Electric vehicles startup Lordstown Motors buy closed GM factory in Lordstown Ohio

(November 10, 2019) The closed GM factory in Lordstown Ohio has a new owner an electric vehicle (EV) startup called Lordstown Motors. The deal was announced last May by Trump but was just finalized last Thursday. Terms of the deal were not disclosed.

The deal could bring jobs back to the Lordstown area.

The deal could bring hundreds if not thousands of jobs back to the area and could help that establish Ohio as a hub for EV manufacturing according to GM. GM is itself looking to invest in a nearby factory which they would turn into a facility for manufacturing batteries. However the Lordstown plant is now owned by a small company trying to achieve what almost no other small startup has been able to achieve so far and that is to create an entirely new automaker almost from the ground up.

Lordstown Motors

Lordstown Motors is a company that was specifically set up to buy the Lordstown plant. The firm was created by Steve Burns the founder and former CEO of the struggling EV startup Workhorse.

The Workhorse Group is described by Wikipedia as follows: "Workhorse Group Incorporated is an American manufacturing company based in Cincinnati, Ohio, currently focused on manufacturing electrically powered delivery and utility vehicles.

The company was founded in 1998 by investors who took over the production of General Motors' P30/P32 series stepvan and motorhome chassis.[1] By 2005, they were taken over by Navistar International, which had been selling them diesel engines.[2] Navistar then shuttered the plant in 2012 to cut costs after having suffered heavy losses.[1]In March 2015, AMP Electric Vehicles took over Workhorse Custom Chassis, changing the company name to Workhorse Group Incorporated, and began offering a range of electrically powered delivery vans."

Workhorse has recently found itself in poor financial condition: "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."

Ties between the Workhorse Group and Lordstown Motors

The ties between the two companies go beyond former CEO Steve Burns. Workhorse owns ten percent of Lordstown Motors. Workhorse is also providing licencing to the new company of intellectual property related to its planned W-15 electric pickup. It is also transferring 6,000 preorders for the truck to Lordstown. In exchange Workhorse will get a one percent commission on each of the first 200,000 trucks sold by Lordstown Motors as well as one percent of any debt or equity the Lordstown Motors obtains.

Burn's plans

Burns told the Wall Street journal that he wants to build electric pickup trucks for "business and government" customers. The first Lordstown model will be called Endurance. He said he wants to begin production in about a year but will need at least $300 million to do so.

Burns claims that he wants to eventually reach the maximum production capacity of the plant of about 500,000 vehicles a year. This is double the number of Cruze cars GM made at its peak. It is even more EVs than Tesla makes after 15 years in business.

Although Burns said he planned to have a union workforce, his company has not yet held any discissions with the United Auto Workers who staffed the plant under GM before it was closed.

There are many failures and much competition in US EV startups

There is a long list of EV startups trying to follow in Tesla's wake. For example Faraday Future has burned through about $2 billion but still has no car in production. Another company Seres decided to drop plans to enter the US market.

Byton is nearing production but only after it made a deal with China's state-owned First Automotive Works. Lucid Motors is about to start on a factory in Arizona but only after a one billion dollar rescue by Saudi Arabia's sovereign wealth fund.

One stand out among startups is Rivian that secured a manufacturing facility and locked down sources of financing before announcing a electric pickup truck and an SUV late in 2018. Amazon has ordered 100,000 of the trucks. Burns says that he wants to take a similar approach with Lordstown Motors.

Previously published in the Digital Journal