Because business is business.
These are difficult times for Ohio-based Lordstown Motors. What began as a major triumph for American automotive manufacturing has become something of a nightmare after a report accused the carmaker of misleading investors. This resulted in an SEC investigation and the resignation of Lordstown founder and CEO Steve Burns. He's charged, among other things, with inflating pre-order figures to boost the company's profile with investors. That's called fraud.
In addition to that, earlier this week Lordstown released a troubling end of 2021 financial report which included a lower-than-expected 2022 production output prediction. In short, Lordstown is desperately in need of capital to keep the lights on and the assembly line rolling.
Now, it's taken another hit. General Motors has sold its small stake in Lordstown. It only amounted to less than 5 percent, or 7.5 million Class A common stock shares, but it's a very clear signal that GM no longer has confidence in the EV truck start-up. The Lordstown Assembly Plant was formerly owned by GM and as part of a larger deal, agreed to sell the now embattled carmaker the facility at a fair market price.
All told, GM invested $75 million in cash and in-kind contributions. But GM's goodwill and confidence in Lordstown can only go so far. Lordstown has failed to produce a single Endurance truck aside from pre-production examples used only for final testing.
GM's decision to sell its Lordstown shares should not come as a surprise. It increases the stakes for Lordstown to strike a deal with smartphone maker Foxconn. Last fall, Foxconn bought the Lordstown factory for $230 million but certain terms of the deal have to be finalized. Foxconn is clearly interested in gaining an additional foothold in EV manufacturing but Lordstown's current financial situation could change things.
Foxconn is no stranger to the auto industry. It previously struck a deal with Fisker to manufacture a new EV. GM's decision to leave Lordstown behind once and for all is a tough blow, but it could also give the embattled EV truck maker the chance for a complete reset. The only kicker is that'll very likely depend on what Foxconn decides.