Lordstown Motors has reached a fundamental agreement to sell its giant Ohio assembly plant to iPhone maker Foxconn for $ 230 million, the companies said late Thursday.
Under the agreement, the Taiwan-based electronics contract manufacturer will assemble Lordstown Motors’ first product, an all-electric pickup truck called Endurance, which the company plans to manufacture and sell starting next year.
Sale of the facility to Foxconn, also known as Hon Hai Technology Group, will provide capital for the start-up of electric vehicles and at the same time give Foxconn a start-up aid for the production of electric vehicles. Foxconn also has a deal with a start-up Fisker Produce electric cars in the next few years.
“The partnership would allow Lordstown Motors to benefit from Foxconn’s extensive manufacturing expertise and cost-effective supply chain, while Lordstown Motors can focus on bringing the endurance to market, developing service offerings for our fleet customers and developing innovative new models,” said Lordstown- CEO Daniel Ninivaggi in a statement.
Bloomberg reported first Companies were “close to an agreement” earlier in the day, adding up to 21% in Lordstown stock Thursday before pulling back and closing at $ 7.98, up 8.4%. In after-hours trading, the share gained a further 7.4%.
As part of the proposed transaction, Foxconn will also acquire approximately $ 50 million in Lordstown common stock. The EV start-up then plans to rent part of the former lease on a long-term basis General Motors and Foxconn will provide jobs to Lordstown’s operations and manufacturing staff.
“In addition to achieving our goal of advancing our schedule of building electric vehicle manufacturing capacity in North America, it also reflects Foxconn’s flexibility in providing design and manufacturing services to various EV customers,” said Young Liu, chairman of Hon Hai Technology Group in a statement.
Lordstown was running out of money trying to make money Start production of perseverance. The company said in June it would exist “considerable doubts” of its ability to continue production of the Endurance for the next year due to funding issues.
While Taiwan-based electronics contract manufacturer Foxconn is best known for its iPhone production, it is trying to expand its production to include electric vehicles.
Workers install door hinges on the body of a prototype endurance electric pickup truck at the Lordstown Motors assembly plant in Ohio on June 21, 2021.
Michael Wayland / CNBC
The EV start-up bought the 6.2 million square foot facility in Lordstown, Ohio, in 2019 from General Motors, which ceased operations at the facility as part of a restructuring plan. The startup reportedly bought the facility for $ 20 million, a fraction of its total value, and GM has provided the company with both financial and operational support with suppliers.
GM owns 7.5 million Class A common shares of Lordstown. It received the shares in EV company for an equity value of $ 75 million, most of which were in kind and related to the sale of the property.
Aside from its financial troubles, Lordstown has Wil be inspected from the Securities and Exchange Commission and the Department of Justice regarding its initial public offering and potentially false or misleading statements by 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 related to the accuracy of certain statements” regarding Lordstown’s pre-orders, specifically the seriousness of the orders and who placed them.
In May, short seller Hindenburg Research said the company had misled investors, including using “fake” orders to raise capital for its Endurance electric pickup truck. The short seller also said the pickup was years away from production. Lordstown has kept its plan to start manufacturing the vehicle in September.
Lordstown previously said the internal investigation found that Hindenburg’s report was “fundamentally incorrect and misleading”.