(Bloomberg) — Lordstown Motors Corp. may be forced to cease operations and file for bankruptcy after manufacturing giant Foxconn told the electric-vehicle company that it’s prepared to pull out of a production partnership.
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The deal with Foxconn Technology Group could unravel after the Taiwanese company threatened to withhold funding, something that could force Lordstown into insolvency, the company warned in a securities filing on Monday. Lordstown said it was also seeking alternative financing.
“If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to curtail or cease operations and seek protection by filing a voluntary petition for relief under the bankruptcy code,” Lordstown said.
Representatives for Foxconn could not be reached for immediate comment.
Shares of Lordstown tumbled 29% to 37 cents a share at 11:17 a.m. in New York.
“Foxconn’s actions are completely unwarranted,” a spokesperson for Lordstown said in a statement after the market opened. “Their course of conduct has resulted in material — and what is becoming irreparable — harm to the company.”
The filing underscores the speed at which the partnership has become destabilized amid turmoil in the EV market. Just about six months ago, Foxconn agreed to invest as much as $170 million in Lordstown and take two board seats. The deal gave the EV maker much-needed capital while offering Foxconn, the Taiwanese manufacturer best known as the maker of Apple Inc.’s iPhone, a firmer foothold in automotive production.
Foxconn also paid $230 million for a former General Motors Co. factory in Lordstown, Ohio, where it planned to make Lordstown’s debut vehicle under contract. But in January, Lordstown asked Foxconn to suspend production because the cost of making the Endurance battery-powered pickup exceeded the targeted sale price of $65,000 — and said it would need another partner beyond Foxconn share costs.
Read more: Foxconn Finds EVs Are Harder to Build Than iPhones and Tablets
The EV company said last month that production of the truck had resumed “at a very low pace.”
The two companies are in talks to find a resolution after Foxconn notified Lordstown that it could terminate its investment in as little as 30 days, citing what it claimed was a breach in their agreement, the filing said. Foxconn’s move was precipitated by a Nasdaq warning last month to Lordstown that its stock may be delisted after falling below a minimum $1 per share level for 30 consecutive days.
(Updates with company comment in sixth paragraph)
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Source: finance.yahoo.com