Ed Hightower, an executive at Rosetown Motors, flew from Detroit to Taiwan last year to meet with executives from Foxtron, an affiliate of the Foxconn Technology Group, an iPhone maker, to begin development of a new electric vehicle. I had a meeting to be able to do it. The CEO ghosted him.
Hightower was quarantined for three days to prevent the spread of the novel coronavirus before meeting with Taiwanese officials. He was able to meet Foxconn chairman Young Liu and his deputies. But the important work was to be done in partnership with Foxconn’s majority-owned Foxtron. The idea was to partner on a midsize crossover SUV that would be produced at General Motors’ former Rosetown, Ohio plant.
In an interview, Hightower said the Foxtron president refused to meet. Hightower was unable to obtain the blueprints, data and required license agreements necessary to move the project forward. Liu was the chairman of both companies, but he said he could not force Foxtron to meet with Hightower. Almost two weeks later, the American executive said he had given up and returned home.
“I traveled to Taiwan to break the deadlock,” said Hightower, who was Lordstown’s president at the time of the trip and is now chief executive officer. “A lot of the time it’s about relationships,” says Hightower, but in this case he “failed.”
This incident was an early sign of the troubles ahead.Tuesday, Rosetown filed for bankruptcy The company struggled to make electric trucks and was unable to finalize a partnership that was supposed to be the engineering arm of Foxconn’s U.S. electric vehicle business. Rosetown also sued Foxconn for alleged breach of contract and fraud.
A representative for Foxconn declined to comment beyond the statement released after Lordstown’s bankruptcy announcement. The Taiwanese company said it was “willing to engage in constructive negotiations with Rosetown Motors and help Rosetown find a solution to its financial woes.”
“However, during this time, Rosetown Motors continued to try to mislead the public and was reluctant to execute the investment agreement between the parties on terms,” Foxconn said in a statement. The company said, “We hoped to continue the discussion and reach a solution that satisfies all stakeholders without resorting to unsubstantiated legal means, but so far both parties have yet to reach an agreement. .”
Lordstown is one of the first casualties of the easy-money era, as cash pours into startups looking to transform the auto industry with electric vehicles and self-driving software. Even if they don’t have working vehicles or revenue.
Rosetown stood out from the crowd of flamboyant start-ups, including Nikola and Fisker, in part because its birth story was rich in symbolism. Founder Steve Burns bought a closed GM factory in a dilapidated area of northeastern Ohio for $20 million and vowed to revive it. Along the way, Mr. Burns made a bold pledge to beat Tesla, GM and Ford Motor Co. to bring electric pickup trucks to market. That dream of domination never came true.
“Great news for Ohio!”
The eventful run of Rosetown started with a sudden announcement and a mistake. In May 2019, then-President Donald Trump announced that General Motors would sell its Ohio plant to workhorse group, a loss-making EV startup of which Mr. Burns was once CEO. “Great news for Ohio!” he said. tweeted.
However, GM did not agree to a sale with Workhorse, and had agreed to sell the plant to newly formed Lordstown Motors.
Still, Mr. Burns rode the Trump administration’s support: hosting Visiting the White House with Vice President Mike Pence – En route to going public at the end of 2020 through a reverse merger with special-purpose acquisition firm Diamond Peak Holdings. This raised him $675 million for the development of his Endurance pickup, with his one small electric motor in each wheel.
Months after the merger, short seller Hindenburg Research released a report indicting Burns. mislead investorsEspecially when it comes to claims that the Endurance has reached 100,000 cumulative pre-orders.
Burns responded by quoting Taylor Swift. “The haters will hate, hate, hate, hate, hate. WKBN.
The Hindenburg Report tipped the US Securities and Exchange Commission and the Department of Justice into an investigation into Rosetown. Neither law enforcement agency has released a conclusion, but the company’s own internal investigation found that Mr. Burns did indeed make inaccurate statements about pre-orders. resigned.As a first sign that the company may not be viable, Rosetown going concern caveat.
Then came Dan Ninivadge. A former attorney for billionaire investor Carl Icahn has been appointed CEO to clean up the mess left by Burns.
Nini vaj has arrived agreement In late 2021, it plans to sell the factory to Foxconn in a $280 million deal that includes an equity investment from the Taiwanese company. In addition to building the Endurance, he had plans to use Foxconn’s EV platform and production capacity to have the company’s engineers develop EVs for any automaker.
Late last year, Foxconn replaced its original deal with Lordstown with a new deal and investment in the company.was still like foxconn all in when it agreed to purchase an 18% stake and some preferred stock for $170 million. Lordstown shares initially rose 29% on the news.
But Rosetown claims Foxconn slowly began taking steps to transition the relationship into a true joint venture shortly thereafter. The company said Foxconn ditched assurances it would back Endurance and other future projects to make it easier to acquire the factory as a base for its U.S. EV ambitions. Rosetown said these promises were “designed for Foxconn to pull the company out in order to keep it alive.”
Rosetown alleges that after taking over the plant, Foxconn did not pay for the development of certain vehicles and did not respond to Rosetown’s repeated requests for access to engineering drawings and vehicle designs from Foxtron. , last summer, which caused Hightower’s disastrous trip to Taiwan.
Rosetown alleges in its lawsuit that Foxtron planned to sell its vehicles in the United States in direct competition with the Rosetown joint venture. Hightower said Foxconn executives told Rosetown that Foxtron was considering selling its vehicles through used-car retailer Carvana. A Calvana spokeswoman did not respond to an email requesting comment.
Foxconn said in a statement that Rosetown made “false comments and malicious attacks” in the lawsuit, adding that it “reserves the right to take legal action and also suspends any subsequent good faith negotiations.”
Winning the hearts and minds of consumers may have helped Rosetown overcome behind-the-scenes turmoil. However, several of his early Endurance trucks broke down on the road, including at least one of his that was handed over to a customer. In February, Lordstown asked Foxconn to halt production after it recalled 19 pickup trucks.
Shortly after, Rosetown made a bombshell statement. The company said it needed expertise and cooperation. another external partner That’s because working with Foxconn won’t bring the cost down enough to make a profit at the truck’s list price of $65,000.
That signaled a souring partnership, and Rosetown shares plummeted. By April, the stock had been trading below $1 for so long that Nasdaq sent a delisting notice. Foxconn cited it as a reason for delaying its next round of investment, but Rosetown claims the Taiwanese manufacturer didn’t have the right to do so.
When Lordstown executed a reverse split to lift its share price above $1 the following month, Foxconn ultimately invested $47 million, a split-adjusted price according to the complaint, which compounded the He said the corporate entity would make more than $1 in profit. 60% of Lordstown ownership.
Rosetown is still looking for another automaker to partner with. Hightower said the Endurance could be used by other manufacturers to quickly enter the electric truck market or be adapted for battery-powered SUVs.
Unless a new partner emerges, the Lordstown lawsuit may be the only way to get the money back for shareholders.
Burns has already moved on.he sold off All of Rosetown’s stock was worth about $66 million before bankruptcy.
– By David Welch and Sean O’Kane.
https://www.autofinancenews.net/allposts/capital-funding/lordstown-ceo-was-ghosted-by-foxconn-unit-a-year-before-collapse/ Rosetown CEO was ghosted by Foxconn division a year before collapse