Lordstown Motors Signs Purchase Agreement with Foxconn
LORDSTOWN, Ohio – Electric-vehicle manufacturer Lordstown Motors Corp. announced late Wednesday that it has signed a definitive asset purchase agreement with Hon Hai Technology Group, better known as Foxconn, regarding Lordstown’s manufacturing complex.
As previously disclosed Sept. 30, Lordstown Motors entered into an agreement in principle with Foxconn to work jointly on Lordstown Motors’ electric vehicle programs at the automaker’s manufacturing plant here.
As a sign of confidence in the partnership, Foxconn purchased $50 million of common stock directly from Lordstown Motors at a price of $6.8983 per share.
The definitive asset purchase agreement implements the terms of the agreement in principle. It provides for Foxconn to buy the Lordstown facility, excluding certain assets such as the hub motor assembly line and battery module and pack lines, for $230 million.
The announcement comes on the same day that Lordstown Motors announced the appointment of Edward T. Hightower as its new president, replacing Rich Schmidt.
“This partnership marks the commencement of integrating our resources with Lordstown Motors to develop Ohio into Hon Hai’s most important electric vehicle manufacturing and R&D hub in North America,” said Young Liu, chairman of Hon Hai Technology Group, in a prepared statement.
“As we look to inject Hon Hai’s software and hardware capabilities in the information and communications industry with the wealth of automotive experience that resides in this town and our partners, we will be able to provide customers with more real-time and efficient electric vehicle products,” he said.
Additional terms of the asset purchase agreement include:
- Foxconn has agreed to make a down payment of the purchase price of $100 million by Nov. 18, and subsequent down payments of $50 million on each of Feb. 1, 2022 and no later than April 15, 2022. The balance of the purchase price will be paid at closing.
- The parties have agreed to pursue a contract manufacturing agreement for the Endurance pickup truck, which must be entered into before closing—currently targeted by April 30, 2022.
- Lordstown Motors and Foxconn will pursue a joint venture agreement to co-design and develop vehicle programs for the global commercial fleet market, using the MIH open platform. Lordstown and Foxconn would have the right to commercialize these new EV programs in North America and internationally.
- Upon the closing, Foxconn will receive 1.7 million warrants to acquire Lordstown common stock, exercisable for three years, at a price of $10.50 per share.
Lordstown Motors said the Foxconn partnership would unlock the tremendous potential of the plant by getting it to scale faster. At 6.2 million square-feet and 640 acres, the complex was one of the largest internal combustion engine automotive plants in North America. Foxconn has an excellent opportunity to fill the plant, having already announced that the Fisker PEAR program would be manufactured at the complex, the company noted.
“We are happy to have formed a strategic partnership with a company as innovative and forward-thinking as Foxconn, said Daniel Ninivaggi, CEO of Lordstown Motors. “I believe in their EV strategy and look forward to substantial collaboration in the future. In my view, this transaction provides Lordstown a better opportunity to fulfill its original mission of satisfying the growing demand for electric vehicles, particularly in the underserved commercial market, with a more flexible business model.”
Lordstown Motors and all OEMs whose vehicles are built at the plant will benefit from the increased capacity utilization, possible use of common components and shared overhead costs, the company said. The use of shared space and the open platform provides smaller, more specialized OEM’s the opportunity to achieve the benefits of scale without being a large, fully integrated automaker.
Moreover, the partnership with Foxconn should enable Lordstown Motors to significantly reduce its raw material, component and other input costs, Lordstown Motors said. As one of the largest contract manufacturers globally, Foxconn will bring to bear the purchasing power, supply chain network, and logistics capabilities to significantly reduce vehicle production costs and mitigate supply chain risk.
Lordstown Motors also stands to benefit from Foxconn’s expertise in hardware software integration – critical to EVs – given its experience as a multinational electronics manufacturer.
The closing of the transactions contemplated by the purchase agreement is subject to closing conditions, including entry into the contract manufacturing agreement, regulatory approvals and other customary closing conditions.
Published by The Business Journal, Youngstown, Ohio.