This could be the first in a wave of automaker failings.
With economic times getting tougher, it’s not surprising to see startups automakers struggling. The latest and perhaps most dramatic example comes via Lordstown Motors, which disclosed this week in a regulatory filing it might be forced to cease production and declare bankruptcy. For critics of electrification, this might be considered a victory, but Lordstown Motors could also be a canary in the coal mine for the entire industry.
Check out the first Shelby EV here.
According to multiple reports, trouble for the startup automaker began when it was threatened with being delisted from the Nasdaq, triggering Foxconn, a major investor in the company, to warn Lordstown it was in violation of their investment agreement. The Taiwanese tech company said it would hold back funding the automaker desperately needs to continue operations.
There’s a chance Lordstown Motors could dodge this bullet as the company is seeking alternative financing, per a report from Bloomberg. In the meantime, the company announced if the dispute with Foxconn isn’t resolved soon, it might have to “curtail or cease operations” as well as file for bankruptcy protection.
At the same time, the company said in its federal filing that it contends Foxconn’s allegations of a breach in the investment agreement don’t have merit, potentially giving the automaker protection at a time it’s most vulnerable. Reportedly, negotiations are going on between the two companies, although Foxconn hasn’t withdrawn its previous termination of investment notice.
Predictably, stock shares of Lordstown Motors Corp. dove sharply, suffering a 28% loss in midday trading when the news broke on May 1, reported The Detroit News. That made each share worth $0.13. The reason cited for the company’s stock being delisted from Nasdaq is the value of its stock dipped below $1 back on March 7 and hasn’t punched above that level since. In other words, this news is making a bad situation worse.
Lordstown Motors is hardly the only EV startup that’s struggling at the moment, with others like Rivian signaling dark times might be on the horizon for the market niche. However, trouble in Lordstown might be a harbinger of what’s in store for the auto industry in general.
Images via Lordstown Motors