Lordstown Motors files for bankruptcy and sues Foxconn
Lordstown Motors Corp. has launched a strategic restructuring process to maximise the value of its assets, namely its on-the-road Endurance all-electric (EV) pickup truck and the intellectual property, platform and people that developed it.
As part of the process, Lordstown has filed litigation against global technology company Hon Hai Technology Group and certain of its affiliates, including Foxconn Ventures Pte. Ltd., in the United States Bankruptcy Court for the District of Delaware.
The litigation details what Lordstown describes as "Foxconn's fraud and willful and consistent failure to live up to its commercial and financial commitments to the Company". The automotive company claims that Foxconn's actions led to material damage to the company as well as its future prospects.
As a consequence the harm of Foxconn's actions – or lack thereof – Lordstown is commencing a comprehensive marketing and sale process for the Endurance vehicle and related assets. To see this through and to provide a prospective buyer with assets that are free and clear of any legacy issues, Lordstown is restructuring under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court.
"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. Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown's assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly," says Edward Hightower, CEO & President of Lordstown, in a press release.
The complaint filed against Foxconn centres on a transformative, strategic partnership Lordstown's management team entered into with Foxconn to combine Lordstown's innovation, technology, 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 to form a new, scalable joint vehicle development platform.
Under the partnership, Lordstown 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 the electronics manufacturer would support the Endurance pickup truck in a variety of ways and follow through on a joint vehicle development program.
The lawsuit state that Foxconn had no intention of living up to its commitments, particularly with respect to the new vehicle development platform. As the lawsuit describes, Foxconn simply used its variety of contractual arrangements with Lordstown as a tool to, what the company claims, "maliciously and in bad faith destroy Lordstown's business" — while leveraging resources gained through the partnership to advance its own business interests.
