The troubled electric car company Rosetown Motors, with its ambitious plans to build Tesla pickup trucks, bought a closed General Motors factory in Ohio and filed for bankruptcy protection on Tuesday.
The company, once praised by former President Donald J. Trump for protecting manufacturing jobs, has struggled with repeated development setbacks and frequent management changes, and has been unable to build and sell a few trucks. It was finally.
The Chapter 11 bankruptcy filing in federal court in Delaware was sparked by a dispute with major investor Foxconn, a Taiwan-based contract manufacturer. Foxconn said it breached its investment agreement because Rosetown’s stock price fell below $1 a share. Rosetown said Tuesday it has sued Foxconn for failing to honor a contract to invest additional funds in the company.
In a statement, Lordstown said it was embarking on a “strategic restructuring process” that would likely sell remaining assets, including the technology and intellectual property it developed for its Endurance pickup trucks.
“We will pursue the lawsuit against Foxconn vigorously accordingly,” said Lordstown CEO Edward Hightower.
Foxconn, officially known as Hong Hai Technology Group, said in a statement that it had hoped to negotiate a solution to Rosetown’s financial problems, but the two sides had not reached an agreement. Rosetown “continues to mislead the public and is reluctant to perform on the terms of the investment agreement between the parties,” Foxconn said.
Lordstown is one of several electric vehicle startups that have run into trouble in recent years. Amazon-backed Rivian has suffered production delays, making far fewer sport utility vehicles, pickups and delivery vans than expected. Other companies struggling to start or increase production include Arrival, Canoo, Lucid and Nikola.
Arrival, Canoe, Lordstown, Lucid and Nicoa all went public by taking advantage of Wall Street and merging with special purpose acquisition companies. A fad that gave business owners and investors permission Taking a company public without going through the more rigorous and regulated process of selling shares through an initial public offering.
Eric Gordon, a University of Michigan management professor who studies the auto industry, said Lordstown’s repeated production delays and quality problems have hurt the confidence of investors and potential customers.
“Given the problems facing other EV startups, the liquidation value for Lordstown will be low,” he said.
The factory deal Mr. Trump pushed has never lived up to expectations. Lordstown Motors will have about 600 employees at its peak in 2021, less than half the 1,400 people GM employed when it shut down Chevrolet Cruze production at its Ohio plant in 2019. .
Nearly all of GM’s employees in Rosetown, between Cleveland and Pittsburgh, have either taken severance pay or moved to other GM plants. GM has built a new battery plant that will employ about 1,100 people near the former Rosetown Automobile Plant.
Lordstown Motors was founded in 2018 by Steve Burns, former CEO of small commercial vehicle manufacturer Workhorse Group. At Workhorse, Burns came up with the concept for his electric pickup truck, but lacked the resources to produce it. When GM announced it was closing the Rosetown plant, he saw an opportunity.
Mr. Trump put pressure on GM and its chief executive, Mary T. Barra, to find a buyer for the plant, and GM began negotiations with Mr. Burns. Trump touted the deal on Twitter before it was signed, and before Burns even finalized the funding and name of the new company.
Rosetown wanted to build a revolutionary truck with an electric motor at each wheel hub, but struggled to turn the idea into a production-ready vehicle.
In 2021, Mr. Burns and Mr. Rosetown were accused of exaggerating the number of orders for the company’s trucks. According to the Hindenburg study, a small investment company. Mr. Burns resigned.
Rosetown ran out of money and sold its factories to Foxconn, which is best known for assembling Apple iPhones in sprawling factories in China. In exchange for the factory, Foxconn was to invest millions in Lordstown to build the Endurance pickup truck.
However, there was a problem with the truck. A test vehicle caught fire and burst into flames in Michigan. Production finally started last year, but only 31 trucks have been built in the last three months of 2022. In the first three months of the year, Lordstown delivered two trucks to customers, earning just $189,000 and a loss of $171 million.
In March, when Lordstown’s stock fell below the $1 minimum price required to list on the Nasdaq, Foxconn announced it was canceling plans to invest more in the company.
Rosetown shares fell more than 20% on Tuesday afternoon to about $2.12. Adjusted for this spring’s reverse stock split in early 2021, the stock was trading at around $400. Rosetown went public after merging with Diamond Peak Holdings in October 2020.