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GM divesting from troubled Lordstown Motors

Sometimes, business just doesn’t work out and you cut your losses. GM has decided to sell its stake in troubled EV startup, Lordstown Motors.

Apparently fed up with the dramas surrounding Lordstown Motors, General Motors will now dispose of its holdings in the startup. GM had 7.5 million shares in the company, amounting to less than 5 percent of the total. The share was worth $75 million.

GM has actually sold the shares already in the fourth quarter of 2021, as confirmed by the company’s spokesperson.

GM and Lordstown got in bed with Lordstown in 2018. The legacy automaker was planning to close down its factory in Lordstown, Detroit, to the disappointment of then-President Donald Trump who attacked the company. GM then decided to sell the plant to Lordstown, then known as Workhorse, who was by that time struggling with issues of its own.

However, the then CEO of Workhorse, Steve Burns, created a new company, naming it Lordstown Motors solely for building electric pickup trucks. GM then decided to put $75 million in the new company. One-third was cash, while the rest was spread over plant assets, permits and other operating costs.

Lordstown would invest about $240 million in kind into the plant to prepare it for production of its only vehicle model, the Endurance. As part of the process, the company went public using the preferred special purpose acquisition company (SPAC) method last year. But that would not solve all of its problems.

Burns had to resign after it came to light that he lied about the number of pre-orders his company got for the Endurance truck, leading to several probes by federal investigators. Lordstown then adjusted its production goals as it faced a cash crunch. It declared it had enough money to continue till the middle of this year.

In its effort to curtail its financial problems, Lordstown decided to sell the plant to Foxconn, a company that assembles phones for Apple, for $230 million. However, the Taiwanese company was facing its own issues as it tried to fulfill its promises to create jobs in the country. In the end, Lordstown decided to loan out the plant to Foxconn and then contract out the manufacturing of its electric pickup truck.

While GM is pulling out, Lordstown is trying to raise $250 million to build the first 500 electric trucks. Given the financial shape of the company, it is hard to imagine investors rushing in.

Lordstown revealed a loss of $81.2 million for the last quarter of 2021. It also said it would only sell 3,000 trucks through 2023, with only 500 units to be produced this year. These numbers are far below the 32,000 units the company promised as it drummed up interest prior to its SPAC merger. It shows the company can hardly compete with the likes of GM, Ford, Rivian, and Tesla, all of whom are working on their own electric trucks too.

All the drama has affected the company’s share, dropping from above $30 last year to $2.57 on Monday.

“Lordstown production guidance was a disaster and adds gasoline to the growing inferno the Street has witnessed with the name over the last year,” said Dan Ives, an analyst at Wedbush Securities.

Written by HackerVibes

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