Foxconn to buy Lordstown plant for EV production
LORDSTOWN — Lordstown Motors Corp., which just six weeks ago announced it was in talks with partners to maximize the value of its automaking plant, intends to sell the 6.2 million-square-foot factory to Taiwanese tech giant Hon Hai Technology Group.
The companies already have a principal agreement in place for $230 million that excludes Lordstown Motors’ hub motor assembly line, battery module and packing line assets, certain intellectual property rights and some other assets, while they negotiate a definitive agreement.
Also, Hon Hai, which operates as Foxconn, has agreed to immediately purchase approximately $50 million in Lordstown Motors’ common stock from the company for $6.89 per share.
In addition, the companies plan to negotiate a contract manufacturing agreement that would have Foxconn manufacture Lordstown Motors’ flagship vehicle, the Endurance truck, at the the Lordstown plant.
The agreement gives Lordstown Motors the ability to leverage Foxconn’s technology and manufacturing expertise as Lordstown Motors pursues production of electric vehicles, according to startup.
It also gives Foxconn, which makes Apple iPhones and other electronics, a U.S. foothold in the electric vehicle space.
“The goal of the partnership is to present both Lordstown Motors and Foxconn with increased market opportunities in scalable electric vehicle production in North America,” a release from Lordstown Motors states.
In addition, the “facility would serve as a speed to market asset that would also support Foxconn’s partner and customer, Fisker Inc.,” according to Lordstown Motors. Fisker is a California-based electric vehicle manufacturer.
The agreement was announced Thursday evening after a day of heavy speculation surrounding the deal that pushed Lordstown Motors’ stock up 8.4 percent.
Newly appointed Lordstown Motors CEO Daniel A. Ninivaggi said the relationship with Foxconn would “provide operational, technology and supply chain benefits” to Lordstown Motors, accelerate scaled vehicle production and increase employment at the plant.
“The partnership would allow Lordstown Motors to take advantage of Foxconn’s extensive manufacturing expertise and cost-efficient supply chain, while freeing up Lordstown Motors to focus on bringing the Endurance to market, developing service offerings for our fleet customers and designing and developing innovative new vehicle models.”
The company has invested millions into the former General Motors auto factory to upgrade it to produce battery-powered vehicles. But, it is using only about 30 percent of the facility.
Concurrently with the closing of an agreement, Lordstown Motors would issue stock warrants to Foxconn exercisable on the third anniversary of the closing for 1.7 million shares of common stock at a price of $10.50 per share.
After the deal closes, Lordstown Motors would enter into a long-term lease for a portion of the plant for its Ohio-based employees, and Foxconn would offer employment to agreed upon operational and manufacturing Lordstown Motors’ employees.
Also, the two companies agreed to explore licensing agreements for additional pickup truck programs.
“We have high expectations through this partnership that we will be able to successfully integrate our resources with Lordstown Motors. In addition to achieving the goal of moving ahead our timeline to establish electric vehicle production capacity in North America, it also reflects Foxconn’s flexibility in providing design and production services for different EV customers,” said Young Liu, chairman, Hon Hai Technology Group.
Lordstown Motors continues to move on limited production of the Endurance for testing, verification and validation approvals for the rest of this year and first part of 2022. However, in light of the agreement with Foxconn, it said it will evaluate the impact of the contract manufacturing relationship on commercial production, supply chain opportunities with Foxconn and integration of of their operations teams.
The company plans to provide an update in mid-November on its third quarter financials call.
Lordstown Motors has been trying to attract new capital to pay for commercial-scale production and launch the Endurance.
It was able to secure a deal with a hedge fund that has the potential to inject $400 million into the company over three years, but followed that announcement in July with another warning the next month about its ability to remain in business without additional operating funds. The most recent going concern notice was in the company’s second quarter financial report in August.
On Thursday, Lordstown Motors updated its 2021 financial outlook last provided in the second quarter financials call.
Capital expenditures remain unchanged at $375 to $400 million, however selling, general and administrative expenses rose to $105 million to $120 million from $95 million to $105 million, mostly due to higher legal and professional fees.
Research and development spending rose to $320 million to $340 million from $310 million to $320 million, largely due to increase prototyping and pre-production costs.
The company’s cash balance fell to $210 million to $240 million from $225 million to $275 million. That includes about $20 million from issuing common stock in August and September, but excludes proceeds of Foxconn’s $50 million stock purchase.
Guy Coviello, president & CEO of the Youngstown / Warren Regional Chamber, said the agreement is a positive development for the Mahoning Valley.
“Lordstown Motors has a great, new vehicle. Foxconn is a well-established, robust corporation that can bring tremendous resources to bear,” Coviello said.
“In addition to utilizing more of the assembly plant, this increases the supply chain opportunities for Valley companies. It also gives our team an opportunity to attract suppliers that would be new to our market,” he said.
U.S. Rep. Tim Ryan, D-Howland, and U.S. Sen. Sherrod Brown, D-Ohio, said the community needs information on Lordstown Motors’ plans.
“I am closely following reports that Foxconn may be purchasing the former GM Lordstown plant and look forward to learning more from Lordstown Motors and Foxconn on their plans for the facility. I plan to meet with company officials soon to discuss what this decision means for jobs in our community and how it will help the Mahoning Valley remain a leader in electric vehicle production. We deserve answers,” Ryan said.
Said Matt Englehart, communications manager with JobsOhio, the state’s private economic development corporation, “Electrification and mobility in the auto industry is a foremost priority for Ohio and JobsOhio. We and our partners are optimistic about this state becoming a global leader in this space and the Mahoning Valley playing a critical role in that effort. It’s not surprising there would be high interest in the Lordstown plant. This is a vast and valuable asset surrounded by great talent at a time when the industry is shifting from combustion to electrification.”