Lordstown Motors Seeks ‘Strategic Investors’ to Power Forward
LORDSTOWN, Ohio – Startup electric-vehicle manufacturer Lordstown Motors Corp. is not for sale, but it is in discussions with “large strategic investors” that would bring more than funding to the table, the company’s CEO said Monday.
“We continue to evaluate what capital is available to us,” Steve Burns said during a conference call with analysts following the release of the company’s first quarter earnings. “It helps float all boats if we are strong financially,” he said. “Selling isn’t anywhere in our vernacular.”
Lordstown Motors reported a net loss of $125 million during the first quarter. Cash on hand was $587 million as of March 31, the company reported.
On Monday the company announced that it would require additional financing to execute its business plans to launch the Endurance, a commercial electric pickup.
Without this funding, Burns said the company expected to cut its 2021 production target by half to about 1,000 vehicles.
“If we don’t get any funding, we might only make half of what we were going to make before,” Burns told analysts. Earlier projections estimated that Lordstown would manufacture 2,200 pickups after the launch of the Endurance in late September.
However, Burns said that higher than expected costs associated with supply chains, engineering resources, parts and equipment, and shipping costs presented challenges to the company.
The company said these factors have driven up operating costs by $115 million. Operating expenses are expected to be between $55 million and $60 million for sales and administrative costs, and between $280 million and $290 million for research and development costs.
“We intend to bring capital in,” he said. One of the opportunities the company is pursuing is financing through the federal government’s Advanced Technology Vehicle Manufacturing loan program.
Burns said companies such as Tesla used the program during its early stage growth to fund some of its critical startup costs.
“I don’t think there would be a Tesla if they didn’t get this loan back in the day,” he said. “We fell good about it.”
The CEO also said that Lordstown Motors’ wheel-hub technology and in-house battery production would ultimately drive the cost of production down.
“We make our own motors so we can control the costs of those down. We make our own battery packs so we can control the costs of those,” he said.
Work on the battery production division within the plant is ongoing and is on track to deliver the first packs in time for the Endurance launch, Burns reported.
Lordstown Motors is in the process of producing beta vehicles of the Endurance at its plant – the former General Motors complex in Lordstown. The company has built 48 out of 57 of these vehicles so far, the CEO said.
These beta tests are used mostly for safety validation tests, and Burns said the Endurance has passed every one.
“We are still on track to build pre-production vehicles in July,” said Lordstown Motors’ president, Rich Schmidt. These models contain parts such as the battery pack and hub motors constructed inside the plant.
Some of these vehicles will be sent for test validation before the National Highway Transportation Safety Administration in late summer as one of the final steps before full production.
Schmidt said the plant is being retooled to accommodate both trucks and cars. “The robotic body shop is up and running and the paint shop is on schedule and is virtually complete,” he said.
“Once all lines are built in commission that we would be the largest manufacturer of hub motors in the world,” he said.
Still, shares of Lordstown Motors nosedived after the earnings report, shedding 10% of their value in after-hours trading Monday evening.
Burns insisted demand for the Endurance is strong, and emphasized the company now has letters of intent for 30,000 vehicles that would require a down payment toward the pickup, due 90 days before the build.
In January, the company boasted it had secured more than 100,000 pre-orders of the Endurance. In March, however, a short-seller’s report accused the company of fabricating many of these orders and alleged Lordstown Motors had misled investors. The report was followed by a disclosure from Lordstown Motors that the U.S. Securities and Exchange Commission had initiated an investigation into its pre-orders and its merger with DiamondPeak Holdings Corp.
Burns said he could not address the short-seller’s report on Monday, but said the company would provide a full response before it released its second-quarter earnings. He reiterated that the company was cooperating with the SEC inquiry.
The CEO also said that preliminary work on Lordstown Motors’ second vehicle, a van, has begun. A prototype of the all-electric van should be available this summer. Production is to begin sometime next year.
Burns said Ford’s announcement last week of the all-electric Ford F-150 Lighting pickup further validates demand for a full-size electric pickup.
“To be this close to production, to be first in this highly competitive marketplace – I hope people can appreciate why we’re so excited,” he said.
Copyright 2021 The Business Journal, Youngstown, Ohio.