GM sells Lordstown factory to the offshoot of a struggling EV startup
The closed General Motors factory in Lordstown, Ohio that’s been at the center of the company’s tension with President Trump has a new owner: an electric vehicle startup called Lordstown Motors. The deal — which was surprise announced by Trump on Twitter back in May — was finalized Thursday. Terms were not disclosed.
The deal could bring hundreds, maybe thousands of jobs back to the area, and GM says the factory’s new purpose will help establish Ohio as a hub for EV manufacturing. (The automaker is itself looking to invest in a nearby factory in order to transform it into a battery-making facility.) But the Lordstown plant now rests in the hands of a small company that finds itself trying to do what almost no other startup has been able to do: build an entirely new American automaker from (almost) the ground up.
To be clear, Lordstown Motors is a new company that was specifically set up to buy the Lordstown plant. It was created by Steve Burns, the founder and former CEO of struggling electric vehicle startup Workhorse. Workhorse has sold electric delivery vans in the past, and is in the running for the contract to build the United States Postal Service’s next-generation vehicle. But the company has recently found itself in dire financial straits. The startup has lost nearly $38 million in 2019, and generated just $4,258 in sales this past quarter. (Workhorse recently sold off a nascent drone business for $4 million, and has around $9 million in cash.) It has survived in large part because of a $35 million loan from hedge fund Marathon Asset Management.
The ties between Workhorse and Lordstown Motors run deeper than Burns. Workhorse owns 10 percent of Lordstown Motors. His old company is also licensing the intellectual property related to its impending W-15 electric pickup truck to Lordstown Motors, and transferring the 6,000 preorders it had collected for the truck to his new startup. In exchange, Workhorse will get a 1 percent commission on each of the first 200,000 trucks sold by Lordstown Motors, as well as 1 percent of any debt or equity financing the new startup comes up with.
Burns wants to build electric pickup trucks for “business and government customers,” according to The Wall Street Journal, and has already decided on the name of Lordstown Motors’ first model: Endurance. He said he wants to start production in about a year, but needs at least $300 million to do so. He also said he intends to eventually reach the Lordstown plant’s 6 million square foot maximum capacity, which would be about 500,000 vehicles per year — double the number of Cruze sedans GM made there at its peak, and more vehicles than Tesla currently makes after 15 years in business. Burns told the Journal he plans to do this with a union workforce, but that his startup has not yet had any discussions with the United Automobile Workers, which staffed the plant before it closed.
There’s now a rather long list of EV startups with an American presence that have tried to follow in Tesla’s wake. Most have failed, and the few that haven’t have had to lean on government bailouts. Perhaps the most famous example, Faraday Future, burned through some $2 billion and still does not have a car in production. Seres (née SF Motors) recently abandoned plans to enter the US market.
Byton is nearly ready for production, but only after striking a deal with Chinese state-owned automaker First Automotive Works (which drove out the startup’s co-founder and CEO). Lucid Motors is about to start building a factory in Arizona following a $1 billion rescue from Saudi Arabia’s sovereign wealth fund. China’s NIO has about 26,000 cars on the road despite being just five years old, but that’s because it struck a contract manufacturing deal with — you guessed it — a Chinese state-owned automaker. (NIO also announced earlier this year that it was getting a $1.45 billion infusion from a state-run investment fund, though the deal has still not closed.) At the same time, NIO has made multiple cuts to its US workforce and closed an office in Silicon Valley.
One example that stands out is Rivian, an EV startup that bided its time and waited until it had a lot of the hard work — securing a manufacturing facility, locking down early rounds of funding — out of the way before unveiling its electric pickup truck and SUV late last year. The Michigan-based startup has since nabbed Amazon and Ford as investors, with the former recently announcing a 100,000-truck order. Unsurprisingly, Burns told the Journal he’d like to take a similar approach to building up Lordstown Motors.