Files Complaint Against Foxconn that Details
Fraud, Bad Faith and Repeated Contractual Breaches
Leading to Value Destruction
Commences Comprehensive Sale Process for
Endurance Truck and Related EV Assets
Files Chapter 11 to Implement Restructuring in
Efficient Manner
Company is Debt-Free and Continues to Operate
with Significant Cash-on-Hand
LORDSTOWN, Ohio, June 27,
2023 /PRNewswire/ -- Lordstown Motors Corp. (Nasdaq:
RIDE), ("Lordstown" or the
"Company"), an original equipment manufacturer (OEM) of electric
light-duty vehicles focused on the commercial fleet market, today
announced a strategic restructuring process to maximize the value
of its assets: its on-the-road Endurance all-electric (EV) pickup
truck and the intellectual property, platform and people that
developed it.
As part of the process, Lordstown today filed litigation against
global technology company Hon Hai Technology Group (TWSE: 2317;
LSE:HHPD) and certain of its affiliates, including Foxconn Ventures
Pte. Ltd. (collectively, "Foxconn"), in the United States Bankruptcy Court for the
District of Delaware (the
"Bankruptcy Court"). The litigation details Foxconn's
fraud and willful and consistent failure to live up to
its commercial and financial commitments to the Company. Foxconn's
actions led to material damage to the Company as well as its future
prospects.
In addition, and as a consequence of Foxconn's material and
irreparable harm, Lordstown is
commencing a comprehensive marketing and sale process for the
Endurance vehicle and related assets. To accomplish this
expeditiously and provide a prospective buyer with a going concern
asset that is free and clear of any legacy issues, Lordstown is restructuring under Chapter 11 of
the U.S. Bankruptcy Code ("Chapter 11") in the Bankruptcy Court.
Lordstown further anticipates that
the restructuring will enable an expedited timeline for hearing
Lordstown's litigation against
Foxconn.
Edward Hightower, CEO &
President of Lordstown, said, "As
one of the early entrants to the EV industry, we have delivered the
Endurance, an innovative and highly-capable EV with significant
commercial and retail potential – and had subsequently engaged with
Foxconn in a purposeful, strategic partnership to leverage this
expertise into a broader EV development platform. Despite our best
efforts and earnest commitment to the partnership, Foxconn
willfully and repeatedly failed to execute on the agreed-upon
strategy, leaving us with Chapter 11 as the only viable option to
maximize the value of Lordstown's
assets for the benefit of our stakeholders. We will vigorously
pursue our litigation claims against Foxconn accordingly."
Foxconn's Fraud, Bad Faith and Repeated
Contractual Breaches Irreparably Harm Lordstown According to
Complaint
The complaint filed against Foxconn centers on a transformative,
strategic partnership Lordstown's
management team entered into with Foxconn to combine Lordstown's innovation, technology,
accomplished vehicle engineering team and manufacturing facility in
Lordstown, Ohio with Foxconn's
resources, supply chain capabilities and position as one of the
world's largest electronics manufacturers with stated significant
automotive capabilities to form a new, scalable joint vehicle
development platform.
Under the partnership, Lordstown agreed to divest its most valuable
assets to Foxconn, namely its Lordstown,
Ohio manufacturing facility, which is one of the largest in
North America, along with its
highly talented and experienced manufacturing and operational
employees. The up-front purchase price for the Lordstown manufacturing facility reflected the
expected benefits of the contractual assurances from Foxconn that
Foxconn would support the Endurance pickup truck in a variety of
ways and follow through on a joint vehicle development program,
leveraging what was purported to be Foxconn's established and
extensive EV ecosystem and meeting its commitments to the
Lordstown community.
The lawsuit details the fact that Foxconn had no intention of
living up to its commitments, particularly with respect to the new
vehicle development platform. As the lawsuit describes, Foxconn
simply used its variety of contractual arrangements with the
Company as a tool to maliciously and in bad faith destroy
Lordstown's business—while
leveraging resources gained through the partnership to advance its
own business interests.
Chapter 11 to Maximize Value of Lordstown's Assets
In addition to the decisive action Lordstown is taking to redress Foxconn's
tortious conduct, it seeks to maximize the value of the Company's
assets and efficiently resolve its contingent liabilities through a
Chapter 11 restructuring process. Lordstown has filed motions with the Court
seeking authority to commence a comprehensive marketing and sale
process under section 363 of the U.S. Bankruptcy Code to realize
the full value of its innovative Endurance vehicle and related
assets. The Endurance is a fully homologated and certified,
production-launched vehicle that can serve as a springboard for the
right OEM or other strategic purchaser into the broader North
American EV full-size truck market at a fraction of the cost and
time it would take to develop a program from the ground-up. The
Company is confident that a buyer could utilize the Endurance
platform to create multiple EV variants and take the product to the
next level.
To ensure a smooth transition into Chapter 11, the Company filed
with the Court a series of customary "first day" motions to
continue operating the business and uphold its commitments to
stakeholders during the process. The Company expects to receive
approval of these routine "first day" requests in short order. The
Company enters Chapter 11 with significant cash on hand and is
debt-free.
Mr. Hightower said, "We remain confident that an orderly,
expedited sale process will maximize value for our stakeholders and
enable the talent and technology behind the Endurance to find new
and supportive ownership. While in Chapter 11, Lordstown will continue to support our
customers. We are grateful for the Lordstown team for their commitment and
dedication to our vision and to our customers, suppliers and
business partners for believing in the Endurance and in the EV
evolution."
Additional information on the Chapter 11 filing, including
access to court documents, is available at
www.kccllc.net/lordstown.
Jefferies is acting as financial advisor to the Company, and
White & Case LLP is acting as legal counsel.
About Lordstown Motors Corp.
Lordstown Motors is an electric vehicle ("EV") OEM developing
innovative light duty commercial fleet vehicles, with the Endurance
all electric pickup truck as its first vehicle. Lordstown
Motors has engineering, research and development facilities in
Farmington Hills, Michigan and
Irvine, California. For additional
information visit www.lordstownmotors.com.
Forward-looking Statements
This release includes forward looking statements. These
statements are made under the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These statements
may be identified by words such as "feel," "believes," expects,"
"estimates," "projects," "intends," "should," "is to be," or the
negative of such terms, or other comparable terminology.
Forward-looking statements are statements that are not historical
facts. Such forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties, which could
cause actual results to differ materially from the forward-looking
statements contained herein due to many factors. With respect to
the matters addressed in this release, those factors include, but
are not limited to the risks and uncertainties regarding our
ability to successfully complete the Chapter 11 cases (the "Chapter
11 Cases") filed in the Bankruptcy Court; our ability to obtain
timely approval of the Bankruptcy Court with respect to motions
filed in the Chapter 11 Cases; the adverse impact of the Chapter 11
Cases on our business, financial condition and results of
operations; the outcome of the litigation against Foxconn, ongoing
litigation, the SEC investigation and any litigation arising out of
the Chapter 11 Cases; the impact of the Chapter 11 Cases on the
trading price and volatility of the Company's Class A common stock
and the possible delisting of the Company's Class A common stock;
our ability to effect a plan of reorganization or liquidation, or
to negotiate and consummate a sale or other transaction with a
third party; the sufficiency of our cash on hand and ability to
obtain sufficient financing to allow us to conduct our business and
facilitate required actions during, and execute our business plan
following (should we emerge), the bankruptcy proceedings in an
orderly fashion; our ability to comply with terms and conditions of
any financing; our ability to maintain our relationships with our
employees, suppliers, vendors, customers and other third parties;
and the actions and decisions of our stakeholders and other third
parties who have interests in our bankruptcy proceedings that may
be inconsistent with our operational and strategic plans. There can
be no guarantees that we will emerge from bankruptcy protection as
a going concern or be able to sell some or all of our assets in an
orderly fashion, that we will otherwise realize any significant
value for our assets or damages through the Foxconn Litigation, or
that our creditors or stockholders (including holders of our Class
A common stock) will receive any recovery from the bankruptcy
proceedings. As a result, the Company expects that its currently
outstanding shares of Class A common stock may have little or no
value. Trading in shares of our Class A common stock during the
pendency of the Chapter 11 Cases will be highly speculative and
will pose substantial risks and trading prices for our securities
may bear little or no relationship to the actual recovery, if any,
by holders of our securities in bankruptcy proceedings.
Accordingly, the Company urges extreme caution with respect to
existing and future investments in our Class A common stock.
Additional information on potential factors that could affect
the Company and its forward-looking statements is included in the
Company's Form 10-K, Form 10-Q and subsequent filings with the SEC.
All forward-looking statements are qualified in their entirety by
this cautionary statement. Any forward-looking statements speak
only as of the date on which they are made, and the Company
undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date of this release.
Contacts:
Investors
Adam Kroll
IR@lordstownmotors.com
Media
Jeremy Fielding/Jon Morgan/Simone
Leung
Kekst CNC
lordstown@kekstcnc.com
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SOURCE Lordstown Motors Corp.