Bankrupt electric vehicle manufacturer Lordstown Motors has proposed to pay nothing for Taiwan’s Foxconn’s preferred equity shares, saying it will prioritize other shareholders if an ongoing effort to sell the company’s assets generates enough cash to repay other debts. The bankruptcy-like Chapter 11 plan filed Friday in Delaware bankruptcy court does not specify how much Lordstown owes creditors. Still, previous court filings indicated the firm owed about $20 million to 30 trade vendors and $40 million to settle a lawsuit by rival automaker Karma.
The filing marks the latest in a series of obstacles for the company that grew out of the recent pandemic-era SPAC boom and touted itself as one of the first EV startups to go public. It also sets the stage for a potentially messy and complicated international business clash between two of the biggest names in electronics manufacturing, with a potential impact on global supply chains and the US-Taiwan trade relationship.
Lordstown, named for the Ohio town where it is based, is primarily known for its Endurance electric pickup truck. It was built at a former GM small-car factory in Lordstown for commercial customers such as local governments. The company halted production earlier this year, though it resumed assembling the trucks in April at a low rate after resolving quality issues with suppliers.
But the company has struggled to raise funds to support its operations, and the relationship with Foxconn frayed after the startup’s stock price plunged below $1 per share, prompting Nasdaq to issue a delisting warning. In April, Foxconn informed Lordstown it would terminate the company’s investment agreement unless the startup could show it was using “necessary efforts” to resolve its EV program budget and milestones, according to its Chapter 11 filing.
In its filing, Lordstown says it needs a buyer willing to commit to restarting total production of the Endurance and leveraging Foxconn’s resources, technology, and workforce to help it get back on track. It adds that it has received offers for the company’s assets, which include its on-the-road Endurance EV and the intellectual property and platform used to develop it.
The bankruptcy filing indicates that the company’s board of directors is considering proposals from parties interested in buying the company and its assets, including the factory. It said it would hold a conference call at 2 p.m. ET to discuss the matter and set a timeline for further discussions.
In addition to the bankruptcy-like Chapter 11 filing, Lordstown also filed a voluntary petition for liquidation with the state of Delaware on Friday. The company says it’s attempting to maximize the value of its assets, including its on-the-road EV and engineering and development capabilities. If the court approves the Chapter 11 case, it will be converted to a Chapter 7 process expected to speed up the sale of the company’s assets.
