The clock is starting to tick very loudly for electric pickup truck manufacturer Lordstown Motors Inc., which now has less than 10 days to seal a deal for contract manufacturing giant Foxconn to acquire its vast plant in Northeast Ohio.
If Lordstown and Foxconn parent company Hon Hai Technology Group don’t soon iron out the details of their contract manufacturing and joint product development agreements, Lordstown will be forced to repay Foxconn $200 million in downpayments made since November – money it does not have. On a conference call with analysts and investors after reporting Lordstown’s first-quarter results, CEO Dan Ninivaggi said he remains optimistic the details can be hammered out.
Foxconn officials this past weekend extended Lordstown’s repayment deadline to May 18 from May 14 and Ninivaggi said the parties are maintaining “a good, constructive dialog.”
On the operational side, Ninivaggi and President Ed Hightower said work has progressed with the company’s Endurance truck, which will have a payload capacity of 1,200 pounds and towing capacity of 8,000 pounds. Hightower said the company has begun final testing and validation work despite running into some materials supply problems. The executives’ plans remain to focus on a relatively small number of fleet customers who would take their first deliveries late this year and who could grow their relationships over time.
Financially, however, inflation and supply chain snarls have contributed to the Endurance’s bill of materials being “significantly higher” than its initial sales price, Ninivaggi said. That won’t meaningfully change until Lordstown can invest in hard tooling equipment, a step its leaders have pushed back until they have cleared their Foxconn hurdle and one they say would take up to 18 months to be completed. Lordstown in the first quarter booked nearly $88 million in operating expenses but no revenues.
Lordstown shares (Ticker: RIDE) fell more than 6% May 9 to about $1.78 and were giving up more ground after hours. Year to date, they have lost more than half their value, cutting the company’s market capitalization to about $350 million.