Lordstown Motors has announced a strategic restructuring process that includes filing for Chapter 11 bankruptcy in the US, looking for a buyer and also filing litigation against Hon Hai Technology Group and its affiliate Foxconn.
The litigation details Foxconn’s ‘fraud and wilful and consistent failure to live up to its commercial and financial commitments to the company’. Lordstown says Foxconn’s actions led to material damage to the company as well as its future prospects.
In addition, and as a ‘consequence of Foxconn’s material and irreparable harm’, Lordstown is commencing a comprehensive marketing and sale process for its assets.
It said that to accomplish this expeditiously and provide a prospective buyer with a going concern asset that is free and clear of any legacy issues, Lordstown is restructuring under Chapter 11 of the US Bankruptcy Code.
Lordstown said it anticipates that the restructuring will enable an expedited timeline for hearing Lordstown’s litigation against Foxconn.
Edward Hightower, CEO & President of Lordstown, said: “As one of the early entrants to the EV industry, we have delivered the Endurance, an innovative and highly-capable EV with significant commercial and retail potential – and had subsequently engaged with Foxconn in a purposeful, strategic partnership to leverage this expertise into a broader EV development platform.
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By GlobalData“Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly.”
The complaint filed against Foxconn centres on a transformative, strategic partnership Lordstown’s management team entered into with Foxconn. The partnership was to combine Lordstown’s innovation, technology and manufacturing facility in Lordstown, Ohio with Foxconn’s resources, supply chain capabilities and position as one of the world’s largest electronics manufacturers with stated significant automotive capabilities. The aim was to form a new, scalable joint vehicle development platform.
Under the partnership, Lordstown agreed to divest its assets to Foxconn, namely its Lordstown, Ohio manufacturing facility, which it says is one of the largest in North America. It says the up-front purchase price for the Lordstown manufacturing facility reflected the expected benefits of the contractual assurances from Foxconn that Foxconn would support the Endurance pickup truck in a variety of ways and follow through on a joint vehicle development program.
The lawsuit maintains that Foxconn had no intention of living up to its commitments, particularly with respect to the new vehicle development platform. It alleges that Foxconn ‘simply used its variety of contractual arrangements with the company as a tool to maliciously and in bad faith destroy Lordstown’s business—while leveraging resources gained through the partnership to advance its own business interests.’
Lordstown said it is confident that a buyer could utilize the Endurance platform to create multiple EV variants and take the product to the next level.
Hightower added: “We remain confident that an orderly, expedited sale process will maximize value for our stakeholders and enable the talent and technology behind the Endurance to find new and supportive ownership. While in Chapter 11, Lordstown will continue to support our customers. We are grateful for the Lordstown team for their commitment and dedication to our vision and to our customers, suppliers and business partners for believing in the Endurance and in the EV evolution.”
