The troubled electric vehicle maker Lordstown Motors has followed through with its promise to sue Foxconn over a promised investment and filed for bankruptcy.
On June 27, the EV maker filed a legal action against Foxconn, the Taiwanese manufacturer of Apple’s iPhones, while simultaneously filing for Chapter 11 protection in Delaware and put itself up for sale.The Ohio-based manufacturer of the Endurance all-electric pickup truck is looking for a new owner, said the company, after also losing General Motors as an investor in March.
The American EV startup sued Foxconn, also known as Hon Hai Technology Group, for fraud and consistently failing to live up to its commercial and financial commitments.
The carmaker had previously announced that it would consider filing a claim against Foxconn for allegedly balking at purchasing additional shares worth roughly $47 million, which could have kept the company afloat.
Foxconn currently holds an 8.4 percent stake in Lordstown.
Lordstown Failed to Maintain Production Levels
Lordstown went public as a startup in 2020 via a merger with a special-purpose acquisition company (SPAC) after launching in 2018.The dispute began after both parties failed to resolve their dispute over a previously agreed upon $170 million investment.
The EV maker accused the Taiwanese consumer electronics firm of fraudulent conduct and for breaking multiple promises in failing to abide by their multimillion-dollar agreement, according to the complaint.
Prior to the deal in June 2021, Lordstown announced that it lacked the money to start commercial production and would likely fail within months as the EV SPAC began to struggle.
Later that year, Foxconn saved the company by agreeing to partner with it and by purchasing its Ohio manufacturing facility and help produce its Endurance pickup truck under contract.
The EV startup received an investment of $52.7 million out of the $170 million promised by Foxconn, which gave Lordstown much needed capital and establishing the Taiwanese company as an automobile manufacturer.
The electronics giant also agreed to pay Lordstown an additional $230 million and buy 10 percent of shares in common stock.
However, Foxconn found it difficult to reach full volume production at the Ohio plant after purchasing it in 2022.
Last November, Lordstown began shipments of its Foxconn-produced EV pickup trucks, but then halted production earlier this year because of supplier-related issues.
Manufacturing resumed at a reduced pace in April after dealing with quality issues in the supply chain, but only reportedly delivered six vehicles in 2023 and manufactured a total of 31 units.
Lordstown warned investors in May that it was threatened by bankruptcy—that if Foxconn pulled its funding, it would cease production of the Endurance “in the near future” without the extra capital.
In the meantime, its board approved a 1:15 reverse stock split to save the company.
Joint Partnership With Taiwanese Electronics Firm Fell Through
The deal then unraveled when the automaker’s stock value fell below $1, forcing Nasdaq to issue a delisting warning and putting the company in breach of its agreement with Foxconn.Foxconn threatened to terminate its agreement if Lordstown failed to get back into compliance.
Lordstown blamed Foxconn for destroying “the business of an American startup” and that its conduct was “littered with a series of broken promises and repeated refusals to take any action” regarding its assurance to invest and purchase a substantial portion of shares from the EV manufacturer.
The lawsuit said that the electronics giant misled the EV company about their joint collaboration and was “not the partner that it promised to be.”
Lordstown accused Foxconn in its court filing of pretending to support its pickup truck and future development plans in order to seize its key manufacturing plant in Ohio and poach its brightest manufacturing and operational talent.
The Taiwanese firm “had no intention of living up to its commitments, particularly with respect to the new vehicle development platform,” alleged Lordstown.
“Once it secured ownership of the plant and obtained a workforce to go with it, Foxconn refused to honor its obligations ... while at the same time causing [Lordstown] to devote substantial resources to the same cause,” read the complaint.
Foxconn said in response that it had maintained “a positive attitude in conducting constructive negotiations with Lordstown,” but that Lordstown had been reluctant to perform the investment agreement in accordance with its terms.
Ohio EV Manufacturer May Face Auction Bid
Lordstown is looking to sell its Endurance pickup and related assets under the Chapter 11 restructuring process.Lordstown called its truck “a fully homologated and certified, production-launched vehicle that can serve as a springboard for the right OEM [orignal equipment manufacturer] or other strategic purchaser into the broader North American EV full-size truck market at a fraction of the cost and time it would take to develop a program from the ground-up.”
The Endurance is powered by an 109-kilowatt-hour battery pack, with a driving range of 174 miles.
The bankruptcy filings and lawsuit could put Foxconn under scrutiny for its plans and partnerships with other automakers.
The company has other agreements with Fisker and Monarch Tractor, and told Nikkei Asia in March that it planned to build EV batteries in Wisconsin and Ohio.
If Lordstown fails to find new investors to help restart full production of the Endurance, Foxconn would have the legal right to use the Ohio factory to build EVs for overseas automakers, intending to take advantage of the Inflation Reduction Act and build its own vehicles on American soil.
The Ohio-based EV maker said it has plans to seek a buyer, but does not have an initial offer at this time, which may lead to an auction with a minimum price bid.
The Epoch Times reached out to Lordstown Motors and Foxconn for comment.
