By Ryan C. Wood
Howdy my fellow humans. It seems we may have lost an option for purchasing an electric vehicle in our “free” market. Actually, Lordstown was trying to develop an all electric commercial fleet type truck named Endurance. Lordstown Motors Corp. aka DiamondPeak Holdings, Inc. and Lordstown EV Corporation filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in the District of Delaware, today, June 27, 2023; Case Numbers 23-10831 and jointly administered 23-10832. The pickup truck to be named Endurance is apparently not happening.
The various filing by Lordstown bankruptcy attorneys provide: “The Debtors have filed these Chapter 11 Cases for the purpose of maximizing value for the benefit of their stakeholders given the ongoing, repeated breaches of contract and commitments by Foxconn.”
I do not know. I have to question Chapter 11 filings that seek to sell all assets of the debtor rather than simply filing a Chapter 7 Liquidation case and allowing a Chapter 7 Trustee to administer the case and liquidate the estate……. Things that make you go hmmmmmmm. So I will let you know what is up from down regarding this issue.
Lordstown bankruptcy lawyers also immediately filed an adversary lawsuit against defendants Hon Hai Precision Industry Co., Ltd (a/k/a Hon Hai Technology Group), Foxconn EV Technology, Inc., Foxconn Ventures Pte. Ltd., Foxconn (Far East) Limited, and Foxconn EV System LLC.
Yes, the same Foxconn you have probably heard about regarding Apple, Inc. and other Silicon Valley technology industry leaders. Their mothership name is Hon Hai Precision Industry, or more commonly referred to as Foxconn. Foxconn is a business partner of Apple, Inc., or at least they used to be. Anyway, the point is Lordstown is suing a big dog in the technology worldwide industry making very serious allegations.
Lordstown v. Hon Hai Precision Industry Co., Ltd. aka Foxconn
So Lordstown did not waste any time and immediately upon filing their petition for relief under Chapter 11 Lordstown also filed an adversary lawsuit against Hon Hai Precision Industry Co., LTD. aka Foxconn alleging is all their fault.
“This case arises from, and is based on, the fraudulent conduct of one of the world’s largest multinational manufacturing companies, which, over time, had the intended effect of destroying the business of an American start-up.”
“This course of conduct is nothing new for Foxconn and its affiliates—their modus operandi in the United States is to overpromise and under or never deliver.”
Ouch, that is pretty precise. So, what specific fraudulent conduct is Lordtowns alleging against Foxconn?
- 2018 Lordstown created to make Endurance EV pick-up truck
- 2019 Lordstown purchased 6.2 million square feet production facility from GM Motors in Lordstown, Ohio
- Self-Proclaimed Equity Valuation of $5.3 billion
- Goal: Combine Foxconn’s resources and efficiencies with the Debtors’ innovation, technology, manufacturing plant and people to jointly develop the next generation of electric vehicles
- Lordstown alleges changing its business model to compliment Foxconn’s “EV Ecosysten”
- 9/30/2021 Lordstown entered into an asset purchase agreement with Foxconn to sell Foxconn the 6.2 million square foot production facility
- Lordstown apparently needed the cash/capital and to lowering operational costs
- Lordstown also entered into a manufacturing partnership with Foxconn
- 9/30/2021 Foxconn Chairman Young Liu said “[t]his mutually beneficial relationship is an important milestone for Foxconn’s EV business and our transformation strategy. I believe that the innovative design of the Endurance pickup truck, with its unique hub motors, delivers an advantageous user experience and has manufacturing efficiencies. It will undoubtedly thrive under our partnership and business model.” Foxconn later expressed hope that it could create “a trillion-dollar business opportunity for electric vehicles.”
- October 2021 Foxconn via an affiliate purchases $50 million worth of Lordstown shares
- November 10, 2021, Lordstown sold the 6.2 million factory to Foxconn; but DID NOT formalize all of the other alleged agreements with Foxconn Lordstown is alleging were also part of the consideration for the reduced price of the Lordstown, OH factory
- Blah Blah Blah Foxconn breached the investment agreement with Lordstown and this negatively affected the share price of Lordstown…….
- On June 27, 2023, arguably faced with the reality that there were no circumstances under which Foxconn would meet its contractual obligation to Lordstown, the Lordstown voluntary filed petitions for relief under chapter 11 of the Bankruptcy Code …..
Long Story Short
The short story is Lordstown would never had sold the 6.2 million square feet manufacturing center factory, its most valuable asset, to Foxconn for 1/5 of the replacement value to Foxconn if Foxconn had not made additional promises of support and partnering with Lordstown to make the Endurance pick-up a manufacturing reality. Lordstown alleges that once Foxconn owned the 6.2 million manufacturing center in Lordstown, OH, Foxconn stopped doing the other parts of the consideration for the sale of the factory to Foxconn. Such as making further investments and more or less funding one way or another all Lordstown sought to accomplish.
So yeah, once upon a time I sold a truck to a dude and part of the sale was for this dude to buff the lenses on my other vehicles and detail the other vehicles. We signed the CA DMV bill of sale and then the dude ignored me. Funny how that works.
Lordstrom Filed A Motion to Sell All Assets Free and Clear of Liens
In layman’s terms, Lordstown, is asking the bankruptcy court for authorization to sell with an overbid process all remaining assets of Lordstown for the benefit of its “creditors.” Yeah, we shall see if any creditor actually benefits from this Chapter 11 bankruptcy filing. The idea is the get as much money as possible for the remaining assets of Lordstown without hammering out which creditors are entitled to the proceeds. That will come later in the Chapter 11 LIQUIDATING plan? Not a reorganization in which the corporate debtor lives on to fight another day. So no Endurance truck ever will be made? I digress.
The bidding a sale process will culminate in a Sale Hearing proposed to held on September 12, 2023.
The Chapter 11 petition provides assets of between $100 million and $500 million with liabilities ranging from $100 million to $500 million as well.
As of December 22, 2022, Lordstown was estimated to have $452,312,000 in assets with $70,280,000 in liabilities. Lordstown has shares of preferred stock totaling 300,000 and common stock shares outstanding totaling 15,944,5582.
The top 5 largest creditors of Lordstown are as follows:
Teijin Automotive Technologies, Inc. $2,083,980.20
ZF Passive Safety Systems, Inc. $1,981,531.56
Marelli North America, Inc. $1,614,252.02
Greatech Integration (M) SDN, BHd, HA LAI $1,532,600
Barry L. Leonard and Company, Inc. $1,361,252.80