Lordstown Motors sues Foxconn, files for bankruptcy
Lordstown Motors has made good on its threat to sue Foxconn, the Taiwanese company best known for manufacturing Apple’s iPhones. The EV company took legal action against Foxconn Tuesday, and simultaneously filed for bankruptcy and put itself up for sale.
Lordstown, the EV startup that went public via a merger with a special purpose acquisition company in 2020, filed for Chapter 11 protection in Delaware.
The litigation and restructure come after Lordstown failed to resolve its dispute with Foxconn over a previously agreed upon investment.
In a complaint filed Tuesday, Lordstown accused Foxconn of fraudulent conduct that destroyed “the business of an American startup.” Lordstown also claimed that Foxconn’s conduct is “littered with a series of broken promises and repeated refusals to take any action” in regards to the consumer electronic company’s agreement to invest in the company and purchase a substantial portion of shares.
Foxconn, also known as Hon Hai Technology Group, had purchased Lordstown’s Ohio manufacturing facility in 2021 from the struggling EV SPAC. At the time, Foxconn agreed to pay $230 million and buy 10% of shares of common stock. Lordstown’s stock continued to take hits and eventually fell below $1, prompting the Nasdaq to issue a delisting warning and putting Lordstown in breach of its agreement with Foxconn. Foxconn threatened to terminate the investment agreement if Lordstown didn’t get back into compliance.
In May, Lordstown cautioned investors that it could be forced to file bankruptcy if Foxconn pulled its funding. The EV startup’s board approved a 1:15 reverse stock split as a Hail Mary. Lordstown’s stock closed Tuesday at $2.76.
In its complaint, Lordstown says Foxconn misled the EV maker about collaborating on vehicle development plans and was “not the partner that it promised to be.” The complaint accuses Foxconn of pretending to support the Endurance pickup truck and future joint product development in order to secure ownership over Lordstown’s most valuable asset, the Ohio manufacturing plant, and to poach some of Lordstown’s skilled manufacturing and operational employees.
“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,” reads the lawsuit filed in bankruptcy court.
Foxconn could not be reached for comment.
The bankruptcy filings and lawsuit could put Foxconn under the microscope for its EV promises and partnerships with other automakers and for itself. The company also has deals with Fisker and Monarch Tractor, and has said it plans to build EV batteries in Wisconsin and Ohio, however Foxconn has found it difficult to reach volume production.
In November 2022, Lordstown began shipping its Foxconn-made Endurance pickup trucks. The automaker paused production on the Endurance earlier this year and resumed building at a low rate in April after dealing with quality issues.
Lordstown also lost General Motors as an investor in March.
If Lordstown can’t find someone to throw it a lifeline and help restart full production of the Endurance, Foxconn would be well within its rights to use the Ohio factory to build EVs for overseas automakers that want to take advantage of the Inflation Reduction Act incentives and build EVs on U.S. soil.
Lordstown plans to seek a buyer but doesn’t have an initial offer in hand, which means there will be an auction with a minimum price bid.
