Lordstown Motors announced a strategic restructuring process Tuesday, filing for Chapter 11 bankruptcy protection and suing former partner Foxconn.
Lordstown says it filed litigation against Hon Hai Technology Group and certain affiliate Foxconn Ventures Pte. Ltd., in the United States Bankruptcy Court for the District of Delaware. Lordstown says 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 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," says Edward Hightower, Lordstown president and CEO. "Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy."
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Hightower says filing Chapter 11 was the only viable option for the company "to maximize the value of Lordstown's assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly."
Lordstown states it is commencing a comprehensive marketing and sale process for the Endurance vehicle and related assets. 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. Lordstown further anticipates that the restructuring will enable an expedited timeline for hearing Lordstown's litigation against Foxconn.
The company adds the complaint filed against Foxconn centers on a transformative, strategic partnership Lordstown's management team entered into with Foxconn to combine Lordstown's innovation, technology, accomplished 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 stated significant automotive capabilities to form a new, scalable joint vehicle development platform.
Under the partnership, Lordstown states it agreed to divest its most valuable assets to Foxconn, namely its Lordstown, Ohio, manufacturing facility, along with its highly talented and experienced 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 lawsuit details the fact Foxconn had no intention of living up to its commitments, Lordstown says, particularly with respect to the new vehicle development platform. As the lawsuit describes, 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 says.
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Additionally, to ensure a smooth transition into Chapter 11, the company filed with the bankruptcy court a series of customary "first day" motions to continue operating the business and uphold its commitments to stakeholders during the process. The company expects to receive approval of these routine "first day" requests in short order. The Company enters Chapter 11 with significant cash on hand and is debt-free, Lordstown says.
"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," says Hightower. "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."
