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Lordstown Motors has sued Foxconn, the Taiwanese iPhone maker. The EV company sued Foxconn Tuesday and filed for bankruptcy and sale.
Lordstown, the 2020 public EV startup, filed for Chapter 11 in Delaware.
Lordstown sued and restructured after failing to resolve its dispute with Foxconn over a previously agreed investment.
Lordstown filed a complaint Tuesday accusing Foxconn of fraud that destroyed “an American startup.” Foxconn’s agreement to invest in and buy a large portion of Lordstown’s shares is “littered with a series of broken promises and repeated refusals to take any action,” according to Lordstown.
In 2021, Foxconn bought Lordstown’s Ohio manufacturing facility from EV SPAC. Foxconn paid $230 million and bought 10% of its common stock. Lordstown’s stock fell below $1, prompting a Nasdaq delisting warning and breaching its Foxconn agreement. If Lordstown didn’t comply, Foxconn would end the investment agreement.
Lordstown warned investors in May that losing Foxconn’s funding could force its bankruptcy. Hail Mary: the EV startup’s board approved a 1:15 reverse stock split. Lordstown closed Tuesday at $2.76.
Lordstown claims Foxconn misled the EV maker about vehicle development plans and was “not the partner that it promised to be.” Foxconn is accused of pretending to support the Endurance pickup truck and future joint product development to acquire Lordstown’s most valuable asset, the Ohio manufacturing plant, and to steal Lordstown’s skilled manufacturing and operational employees.
The bankruptcy court lawsuit states that Foxconn “refused to honor its obligations…while at the same time causing Lordstown to devote substantial resources to the same cause.”
Foxconn was unresponsive.
Foxconn’s EV promises and partnerships with automakers and itself may be scrutinized by the bankruptcy filings and lawsuit. Foxconn has agreements with Fisker and Monarch Tractor and plans to build EV batteries in Wisconsin and Ohio, but volume production has been difficult.
Lordstown shipped Foxconn-made Endurance pickup trucks in November 2022. After quality issues, the automaker resumed Endurance production in April at a low rate.
March saw Lordstown lose General Motors as an investor.
If Lordstown can’t find a rescuer to restart Endurance production, Foxconn could use the Ohio factory to build EVs for foreign automakers that want to take advantage of the Inflation Reduction Act incentives to build EVs in the U.S.
Lordstown will hold an auction with a minimum bid because it doesn’t have a buyer yet.
