Workhorse CEO calls potential sale of GM Lordstown a 'win-win'
Workhorse Group Inc. lost $37 million on sales of just $6,000 in the second quarter, but leaders hope the potential purchase of General Motors Co.'s Lordstown Assembly Plant by an affiliated company will help the electric-truck maker land a major contract to build delivery vehicles for the U.S. Postal Service.
The sale of the plant to Lordstown Motors Corp., a newly formed entity of which Workhorse would own 10%, could help Workhorse win bigger contracts and help it become a leader in electric vehicles, Workhorse CEO Duane Hughes said on an earnings call Tuesday.
The agreement between Lordstown Motors and Workhorse calls for Lordstown Motors to enter into a license agreement with Workhorse to use the Workhorse technology to build at the Lordstown plant a new battery-electric pickup truck that's based on the Workhorse W-15 truck.
Workhorse officials said combining its technology "with the historic GM Lordstown facility will provide Workhorse with the greatest benefit in monetizing its pickup truck technology," Hughes said. "In the end, we believe this will be the proverbial win-win."
His is one of five companies vying for a $6.3 billion contract to build 180,000 electric delivery trucks for the U.S. Postal Service and potentially partnering with Lordstown Motors to build them in Lordstown.
Workhorse's stock price plummeted after the earnings report was released. Shares closed down 20.5% to $3.19 Tuesday as equity markets recovered from the worst sell-off of the year.
"From the beginning, we viewed access to the Lordstown facility as a potential competitive advantage to further enable us to win the postal service contract primarily just because of its size, its ability to push through vehicles out of that plant," Hughes said, calling the plant a "potential game changer." He said a trained auto production workforce in the community is a bonus.
The Detroit News reported Friday Lordstown Motors founder and CEO Steve Burns is moving forward with plans to purchase the 6.2 million-square-foot GM facility. He's seeking investors to get the $300 million needed for the purchase and retooling of the plant.
The 53-year-old GM assembly plant would be able to stay an auto assembly plant if the deal goes go forward, but it could potentially be more than assembly operation.
Ohio State Sen. Sean O'Brien of Bazetta Township last week visited the Cincinnati-based Workhorse and met with Hughes and Burns. After the meeting, O'Brien learned that if Lordstown Motors is able to purchase the assembly plant in the Mahoning Valley, it would become the company's headquarters and research and development center — a decision Burns confirmed to The News.
"There's a lot of opportunity," O'Brien said. "We are trying to set up partnerships with Workhorse. We want to welcome them into the community."
But O'Brien is cautious about the opportunity. The "unallocated" GM Lordstown Plant cannot be sold under the current collective bargaining agreement between the United Auto Workers and GM. UAW officials have said they will fight to get GM product back into the Lordstown plant and other "unallocated" plants in Michigan and Maryland. Production of Chevrolet Cruze ended in March and the plant has been closed since then.
"You want to do it right," O'Brien said. "You still have to get over the hurdle of the UAW contracts."
Hundreds of members of UAW Local 1112 at GM Lordstown have taken transfers to other plants. There are now about 400 members who worked at GM Lordstown still in the area, Local 1112 Vice President Tim O'Hara said. O'Hara will take over as president later this month after current union local President Dave Green relocates to Bedford, Indiana.
"Our main goal still is to have GM put a product back in there," O'Hara said. "If negotiations don’t produce that result then whatever jobs do go in there we of course want them to be UAW and Local 1112 [represented]. It’s evident by what GM has been saying over the last several months. Their intention is to sell the plant."
If Lordstown Motors purchases the plant, the company would become a part of an ongoing transformation in the Mahoning Valley from an old-school manufacturing town built around steel to a tech town with business incubators focused on helping technology start-ups.
Rick Stockburger, CEO of the Tech Belt Energy Innovation Center a business incubator located in Warren, Ohio, that focuses on helping energy start-ups, has had early conversations with Workhorse leaders and hopes to collaborate with them if the sale does go through.
"We would like to think that our expertise in the area is absolutely something that attracted them," Stockburger said. "It’s really a perfect place for a company like Workhorse to land."
In the second quarter, Workhorse reported a net loss of $36.9 million, compared with a net loss of $6.9 million in the same quarter a year ago. Workhorse's reported sales of $6,000 were down 96% from the second quarter of 2018.
As of June 30, the company had cash, cash equivalents and short-term investments of $23.5 million, up from $1.5 million recorded on Dec. 31.