Lordstown Motors files for bankruptcy protection, sues Foxconn

https://www.cnbc.com/2023/06/27/lordstown-motors-files-for-bankruptcy-protection-sues-foxconn.html

U.S. electric truck manufacturer Lordstown Motors filed for bankruptcy protection on Tuesday and put itself up for sale after failing to resolve a dispute over a promised investment from Taiwan’s Foxconn. Shares of Lordstown tumbled 35.6% in pre-market trading. The automaker, named after the Ohio town where it is based, filed for Chapter 11 protection in Delaware and simultaneously took legal action against Foxconn.

In a complaint filed in bankruptcy court, Lordstown accused the electronics company of fraudulent conduct and a series of broken promises in failing to abide by an agreement to invest up to $170 million in the electric-vehicle manufacturer. Foxconn previously invested about $52.7 million in Lordstown as part of the agreement, and currently holds an almost 8.4% stake in the EV maker. Lordstown contends Foxconn is balking at purchasing additional shares of its stock as promised and misled the EV maker about collaborating on vehicle development plans. Foxconn, formally called Hon Hai Precision Industry and best known for assembling Apple’s iPhones, has said Lordstown breached the investment agreement when the automaker’s stock fell below $1 per share. The Taiwanese company said on Tuesday that it had maintained “a positive attitude in conducting constructive negotiations with Lordstown” but said the U.S. firm had been reluctant to perform the investment agreement in accordance with its terms.

It said the company was suspending negotiations with Lordstown and reserved the right to pursue legal action. The twin filings by Lordstown set up an international business clash that could intensify scrutiny of Foxconn’s EV ambitions and partnerships, not only with Lordstown but also other automakers. The lawsuit portrays Foxconn as consistently shifting goal posts in its collaboration with Lordstown on the automaker’s future vehicles, which included failing to meet funding commitments and refusing to engage with the company on initiatives Foxconn allegedly directed and purported to support. Lordstown, a startup launched in 2018, said in a regulatory filing earlier this month that it had planned to sue Foxconn after receiving a letter from the company that led Lordstown to believe Foxconn was unlikely to make its additional expected investment.