In a reversal, Lordstown Motors’ new management said the company was not that bad after all, with enough confirmed pre-orders for its electric pickup to start production this fall with enough money to go through early next year.
The sunnier outlook comes days after the company stated in a government filing that it did not have enough funds to start commercial production and has a “going concern,” a legal phrase that suggests it does may not make it.
The startup then ousted its CEO and founder Steve Burns and CFO Julio Rodriguez on Monday. An inside report Tuesday interviewed 17 people who had worked with Burns. Some portrayed him as a visionary entrepreneur and others as a salesman who bent rules and didn’t keep promises.
But during an Automotive Press Association webinar on Tuesday heard by more than 240 reporters, Lordstown Motors’ new CEO and Independent Director Angela Strand said it was “a new day at Lordstown Motors and there will be no disruption to day-to-day operations . “
Lordstown Motors’ president, Rich Schmidt, who runs day-to-day operations, said the automaker was ready to begin building the endurance pickup in September. Around 15,000 pickups will be built by May 2022.
“We currently have enough funds to get us through the fourth quarter by May 2022,” said Schmidt. He said the company had $ 400 million “in the bank”.
But to grow it will need more funding and ask General Motors, an early investor in Lordstown Motors, for additional capital, Schmidt said.
GM is ready to listen
Lordstown Motors bought its northeast Ohio plant and equipment from GM in 2019 after GM closed the former Lordstown assembly plant.
“We have a good working relationship with GM,” said Schmidt. “We’ll talk to our original investors first, but that’s not our only option. We’ll raise the funds because we need money after May.”
GM owns approximately 5% of Lordstown Motors or approximately 7.5 million Class A common shares in exchange for an equity value of $ 75 million in the company.
GM’s equity stake primarily reflects the selling price of the plant, equipment and the value of the in-kind contributions GM has provided to help Lordstown Motors complete the purchase and bring it to market.
Despite all of Lordstown Motors’ recent troubles, GM has kept its stake, including a $ 125 million loss in the first quarter and an ongoing investigation by the Securities and Exchange Commission into research firm Hindenburg that labeled Lordstown’s vehicle pre-order claim as largely fictitious. Raise capital and give legitimacy. “
When asked if GM would be willing to invest more capital in the startup, GM spokesman Jim Cain said: “We are happy with our current relationship with Lordstown Motors and have no plans to change it, but we are ready to move on Suggestions to hear the sense of bot. “
Schmidt has been with Lordstown Motors since November 2019, around the time the company bought GM’s 6.2 million square meter factory.
Schmidt, an automotive veteran who has worked at Toyota, Nissan, Hyundai, Volkswagen, JD Power, and Tesla Motors, said Lordstown Motors is now actively raising money but did not provide details.
In November 2019, Lordstown Motors commissioned Cleveland investment bank Brown Gibbons Lang & Co. to raise $ 450 million to convert the plant.
By May 2022, Schmidt expects Lordstown Motors to have $ 25 to 50 million in cash. He said he was confident that once endurance production begins later this year, investors will see that the company “has great growth opportunities”.
On the one hand, the start-up costs were reduced by the fact that many of the former GM devices could be used in the factory, said Schmidt.
- GM’s body shop used to manufacture the Chevrolet Cruze small car is suitable for Endurance. A new body shop would have cost $ 500 million.
- GM’s paint shop only needed $ 14 million to convert, and it would cost $ 300 million to build a new paint shop.
- GM built a new assembly line in 2016, a new assembly line would have cost $ 5.5 million.
Schmidt said the company has contracts with suppliers that set different costs for raw materials, although some materials like steel have increased in price. Most of the Endurance is made of aluminum, but the company has increased the starting price of the Endurance by $ 2,500 to $ 55,000.
The Lordstown Motors plant is largely complete, said Schmidt. The automaker will start programming its paint shop this week and will build the line for installing the hub motors in July. The Endurance is powered by four motors in the hub of each wheel.
Some investors criticized the durability of the hub motors and urged Lordstown Motors to abandon the idea, but chief engineer Darren Post, who worked for GM for three decades, said, “We’re sticking with the hub motors. They are long-lasting and they are and are powerful.”
A union shop?
But the company has changed when it comes to unionizing the workforce.
About this time last year Burns told the Free Press that the work employ 4,000 to 5,000 people one day, as the case may be on request for the endurance. At the time, Burns said he would allow the UAW to organize if workers opted to unionize.
The jobs are reported to cost about $ 17 an hour, a few dollars less than what a new line worker at the Detroit Three pays per hour in the UAW’s current contract. Burns did not want to confirm a salary figure at the time.
According to Schmidt, Lordstown Motors currently employs 600 people, 130 of whom work at its development center in Farmington Hills and a few dozen in California.
When asked if Schmidt and Strand, as Burns said, were open to a union organizing campaign, Schmidt said: “We have no position on it. That is more of a question for our employees.”
He said the team is creating a culture where employees “feel like family” and the company is currently offering free breakfast and lunch. The employees also participate in the company’s success.
Schmidt said the company executives had an “unofficial off-site meeting” with the UAW “just to go over the process,” but there were no other active discussions.
In response to Schmidt’s comments, UAW Vice President Cindy Estrada, director of the UAW Organizing Division, said, “We agree with President Biden that we can build better. Building better means we can protect the environment while providing well-paid union jobs. We are disappointed that the company appears to be more interested in non-union than in working with the UAW and other stakeholders to make the company successful. “
But Schmidt said employee morale was good despite the management restructuring, poor first quarter, and other issues.
“We’re on the same path that the former CEO suggested … the same schedule, the same marketing plan … we just have to go a little faster and make decisions a little smoother,” said Schmidt.