Lordstown Motors Confirms $230M Foxconn Deal, Updates Production, Financial Outlook

LORDSTOWN, Ohio – Lordstown Motors Corp. and global technology company Hon Hai Technology Group today announced they have reached an agreement in principle to work jointly on Lordstown Motors’ electric vehicle programs in Lordstown Motors’ 6.2 million square foot production and assembly plant here.

The deal, if fully consummated, would mean Foxconn would pay Lordstown Motors $230 million for its plant and buy $50 million of the EV startup’s common stock.

Beyond certain customary provisions, the agreement is non-binding and subject to the negotiation and execution of definitive agreements, the companies said.

The parties have entered into a subscription agreement, under which Foxconn will purchase approximately $50 million of Lordstown Motors’ common stock directly from Lordstown Motors at a price of $6.8983 per share, the average daily volume adjusted price over the past 15 trading days prior to the execution of the agreement in principle. Foxconn has agreed to retain these shares for a specified period.

The agreement between both companies would allow Lordstown Motors to leverage the technology and manufacturing expertise of Foxconn, as Lordstown Motors pursues the production of electric vehicles at its Ohio facility. The goal of the partnership is to present both Lordstown Motors and Foxconn with increased market opportunities in scalable electric vehicle production in North America.

The agreement provides as follows:

  • Lordstown Motors and Foxconn will use commercially reasonable best efforts to negotiate a definitive agreement pursuant to which Foxconn would purchase the Lordstown facility, excluding Lordstown Motors’ hub motor assembly line, battery module and packing line assets, certain intellectual property rights and other excluded assets, for $230 million.
  • Both entities would also negotiate a contract manufacturing agreement, which would be a condition to closing of the facility purchase, whereby Foxconn would manufacture Lordstown Motors’ Endurance full-size pickup truck at its Lordstown facility. Lordstown Motors would also agree to provide Foxconn with certain rights with respect to future vehicle programs.
  • Concurrently with the closing under the definitive agreements, Lordstown Motors would issue warrants to Foxconn that are exercisable until the third anniversary of the closing for 1.7 million shares of common stock at an exercise price of $10.50 per share.
  • The parties have agreed to explore licensing arrangements for additional pickup truck programs.

Following the closing under the definitive agreements, Lordstown Motors would enter into a long-term lease for a portion of the existing facility for its Ohio-based employees, and Foxconn would offer employment to agreed upon Lordstown operational and manufacturing employees.

Young Liu, chairman of Hon Hai Technology Group, commented “We have high expectations through this partnership that we will be able to successfully integrate our resources with Lordstown Motors. 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. 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. It will undoubtedly thrive under our partnership and business model.”

In addition, this facility would serve as a speed to market asset that would also support Foxconn’s partner and customer, Fisker Inc.

Daniel Ninivaggi, CEO of Lordstown Motors Corp., stated “We are excited about the prospect of joining forces with a world-class smart manufacturer like Foxconn and believe the relationship would provide operational, technology and supply chain benefits to our company and accelerate overall scaled vehicle production and increase employment in the Lordstown facility. The partnership would allow Lordstown Motors to take advantage of Foxconn’s extensive manufacturing expertise and cost-efficient supply chain, while freeing up Lordstown Motors to focus on bringing the Endurance to market, developing service offerings for our fleet customers and designing and developing innovative new vehicle models.”

Lordstown Motors also updated its 2021 financial outlook as follows:

  • Capital expenditures – unchanged in total from $375 to $400 million, including changes in timing of tooling and equipment purchases and the inclusion of forecasted soft tooling expense purchases previously included in R&D expense.
  • SG&A expenditures – $105 to $120 million, up from $95 to $105 million, primarily due to higher legal and professional fees.
  • R&D expenditures – $320 to $340 million, up from $310 to $320 million, largely due to increased prototyping and pre-production expenses, reduced by the impact of moving forecasted soft tooling expense to capital expenditures as mentioned above.
  • Cash balance on Sept. 30 is $210 to $240 million, down from $225 to $275 million, which includes approximately $20 million of proceeds from the issuance of common stock under the company’s equity purchase agreement in August and September but excludes proceeds from Foxconn’s purchase of $50 million of the company’s common stock as announced today.
  • These updated financial projections regarding pre-production expenses may be affected by numerous factors, including the results of validation and regulatory testing, supply chain constraints and delays, and the timing of tooling and equipment purchasesLordstown Motors has engaged Jefferies LLC to advise the Company on additional financing alternatives, which may include private or public equity transactions, debt financings, or some combination of these.

SOURCE: Lordstown Motors. Image: Lordstown Motors.

Copyright 2021 The Business Journal, Youngstown, Ohio.