Lordstown Motors executive: 'It's a new day at Lordstown' with 'no disruptions'
Detroit — The surviving leaders of Lordstown Motors Corp. are attempting to save the electric vehicle startup's plans, despite a series of bad headlines hitting as the company looks for more capital.
Their bid to change the narrative started Tuesday at a virtual Automotive Press Association event — a day after founding CEO Steve Burns and CFO Julio Rodriguez quit. There, newly appointed Executive Chairwoman Angela Strand said: "It's a new day at Lordstown, and there are no disruptions and will be no disruptions to our day-to-day operations."
Lordstown's stock plummeted nearly 20% Monday after Burns and Rodriguez resigned in the wake of a board report alleging "inaccurate" disclosures about pre-production orders. Their departure came just a week after the company told investors and the public it needed more money to survive the next year. The stock price was up more than 7.5% mid-afternoon in Tuesday trading, and closed up 11.3% at $10.31 per share.
The executive shake-up comes after the startup that took over the former General Motors Co. Lordstown Assembly plant in northeast Ohio has battled several setbacks in recent months — from a short-seller report claiming the startup misled investors to most recently a regulatory filing warning it may not survive into next year without additional funding.
During its May first-quarter earnings report, Lordstown reported a first quarter 2021 net loss of $125 million, capital expenditure funds of $53 million and cash of $587 million as of March 31.
On the earnings call, Burns said the company only had enough cash to make a portion of the Endurance electric trucks it planned to make this year. Then last week, Lordstown updated its annual regulatory filing with the Securities and Exchange Commission noting its doubts of continuing as a "going concern," an accounting term that means the company has the means to meet its financial obligations.
During the Tuesday APA event, Lordstown Motors President Rich Schmidt said the company had enough funding for production through next May with more than $400 million in the bank. Right now, the plant is tooled to build 20,000 vehicles. How much capital the startup needs will depend "how fast we want to grow," Schmidt said.
Until a permanent CEO and CFO are found, Strand — Lordstown Motors' lead independent director — will be executive chairwoman of the company, and Becky Roof, a managing director of Alix Partners LLP, will serve as interim CFO. Strand is managing director of Strand Strategy, an advisory firm that specializes in technology, business strategy and organization. Roof is a certified public accountant with a knack for financial restructuring who has worked with such companies as Eastman Kodak, Hudson’s Bay Co. and Saks Fifth Avenue.
Burns will continue to receive base salary payments for a period of 18 months in the aggregate amount of $750,000, according to his separation and release agreement. Rodriguez will receive base salary payments for a period of six months in the aggregate amount of $200,000.
The resignations came the same day as the release of findings from the automaker's committee formed to evaluate claims made in a report by short-seller Hindenburg Research that, in part, accused the startup of misleading investors with pre-orders that were "largely fictitious and used as a prop to raise capital and confer legitimacy."
The committee's investigation found the Hindenburg report "in significant respects, false and misleading," but it did find that Lordstown Motors had made some "inaccurate" disclosures about its pre-orders.
In a Monday note, Morgan Stanley analyst Adam Jonas said a management change was needed for the company to move forward: "We felt it was untenable for the company to secure necessary new capital with a management team widely seen as potentially not leading the company into the next era of its development."
Lordstown intends to launch production of its Endurance truck this September. The $55,000 truck is being marketed to commercial companies as a fleet vehicle. Schmidt said the company currently has enough "firm" orders for production in 2021 and 2022, noting that it will probably build about 15,000 through next year.
"They are basically binding orders," he said. "They are committed ... in the last two weeks reconfirmed orders, so they're pretty solid. I would think that's on the light side."
GM has aided Lordstown Motors in its efforts to transition the more than 50-year-old auto plant into one that makes EVs. Its investment includes $25 million in cash, the $20 million value of the plant and the equipment inside, and $30 million in operational support. GM has about a 5% stake in the company and owns 7.5 million shares of Lordstown's Class A common stock.
During its funding phase, Schmidt said Lordstown will "look at our original partners first, and of course it makes sense for them because you know we share some [common] parts and some engineering and we've had good cooperation amongst General Motors, so we will talk to our original investors first but that's not to say that's our only avenue."
GM spokesman Jim Cain said in a statement: “We are comfortable with our current relationship with LMC and we don't envision changing it, but we are willing to listen to proposals."
Wedbush analyst Daniel Ives said in a statement the executive transition at Lordstown "puts gasoline on the fire and the street is clearly worried at this evolving situation. Steve Burns departing is a gut punch to the story. The Lordstown story has been an episode out of the Twilight Zone, and these executive departures have caused more questions than answers. It’s a massive dark cloud over the story."
Lordstown Motors executives will again attempt to reshape the startup's story next week during its Lordstown Week event that kicks off Monday. Media, investors, analysts, customers and partners are invited to talk with the startup's management team, tour the plant and see how they are preparing for the September launch of the Endurance.
"We remain committed to inspiring, building and maintaining confidence and transparency in our relationships with each other at Lordstown, and very importantly, with our customers, our partners, our suppliers and our shareholders," Strand said. "Finally, what's not changing is our plan to start limited production in late September."