Lordstown Motors, short on cash, warns of possible closure

[MEDICALJMP]

Lordstown Motors, short on cash, warns of possible closure

ByJoey Klender
Posted on June 9, 2021
https://www.teslarati.com/lordstown-motors-short-on-cash-possible-closure/

Lordstown Motors says it is running out of cash for its future development of electric vehicles and might be forced to close its doors for good within the next year.

On Tuesday, Lordstown Motors warned that it was facing issues with cash flow and that there is “substantial doubt” about the company’s ability to remain open over the course of the next twelve months. The news sent shares down around 20% during midday trading on Wednesday, CNN says.

Lordstown Motors is based in Lordstown, Ohio, and the company purchased a 6.2 million square foot factory from General Motors in 2019. In addition, the company promised that it would pay union-level wages to workers when it starts manufacturing the Endurance pickup, the truck it planned to release according to a June 2020 unveiling event. The Endurance was set to start at $52,500 and give 250 miles of range with 600 horsepower and 7,500 pounds of towing capacity, but the company’s financials don’t give the Endurance much of a chance of making it to the production and delivery stages.


Lordstown’s most recent filing said it had $259.7 million in cash on hand. However, this was as of March 31st, and the company posted a loss of over $125 million in Q1 2021, making it substantially difficult to see how the company could continue to operate without sizeable financial backing or assistance at the hands of its large-scale investors, a move that the company admitted it is making currently.

According to the filing, Lordstown said that its doors staying open “is dependent on its ability to complete the development of its electric vehicles, obtain regulatory approval, begin commercial-scale production and launch the sale of such vehicles.” It plans to begin manufacturing the Endurance pickup in September.
After production begins, Lordstown will have to navigate through a highly competitive and quickly-growing sector of companies that are beginning to offer electric trucks. This year alone, two new electric pickups will enter the market: Rivian’s R1T pickup will begin deliveries in July, while the Tesla Cybertruck will begin production and should complete some deliveries by the end of 2021. Additionally, legacy automaker Ford has electrified its F-150, the best-selling pickup in the United States. The F-150 Lightning has accumulated a substantial number of pre-orders at over 70,000, while the Cybertruck is sitting well ahead with 1,000,000 orders.


Lordstown’s struggling financials were highlighted earlier this year when Hindenburg Research released a report that put the company’s contracts into question. Hindenburg commented on the reports of Lordstown’s financial situation on Tuesday:

“After months of denials, Lordstown is finally beginning to acknowledge its precarious financial state and that its earlier production projections were nowhere close to reality.”

CNN said that Sears also released a similar filing in 2017 that used the same language. The company eventually filed for bankruptcy and only has a small percentage of its stores operating to this day.

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[ajdelange]

Yes but they bounced back a smidge yesterday after announcing that they are courting new investors.

 

[MEDICALJMP]

Lordstown relieves CEO and CFO of duties after financial woes, shares slide 16%
CREDIT: LORDSTOWN MOTORS
Joey Klender
June 14, 2021

Lordstown Motors (NASDAQ: RIDE) announced earlier today that it had relieved CEO Steve Burns and CFO Julio Rodriguez from their duties while appointing Becky Roof to Interim CFO and Angela Strand to Executive Chairwoman. The announcement comes just a week after Lordstown announced that it was struggling financially, with estimates that there wasn’t enough cash to last another 12 months.

News of the changes in Lordstown’s management caused shares to slide over 17%.


“Lordstown Motors Corp. a leader in electric light-duty trucks focused on the commercial fleet market, today announced several changes to its executive management team as the Company begins to transition from the R&D and early production phase to the commercial production phase of its business,” the automaker said in a statement today. “To that end, Lordstown Motors Lead Independent Director Angela Strand has been appointed Executive Chairwoman of the Company, and will oversee the organization’s transition until a permanent CEO is identified, and Becky Roof, will serve as Interim Chief Financial Officer. Steve Burns has resigned as Chief Executive Officer and from the Company’s Board of Directors, and Chief Financial Officer Julio Rodriguez has also resigned. All changes are effective immediately and the Company has engaged an executive search firm to identify a permanent CEO and CFO.”

Last week, Lordstown revealed it was struggling with cash flow, and the company cited that there was “substantial doubt” that it would be able to continue operating over the course of the next twelve months.

Companies often struggle financially early on, especially automakers, unless they have significant financial backing. Tesla experienced significant financial struggles in its early days, and Elon Musk has told the story of splitting the rest of his money between the automaker and SpaceX, so both companies would have a chance. Tesla was on the verge of closing its doors before investors called and offered to throw more money in. Four years later, Tesla would release the Model S after significant engineering efforts, and it eventually became the catalyst to Tesla’s momentum in the sector.

Lordstown said in the press release that it remains committed to “delivering on our production and commercialization objectives, holding ourselves to the highest standards of operation and performance and creating value for shareholders,” new Executive Chairwoman Angela Strand said.

The company is also planning to host “Lordstown Week” from June 21st to the 25th, an event that will host investors, partners, customers, and analysts, to show firsthand how the production teams plan to prepare the Ohio-located plant for the beginning of production of the Endurance electric pickup truck. The Endurance is scheduled to begin mass production in September.

At the time of writing, Lordstown stock was trading at $9.40, down 17.57%.

Disclosure: Joey Klender is not a Lordstown Motors shareholder. He does hold TSLA Stock.
https://www.teslarati.com/lordstown-motors-relieves-ceo-cfo-shares-slide/

 

[MEDICALJMP]

https://insideevs.com/news/513897/lordstown-motors-ceo-cfo-resigns/

Lordstown Motors CEO And CFO Resign

Jun 14, 2021 at 11:11am ET
By: Mark Kane

The company announced the results of the Special Committee Investigation of the Hindenburg Research Report.

Lordstown Motors announced today several changes to its executive management team - officially, because the "company begins to transition from the R&D and early production phase to the commercial production phase of its business."

We guess that it's rather because the situation is quite challenging and requires fast and possibly radical moves to secure financing for operation beyond 2021.

Anyway, Lordstown Motors' two top executives - CEO Steve Burns and CFO Julio Rodriguez - "resign" from the company.

They will be replaced temporarily by Angela Strand, Lead Independent Director (appointed Executive Chairwoman) and Becky Roof (appointed Interim CFO), until a permanent CEO and CFO will be appointed. It's another sign that it's not a planned move and the company did not have a new CEO and CFO ready for the transition.

"To that end, Lordstown Motors Lead Independent Director Angela Strand has been appointed Executive Chairwoman of the Company, and will oversee the organization’s transition until a permanent CEO is identified, and Becky Roof, will serve as Interim Chief Financial Officer. Steve Burns has resigned as Chief Executive Officer and from the Company’s Board of Directors, and Chief Financial Officer Julio Rodriguez has also resigned. All changes are effective immediately and the Company has engaged an executive search firm to identify a permanent CEO and CFO."

Lordstown Motors listed also a few more positions in its augmented executive team:

Rich Schmidt, President of Lordstown Motors, will continue to oversee all day-to-day operations, including manufacturing and engineering. Mr. Schmidt was promoted to President in November having previously served as Lordstown’s Chief Production Officer. He has over 30 years of automotive industry expertise, including experiences at Toyota and Nissan, Hyundai, Volkswagen, J.D. Power, and Tesla Motors.
Jane Ritson-Parsons, formerly Lordstown Motors Interim Chief Brand Officer, has been appointed Chief Operating Officer. Jane is a highly experienced senior global executive with demonstrated leadership and revenue building success with a successful track record most recently at Hasbro Inc as their Group Executive, Global Marketing.

Carter Driscoll, formerly Lordstown Motors Head of Investor Relations, has been promoted to Vice President, Corporate Development, Capital Markets and Investor Relations.

Tom Canepa, General Counsel, Shane Brown, Chief Production Officer, Darren Post, Vice President of Engineering, John Vo, Vice President of Propulsion, will all remain in their current roles to continue to guide the Company’s progress.

On the positive side, the company still believes that it will start production of Lordstown Endurance electric pickups in September 2021.

However, the customer deliveries seem to be quietly delayed again, as the new expected timeline is Q1 2022. Previously, we thought that sales would also start in September/end of 2021. At this point, it basically has no chance to be the first modern, series-produced electric pickup on the market.

Hindenburg Research

A separate press release was focused on the results of the investigation conducted by the Special Committee of its Board of Directors into the report published by Hindenburg Research on March 12, 2021 (the “Hindenburg Report”).

Lordstown Motors engaged Sullivan & Cromwell LLP to double-check all the allegations and according to the results, in most cases, everything is under control, but there were issues with pre-orders.

"The Special Committee’s investigation concluded that the Hindenburg Report is, in significant respects, false and misleading. In particular, its challenges to the viability of Lordstown Motors’ technology and timeline to start of production are not accurate. The investigation did, however, identify issues regarding the accuracy of certain statements regarding the Company’s pre-orders. A summary of the Special Committee’s findings is presented below."

Regarding the production target, the company believes that it is on track to meet the projected date of September 2021. Hindenburg Report stated that it's unrealistic.

"The Special Committee concluded that while various factors could lead to delays in the start of production, the projected September 2021 start of production remains achievable with the expectation of delivery to customers in the first quarter of 2022."

The company says that it continues to use steel frames and there is no change in that matter that could affect the market launch.

Lordstown Motors explains also that "initial battery pack assembly equipment has been received and is being installed, with remaining equipment due to arrive in advance of the projected start of production date."

In terms of hub motors - the automated production line will be ready in several months.

"Lordstown Motors currently expects to produce hub motors in part using manual processes while the automated hub motor production line is installed over the next few months. It expects this process to provide sufficient hub motor production capacity to support expected production volumes in 2021 and 2022."
The company also dismisses doubts about the viability of hub motors:

"The Endurance was engineered to address the unsprung vehicle mass attributable to in-wheel motors, including through tuning of the suspension, reinforcing the vehicle structure, and utilizing a heavier truck chassis."

The prototype fire about which we covered in detail in January (see images here) is considered "an isolated event rather than one reflecting a systemic problem."

"Lordstown Motors conducted a technical investigation of the incident that identified the root cause of the fire to be non-conforming parts on a battery pack that had been manually reworked for assembly on the prototype. During a test drive, the driver accelerated beyond the expected test parameters for that prototype. As a result of the rapid acceleration, the faulty connection point resulting from the manually reworked assembly experienced an overload of electric current which caused the battery to ignite."

In terms of pre-orders - there were issues, but Lordstown Motors do not find anything significant. Those were non-binding reservations after all, mostly without even deposits. In other words, the value of those numbers is pretty low.

"In most instances, Lordstown Motors’ pre-orders did not require a reservation or similar payment, though pre-orders submitted through a website portal required a refundable $100 payment. Lordstown Motors entered into an arrangement to pay one entity commissions for procuring pre-orders. That entity procured approximately 1,000 pre-orders and also assisted Lordstown Motors into entering into an important commercial relationship with a leading fleet management company."

Lordstown Motors noted one entity that provided a "large," but undisclosed number of pre-orders, despite lack of resources:

"Lordstown Motors made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate.

Lordstown Motors has stated on several occasions that its pre-orders were from, or “primarily” from commercial fleets. In fact, many pre-orders were obtained from (i) fleet management companies or other end users that indicated interest in purchasing Endurance trucks, similar to commercial fleets, and (ii) so-called “influencers” or other potential strategic partners that committed to attempt to secure pre-orders from other entities, but did not intend to purchase Endurance trucks directly.

One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks. Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed."

And here is a part about some other matters:

"The Special Committee also reviewed certain other matters raised in the Hindenburg Report and made the following observations. First, although not in a position to assess ongoing litigation with Karma Motors, the Special Committee notes that Lordstown Motors has denied the allegations against it and is contesting both liability and damages.

Second, as described in various Form 4 filings in the months following the DiamondPeak transaction, certain Lordstown Motors directors and executives have sold or transferred shares in the Company. Each of those transactions were made for reasons unrelated to the performance of the company or viability of the Endurance, and each such director and executive retained substantial Lordstown Motors equity holdings in the form of shares and options following the sales and transfers described in the Company’s public filings."

As we can see Lordstown Motors basically says that most of the things are ok. Only time will tell how the project will progresses. The key element is probably financing, and then the hard work begins - to produce a reliable electric vehicle and compete on the market.

 

[Quicksilver]

So what I take from the above is that unless they get a massive infusion of cash they are going belly up. Or did I miss something?

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