Lordstown Motors to Lay Off Nearly 100 at Michigan Tech Centers
LORDSTOWN, Ohio – Electric-vehicle manufacturer Lordstown Motors Corp. will begin permanent layoffs of approximately 100 employees next month at its research and design centers in Farmington Hills, Michigan, according to documents filed with the state.
The company, which filed for Chapter 11 bankruptcy Tuesday, submitted a notice under the Worker Adjustment Retraining Notification, or WARN, Act, on May 19 with the Michigan Department of Labor and Economic Opportunity, just as a dispute with major investor Foxconn intensified.
According to the WARN filing, Lordstown plans to begin layoffs of 98 employees at its two locations in Farmington Hills as early as July 17 and no later than July 31, the notification said. The centers conduct research, design and testing on electric vehicle products in Lordstown Motors’ pipeline.
The planned action will be permanent, the filing stated, and none of the employees are affiliated with a union. The majority of positions affected by the layoffs are in engineering, according to the filing.
“The layoffs are due to insufficient funding resulting primarily from a dispute with Foxconn Ventures Pte. Ltd regarding its contractual obligations to LMC,” the WARN letter states.
Lordstown Motors has also filed a lawsuit against Foxconn in U.S. Bankruptcy Court for the District of Delaware.
As of Wednesday, there were no WARN notifications posted for Lordstown’s local operations in Trumbull County, where the company is headquartered.
Lordstown Motors in November 2019 purchased the former General Motors Assembly plant in Lordstown after GM ceased production of the Chevrolet Cruze in March of that year. In 2020, the EV startup went public through a special purpose acquisition company, or SPAC, and envisioned manufacturing thousands of EV pickups from the idled plant.
However, an internal shakeup led to the resignation of founder and CEO Steve Burns and others in June 2021, after it was disclosed that executives at the company made misleading public statements regarding preorders for the company’s flagship pickup, the Endurance.
Under new management, the company adopted a new business model that sought out a strategic partner to develop the new EV. In May 2022, Hon Hai Technology, better known as Foxconn, acquired Lordstown’s plant for $230 million.
The acquisition was contingent upon the parties signing separate contract manufacturing and joint venture agreements, whereas the companies would collaborate on existing and future EV products.
Lordstown’s complaint alleges that Foxconn never followed through with its JV commitments, including its promise to share data and engineering information of the new products. Foxconn also never approved a budget for the new JV, nor shared bank information with Lordstown Motors, the lawsuit alleges.
Lordstown Motors was subsequently forced to defer “promising discussions” with one of the largest fleet managers in North America, court papers say.
The JV agreement was then renegotiated in November to a direct investment deal where Foxconn would purchase $170 million in stock of Lordstown Motors, or 10% of the company.
Meanwhile, Lordstown Motors’ stock plunged, and the company received a delisting notice in April saying the company was in violation of Nasdaq rules since its stock price had fallen under $1 for 30 consecutive business days.
The delisting notification triggered Foxconn to hold back a subsequent purchase of $47.3 million in Lordstown stock, per the agreement. Lordstown Motors, in a regulatory filing in May, said that should the investment not close it would consider bankruptcy as an option.
The company alleges Foxconn never had any intention of going through with the JV and the investment deal, noting that the Taiwanese tech manufacturer used the agreements to acquire Lordstown Motors’ plant, court documents say.
“Instead of building a thriving business for the benefit of all Lordstown stakeholders, Foxconn’s fraudulent actions have destroyed the company’s business and future, stripping its ability to continue as a going concern absent a strategic Chapter 11 transaction,” Lordstown Chief Financial Officer Adam Kroll said in an affidavit filed Tuesday.
Foxconn has called the lawsuit “baseless” and characterized Lordstown Motors’ comments as “malicious.”
“Regarding LMC’s litigation announcement today and the false comments and malicious attacks made by LMC in its external statements against Foxconn, the company reserves the right to pursue legal actions and also suspends subsequent good faith negotiations,” Foxconn said in a statement.
“Foxconn originally hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus.”
A hearing in U.S. bankruptcy court in Delaware is scheduled for 3 p.m. today. Lordstown Motors has said it is confident it could find a buyer for the company’s assets.
At midday, Lordstown Motors stock, which is listed under the ticker RIDE, was trading at $2.08 per share, a decline of 41% over the past five days.
Pictured at top: The Lordstown Motors sign is seen on the assembly plant in Lordstown in 2021.
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