By Michelle Chapman
Commercial electric vehicle startup Lordstown Motors Corp. has filed for Chapter 11 bankruptcy protection nearly two months after it warned that it was in danger of failing.
In early May electronics company Foxconn wavered on a $170 million investment in Lordstown. The Ohio company said in a regulatory filing at the time that it had received notice from Foxconn on April 21 that it was in breach of their investment agreement because it had received a delisting warning from Nasdaq two days earlier.
Lordstown said at the time that given the uncertainties, there was substantial doubt it could continue as a going concern.
Lordstown was in danger of being delisted from the Nasdaq because its share price closed below $1 on March 7 and continued to falter after that.
Foxconn told Lordstown at the time that it may unwind their agreement if Lordstown did not resolve its listing issues. Lordstown said in May that it had notified Foxconn that, among other things, it believed the breach allegations were without merit and that the terms of the investment agreement didn’t allow Foxconn to end the deal following the initial closing.
Lordstown said Tuesday that it was filing a lawsuit against technology company Hon Hai Technology Group and certain affiliates, including Foxconn. Lordstown said the lawsuit “details Foxconn’s fraud and willful and consistent failure to live up to its commercial and financial commitments to the company.” It claims Foxconn's actions led to material damage to Lordstown and its future prospects.
Lordstown said it's also looking to sell its Endurance vehicle and related assets. The company said that restructuring under Chapter 11 will help with the sale process of Endurance and speed up the timeline for hearing its lawsuit against Foxconn.
In November Lordstown had announced that it had received approval to ship the first batch of its first model, the Endurance pickup.
The trucks were built in an old General Motors small-car assembly plant in Lordstown, Ohio, near Cleveland, that was purchased in 2021 by Taiwan’s Foxconn Technology Group, the world’s largest electronics maker.
Lordstown said that it is entering Chapter 11 with significant cash on hand and is debt-free.
The company's stock plunged more than 65% before the market open.