Starting a car brand has to be among the more foolhardy endeavors one can embark upon. The industry is saturated with giant, multinational companies that don’t want competition and a regulatory environment that requires a ludicrous amount of wealth and plenty of time to overcome. Despite this, we’ve seen countless electric vehicle startups attempting to accrete into something profitable over the last few years. But even the winners have found themselves wholly dependent upon government-backed. carbon-credit schemes or blank-check firms designed to guarantee their IPOs are astronomically high — often before they’ve shown a functional prototype.
This makes distinguishing a company with potential from those that are dead on arrival incredibly difficult. Though it’s getting easier to see which side of the fence Lordstown Motors will be occupying after a particularly grim string of months. One of its prototypes spontaneously combusted during testing last March, at roughly the same time Hindenburg Research was accusing it of fraud. More recently, the business lost CEO Steve Burns and confessed that it was in desperate need of money to start production.
The company announced Burns’ departure on Monday, stating that CFO Julio Rodriguez had also left the business. Angela Strand (lead independent director) has been appointed executive chairwoman of the business and Becky Roof will take over as interim CFO. Lordstown stated that it would be seeking to replace both positions but we already know that this is likely to send the business into a protracted death spiral. It’s kind of a shame, too. Because there was a stretch where the EV startup looked to have a decent chance of becoming a real automaker — one that it was supposed to create jobs for a region of the country that undoubtedly could have used them after Chevy Cruze production ended.
Created by Steve Burns (former CEO of Workhorse Group) in 2018, Lordstown Motors shares its name after the shuttered production facility it purchased from General Motors in 2019. The deal had 40 million come from GM to underwrite a substantial part of the plant’s purchase and was followed by a $12 million agreement that allowed the company to lease some of the intellectual property associated with Workhorse’s electric pickups.
By 2020, Lordstown entered into a reverse merger with special-purpose acquisition company (SPAC) DiamondPeak Holdings, resulting in an estimated equity value of $1.6 billion. The following months were supposed to be devoted to preparing the factory for assembly but 2021 launched with plenty of bad news for the startup.
The Ohio-based company had been discussing the merits of California for some time and announced it would be opening a service center in Irvine, California. While the January announcement was noncommittal, former and current staffers started to suggest the company might relocate to the region. At the same time, Lordstown issued a press release praising California for the “favorable regulatory backdrop in the state, which is aggressively promoting more widespread adoption of electric vehicles.”
This created rampant speculation that quickly gave way to more unflattering media attention. After kicking off the year by announcing it had exceeded 100,000 pre-orders for the Endurance light-duty, all-electric pickup, Lordstown Motors became the target of Hindenburg Research. The notorious short-selling research firm released a report questioning the legitimacy of those orders and the company’s true ability to manufacturer anything by the claimed September target. The in-house battery claims also turned out to be largely fictitious and one of its prototypes ended up catching fire.
May ended with the company stating that it would be required to cut its existing production estimates, with news trailing into June about how it desperately needed more money. Now, its CEO appears to be abandoning ship as Lordstown Motors’ already crippled share price takes another 12 percent dip.
“We remain committed to delivering on our production and commercialization objectives, holding ourselves to the highest standards of operation and performance and creating value for shareholders,” stated Strang. “Along with the management team, I will continue to work closely with them and the Board to execute on Lordstown’s vision for the future of electrified transportation. I am excited to lead the passionate and dedicated team of Lordstown employees and to work with our valued customers, suppliers, investors and partners and to hosting Lordstown Week, which commences on June 21st.”
Something tells us Lordstown Week might be mildly depressing. We’re hoping we’re wrong and the company turns things around and creates a bunch of new jobs for Ohioans. But our gut is telling us to keep this one on deathwatch until after it decides whether or not it can commence production in the fall.
[Image: Lordstown Motors]