Embattled EV start-up Lordstown touts ‘real employees at a real plant’ as it seeks capital infusion

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Embattled EV start-up Lordstown touts ‘real employees at a real plant’ as it seeks capital infusion

Workers install door hinges to the body shell of a prototype Endurance electric pickup truck on June 21, 2021 at Lordstown Motors’ assembly plant in Ohio.

Michael Wayland / CNBC

LORDSTOWN, Ohio – Lordstown Motors‘ new executive team wants to make one thing clear to the investors this week: The electric vehicle start-up has “real employees at a real plant.”

That wouldn’t need to be said for most companies, but the aspiring EV manufacturer has been hemorrhaging money, it recently warned investors that it may not have enough cash on hand to survive the next 12 months and it ousted its top two executives. The Securities and Exchange Commission has also opened and inquiry looking into statements made by the company and executives about orders.

The message is part of tours this week for media, analysts, investors and others the company is calling “Lordstown Week.” It’s meant to show that the embattled company has made progress as the new executive team seeks to raise funds to keep it afloat.

Real investors haven’t been so convinced. Its shares have been cut in half this year, including a roughly 3% decline this week.

Wall Street analysts who toured the facility noted the company’s progress in gearing up to produce its first EV, an electric pickup truck called the Endurance, in late-September. They also noted some parts of the plant still needed significant work and said the event didn’t change their concerns about the company’s finances or long-term prospects.

“While we largely note constructive takeaways from the event, we still express the same concerns as before regarding liquidity, path to scale and especially the commercialization of the in-hub motors,” Morgan Stanley analyst Adam Jonas wrote in a note to investors.

RBC Capital analyst Joseph Spak said the firm believes “Lordstown has a long road ahead.” Spak noted the massive plant was “largely empty” but said it could be an important asset as collateral for a loan that could help short up its finances.

‘Value’ and experience

Lordstown Motors gave rides in prototypes of its upcoming electric Endurance pickup truck on June 21, 2021 as part of its “Lordstown Week” event.

Michael Wayland / CNBC

Strand, who addressed media without taking questions, is leading Lordstown as the board searches for a permanent replacement for ex-CEO Steve Burns, a founder and former chairman of the company who was ousted last week.

Strand said the company continues to evaluate “strategic partners” as part of its search for capital needed to stay in operation. The company on June 8 warned investors that it may not be able to continue as a “going concern,” citing “substantial doubt” about its ability to survive the next year.

She said Lordstown is “continuing our due diligence” in seeking a loan from the U.S. Department of Energy. Burns last year said the company was seeking a $200 million loan from the Energy Department’s Advanced Technology Vehicles Manufacturing loan program.

Lordstown also gave test drives in “beta” pickup prototypes as well as a new military concept vehicle based on the Endurance platform. The rides in the prototype truck were limited to 45 mph since the truck isn’t finished yet and the test drives were on an uneven parking lot, an employee said.

Unfinished plant

Lordstown was viewed by some as ahead of other EV start-ups, largely thanks to its massive assembly plant. The deal with GM included much of the plant’s machinery as well as assistance from the established automaker with suppliers and retooling the facility.

The plant saved Lordstown billions of dollars and Burns previously described GM’s assistance as “invaluable.” But it’s easy to see that Lordstown does not need the entire 6 million-square-foot plant currently.

Lordstown Motors has developed this electric vehicle based on the platform of its Endurance pickup truck for military applications, according to the company.

Michael Wayland / CNBC

Signage outside Lordstown Motors Corp. headquarters in Lordstown, Ohio, on Saturday, May 15, 2021.

Dustin Franz | Bloomberg | Getty Images

“The traditional approach is you install equipment and then you spend several months fine-tuning it and running parts down there, making sure all the processes are working correctly, you’re quality processes are in place and training the staff, all of that stuff,” Abuelsamid said. “It’s not a good sign that they tend to install motor line and go straight to production.”

Traditional automakers regularly retool plans and reuse parts, but their lead up to real production can take months. For example, Ford Motor began building its new electric Mustang Mach-E crossover at a retooled plant in Mexico last February, roughly nine months before the vehicle went on sale for consumers.

“There is a lot to be done, no question,” Ian Upton, Lordstown director of production control and a former GM employee of 22 years, told CNBC. “But I think [the motor line] will be ready. We will ramp slow this fourth quarter.”

Burns last month said production of the Endurance would be half of the 2,200 vehicles previously expected without additional funding. The company has said it expects to begin customer deliveries in the fourth quarter.

Questions remain

There was high interest by investors in Lordstown when the company went public in October. But the excitement fizzled this year following changes to business plans and executives. Not to mention, the SEC probe as well as Ford unveiling the electric F-150 Lightning pickup, a less expensive competitor than the Endurance.

“While the market opportunity is large and Lordstown’s truck received decent initial interest from potential fleet customers, we see considerable uncertainty ahead,” Deutsche Bank analyst Emmanuel Rosner wrote Monday in a note. “In the near-term, the company has encountered large operational and supply chain challenges and material cost overruns in its aggressive ramp up towards production, and is now in urgent need of capital.”

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Hi, my name is Ankita Dixit. I started writing from young age and most of my writing skills and knowledge are self taught. Currently, I am working as a professional writer at Paisa.co. I have write on various topics including travel, motivation, finance, technology, credit cards, insurance and entrepreneurship etc.