an asset purchase agreement with Taiwan-based Foxconn. Under the agreement, Foxconn would purchase Lordstown’s assembly plant for $230 million and invest another $50 million in equity.
The deal, however, is contingent upon both parties arriving at a joint product development agreement in which Foxconn would manufacturer future Lordstown Motors vehicles on Foxconn’s mobility in harmony – or MIH – platform.
Such a deal is critical, executives say, since the company needs to raise about $250 million in the near-term in order to launch its first commercial vehicle, The Endurance, an all-electric pickup during the third quarter. Much of this capital would be used for hard tooling used to manufacture the pickup.
The company is looking for funding from Foxconn to help finance production of the Endurance and future Lordstown Motors models as part of the joint development agreement. Ninivaggi said the company has submitted a draft before the Committee on Foreign Investment in the United States, or CFIUS, for review.
“We’ve made significant progress and we’ve filed a draft with CFIUS, but it’s not yet final,” Ninivaggi said. The joint product venture allows more flexibility and gives Lordstown Motors the opportunity to broaden its product portfolio under the MIH platform, he said.
Lordstown Motors said Monday it plans to produce just 500 units of the Endurance in 2022, and 2,500 pickups in 2023. Ninivaggi told analysts that the company had targeted pre-selected fleet customers that stand the best chance of establishing long-term relationships with the company. Commercial production is still set for the third quarter of this year, the company said.
Lordstown Motors President Edward Hightower told analysts on the call that pre-production vehicles are rolling out of the plant. These vehicles are used for validation, certification and market demonstration purposes.
The plant plans to manufacture 64 pre-production vehicles and has completed 27 full pickups and 10 partial build vehicles for passenger safety tests, he said.
Yet the anemic commercial production numbers for the Endurance, coupled with the slow pace of negotiations with Foxconn, sent Lordstown Motors’ shares tumbling 17% by noon on Monday to $2.66 per share.
Foxconn acquired $50 million in equity shares and paid $100 million toward the plant’s purchase during the fourth quarter of 2021, according to the company’s financial results. Another $50 million installment was made on Jan. 28, 2022, the company said. The balance of the sale is due at closing, set for April 30.
According to financial documents filed with regulators on Monday, Lordstown Motors said the company requires “a joint product development agreement and an appropriate funding structure that enables us to raise substantial additional capital necessary to bring the Endurance into production and to fund future vehicle development.”
Should the deal not close, Lordstown Motors would be “unlikely to have sufficient available cash to repay Foxconn’s down payments,” the filing stated. As a result, Foxconn could exercise its rights under the agreement and foreclose “on its liens on some or substantially all of the company’s assets. Under such circumstances, we would not be able to continue as a going concern or realize any value from our assets,” the filing notes.
In December, Foxconn extended an open-end mortgage instrument of $500 million to Lordstown Motors in return for the EV startup putting its plant and land up as collateral.
Lordstown Motors reported it had $244 million cash on hand as of Dec. 31, 2021. The company reported a net loss of $410.3 million for the year.
Ninivaggi emphasized to analysts that it’s “highly unlikely” that the deal will fall through. “They [Foxconn] understand the importance of all the elements of the agreement and I think we’ll work hard to get there.”
He said the company isn’t at a point in which it would consider other financing options.
“We are all in with Foxconn and we’re very confident we can make the relationship work,” Ninivaggi said.
“Clearly, we and Foxconn have more work to do.”
Pictured: During a Feb. 28 conference call, Lordstown Motors Corp. CEO Daniel Ninivaggi said he was confident a deal with Foxconn would be reached.
Copyright 2022 The Business Journal, Youngstown, Ohio.