Lordstown Motors Corp. (NASDAQ: RIDE) is forging ahead with its battery-electric commercial Endurance pickup truck despite ousting its founder, CEO and chief financial officer following a “going concern” filing last week with the Securities and Exchange Commission.
The startup that went public last October in a business combination with special purpose acquisition company (SPAC) Diamond Peak Holdings Corp. has enough cash to build trucks through May 2022, President Rich Schmidt told the Automotive Press Association in Detroit on a Zoom call Tuesday.
Lordstown shares rebounded from Monday’s news on Tuesday, closing up 11.34% at $10.31.
The $400 million remaining from the $780 million received in the SPAC is enough to build 15,000 to 20,000 trucks using so-called soft tooling. Lordstown has binding orders for those trucks, though it will not deliver them until receiving federal safety certification.
Inflating the number of preorders contributed to the Lordstown board’s move to replace founder and CEO Steve Burns.
Lordstown Chief Engineer Darren Post, a veteran of five car launches during a 30-year career at General Motors (NYSE: GM), said computer-aided engineering models based on the federal standards show the trucks will meet or exceed the requirements.
Production speed boost
Despite a manufacturing and engineering team with decades of traditional and startup experience, how is Lordstown managing to get a truck produced in less than half the time a new product program takes?
“We’re not building a brand new configuration that never existed before,” Post said. “That enabled us to use a lot of key architectural components that take years to make [such as] power steering gears, electric power steering, columns, HVAC units.”
While a lot has been written about Lordstown licensing the underpinnings of the Endurance from an electric pickup truck developed at Workhorse Group (NASDAQ: WKHS), GM is a more significant contributor than previously known.
“We started with basically the 2015 [Chevrolet] Silverado and we evolved it to our own vehicle,” Schmidt said. “We do share a lot of General Motors’ parts bin, and having that access has been critical in cutting maybe nine months off of that four-year program.”
The Endurance has formidable competition from established truck makers, including the recently revealed F-150 Lightning electric pickup from Ford Motor Co. (NYSE: F).
More GM involvement than known
GM sold the 6.2 million-square-foot assembly complex to Burns for $40 million in November 2019 and lent him $20 million for retooling.
At the closing of the SPAC, GM invested $25 million in cash in addition to turning over the plant and tooling as an in-kind contribution. GM operated Lordstown assembly and metal stamping operations for 53 years before idling the plant in March 2019.
Agreeing to work with Burns on the LMC project helped GM reduce heat from former President Donald Trump, whose 2016 victory included promising the retention of jobs in Ohio’s Mahoning Valley where Lordstown is located. The area was home to major steel mills until the late 1970s.
Trump criticized GM CEO Mary Barra for shuttering Lordstown and urged her to find a new product for the plant. Coincidentally, GM is building a $2.3 billion battery manufacturing plant nearby in a joint venture with Korea’s LG Chem.
Uncertainty for the UAW
The United Auto Workers, which represented hourly employees since the plant opened in 1966, agreed to its closing as part of settling a 40-day national strike that cost GM billions in the fall of 2019.
Schmidt was vague about whether the UAW would have an unimpeded path to organizing the new workforce at LMC, something Burns had pledged when he lobbied Lordstown officials to support his startup.
Schmidt, who worked for four years at Tesla Inc. (NASDAQ: TSLA) and for a host of nonunion Asian auto companies, said Lordstown officials are not currently engaged with the UAW. He said it is up to the workers to decide whether to join the union.
LMC has about 600 employees, most of them in Lordstown. Significant hiring is expected in the next few months as production nears.
Lordstown expects it will have $25 million to $50 million in the bank after building the first batch of Endurance trucks. It wants to cut bill-of-material costs by developing hard tooling for the trucks. That tooling is expensive and takes months to produce after ordering.
So, the hunt for new money is on. Early investors, including GM, can expect a call.
“We’ve had good cooperation [with] General Motors,” Schmidt said. “We will talk to our original investors first, but that’s not to say that’s our only avenue.”
Top Lordstown executives out as SPAC-backed startup teeters
Lightning strike: Lordstown Motors might not survive the year
News analysis: Nikola tormentor Hindenburg Research opens fire on Lordstown Motors