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US electric truck startup Lordstown faces bankruptcy, after Foxconn deal failure
After failing to reach any consensus with partner Foxconn in a deal, US electric truck maker Lordstown Motors Corp. filed for bankruptcy on Tuesday
US electric truck maker Lordstown Motors filed for bankruptcy on Tuesday protection after it failed to resolve a dispute over promised investment from Taiwan company Foxconn.
In its statement, Lordstown said that it would start a sale process to maximise the value of its Endurance electric pickup. The company's Chapter 11 petition was filed on Monday and valued as much as $500 million of both assets and liabilities.
A tumultuous year for Lordstown
The company filed for bankruptcy after undergoing a merger with a special purpose acquisition company to go public. The company also had to fight off short-seller claims and a Securities and Exchange Commission inquiry about inflated vehicle pre-orders. Ultimately, the company agreed with Foxconn in a bid to raise much-needed cash.
Two months ago, Lordstown had warned that it might end up filing for bankruptcy if the Foxconn dispute was not resolved on time. During that time, the Taiwanese manufacturer hinted at terminating its investment due to a breach in their agreement.
Lordstown-Foxconn deal
In 2022, Foxconn committed to invest as much as $170 million in Lordstown and take two board seats. The deal was the only ray of hope for the EV maker to raise the much-needed capital for operation. The capital came at the cost of a firmer foothold for Foxconn in automotive production. Foxconn, the Taiwanese manufacturer is famously known as the maker of Apple Inc.’s iPhone.
As per the contract, Foxconn also purchased a former General Motors Co. factory in Lordstown, Ohio, from the company. The iPhone maker had also planned to make Lordstown's debut vehicle under contract.
However, the plan went awry when Lordstown, in January this year, asked Foxconn to suspend production of the vehicle because of exceeding production costs. According to Lordstown, the cost of making the Endurance exceeded the targeted sale price of $65,000. The company had also said that to begin the production of the vehicle, it would need another partner beyond Foxconn to share costs.
(With agency inputs)
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Business NewsCompaniesNewsUS electric truck startup Lordstown faces bankruptcy, after Foxconn deal failure
First Published:27 Jun 2023, 02:19 PM IST
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