Lordstown Motors Corp., an original equipment manufacturer of electric light-duty vehicles focused on the commercial fleet market, announced a strategic restructuring process to maximize the value of its assets: its on-the-road Endurance all-electric (EV) pickup truck and the intellectual property, platform and people that developed it. As part of the process, Lordstown has filed litigation against global technology company Hon Hai Technology Group and certain of its affiliates, including Foxconn Ventures Pte. Ltd., in the United States Bankruptcy Court for the District of Delaware. Lordstown Motors said the litigation details “Foxconn’s fraud and willful and consistent failure to live up to its commercial and financial commitments to the company. Foxconn’s actions led to material damage to the company as well as its future prospects.”
As a consequence of Foxconn’s “material and irreparable harm,” Lordstown Motors said it is is commencing a comprehensive marketing and sale process for the Endurance vehicle and related assets. To accomplish this 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 U.S. Bankruptcy Code. Lordstown further anticipates that the restructuring will enable an expedited timeline for hearing Lordstown’s litigation against Foxconn.
“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. Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute 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,” said Edward Hightower, CEO and president of Lordstown. “We will vigorously pursue our litigation claims against Foxconn accordingly.”
The complaint filed against Foxconn centers on a strategic partnership Lordstown’s management team entered into with Foxconn to combine Lordstown’s innovation, technology, vehicle engineering team 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 significant automotive capabilities to form a new, scalable joint vehicle development platform, Lordstown Motors said.
Under the partnership, Lordstown said it agreed to divest its most valuable assets to Foxconn, namely its Lordstown, Ohio, manufacturing facility, along with its manufacturing and operational employees. 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, leveraging what was purported to be Foxconn’s established and extensive EV ecosystem and meeting its commitments to the Lordstown community, the company said.
In the lawsuit, Lordstown claims that Foxconn had no intention of living up to its commitments, particularly with respect to the new vehicle development platform. According to the lawsuit, Lordstown said Foxconn used its variety of contractual arrangements with the company as a tool to destroy Lordstown’s business—while leveraging resources gained through the partnership to advance its own business interests.
In addition to the lawsuit, Lordstown is seeking to maximize the value of the company’s assets and efficiently resolve its contingent liabilities through a Chapter 11 restructuring process. Lordstown has filed motions with the Court seeking authority to commence a comprehensive marketing and sale process under section 363 of the U.S. Bankruptcy Code to realize the full value of its Endurance vehicle and related assets.
Lordstown said the Endurance is a fully homologated and certified, production-launched vehicle that can serve as a springboard for the right OEM or another 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.
Additional information on the Chapter 11 filing, including access to court documents, is available at www.kccllc.net/lordstown.
