Under the deal, the Taiwan-based electronics contract manufacturer will assemble Lordstown Motors’ first product, an all-electric pickup truck called the Endurance, that the company was preparing to produce and sell beginning next year.
Selling the plant to Foxconn, also known as Hon Hai Technology Group, will provide capital for the cash-strapped electric vehicle start-up, while giving Foxconn a jump start to producing EVs. Foxconn also has a deal with start-up Fisker to produce EVs in the coming years.
“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 CEO Daniel Ninivaggi said in a statement.
Bloomberg first reported the companies were “near an agreement” earlier in the day, sending Lordstown shares up by as much as 21% on Thursday before retreating to close at $7.98, up 8.4%. The stock increased by another 7.4% during after-hours trading.
“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,” Young Liu, chairman of Hon Hai Technology Group, said in a statement.
Lordstown has been strapped for cash as it attempts to begin production of the Endurance. The company in June said there was “substantial doubt” about its ability to continue as a going concern in the next year because of problems funding the production of the Endurance.
While Taiwan-based electronics contract manufacturer Foxconn is best known for iPhone production, it’s attempting to broaden its manufacturing to electric vehicles.
Workers install door hinges to the body shell of a prototype Endurance electric pickup truck on June 21, 2021 at Lordstown Motors’ assembly plant in Ohio.
Michael Wayland / CNBC
The EV start-up purchased the 6.2 million square-foot massive facility in Lordstown, Ohio, in 2019 from General Motors, which ceased operations at the plant as part of a restructuring plan. The start-up reportedly bought the facility for $20 million, a fraction of its overall value, and GM has assisted the company both financially and operationally with suppliers.
GM owns 7.5 million shares of Lordstown Class A common stock. It received the shares in exchange for equity value of $75 million in the EV company, most of which were in-kind services and linked to the sale of the property.
Aside from its financial troubles, Lordstown is under investigation by the Securities and Exchange Commission and Department of Justice regarding its deal to go public as well as potentially false or misleading statements from former management, including company founder and ex-CEO Steve Burns.
Burns and his CFO left the SPAC-backed company in June after an internal investigation found “issues regarding the accuracy of certain statements” around Lordstown’s preorders, specifically the seriousness of the orders and who was making them.
In May, short seller Hindenburg Research said the company misled investors, including using “fake” orders to raise capital for its Endurance electric pickup. The short seller also said the pickup was years away from production. Lordstown has maintained it’s on track to start making the vehicle in September.
Lordstown previously said the internal investigation found Hindenburg’s report “is, in significant respects, false and misleading.”
Read More: Lordstown Motors to sell Ohio plant to Foxconn for $230 million