Newly formed Lordstown Motors Corp. moves on plans to buy GM plant
To show how serious he is about purchasing General Motors Co.'s Lordstown plant, Steve Burns named his newly formed company Lordstown Motors Corp. and he's raising financing to make the deal reality.
Burns, founder of electric truck maker Workhorse Group Inc., told The Detroit News earlier this week he is working behind the scenes on his plan to take over the sprawling GM plant that stopped producing Chevrolet Cruze compact cars in March.
As workers remaining in Lordstown languish in what a top union leader calls “automotive purgatory,” Burns is pushing to raise $300 million to back the effort to repurpose the assembly complex into a plant building electric commercial pickups and perhaps a new U.S. Postal Service delivery truck.
“We are impressed with the Lordstown facility, and we have had great support from Workhorse, our technology partner and strategic partner, as well as General Motors,” Burns told The News in an e-mailed statement. “Our name, Lordstown Motors Corp., reflects the depth of the commitment we will make to the plant, the community and the state of Ohio once this deal is completed. We have started investor outreach, which is the next step toward launching our battery-electric commercial pickup.”
Under terms of the current collective bargaining agreement with the United Auto Workers, GM can't sell, idle or close the plant without union consent. UAW officials have downplayed the Workhorse offer and vowed to fight to keep product in Lordstown and other "unallocated" plants in Michigan and Maryland during their new contract negotiations that began last month.
If the sale between GM and Lordstown Motors moves forward, the Lordstown plant would be one of just a few auto assembly facilities to continue vehicle assembly under a new owner. They include the former NUMMI GM and Toyota joint-venture plant that's now home to the Tesla Inc. plant in Fremont, Calif., and a former Mitsubishi Motors Corp. plant in Normal, Illinois, acquired by Rivian Automotive Inc., a Plymouth-based electric truck company and Workhorse competitor.
"GM probably has several options," Kristin Dziczek, vice president of industry, labor & economics at the Ann Arbor-based Center for Automotive Research, said of the plan for Lordstown. Workhorse "is one that would allow that plant and [the] remaining workforce in the area to continue to build vehicles. I don’t think that is the only option that’s being considered for that plant."
If the plant would be used for anything other than auto assembly, it likely wouldn't employ as many people or generate as much payroll or tax revenue for the northeast Ohio community. Last year, the automaker confirmed, GM Lordstown wages totaled $221 million and the plant generated $40.4 million in payroll taxes.
But one thing is for certain, if industry tradition is any indication: an automaker looking to winnow its production capacity likely would not choose to sell a plant to another competing automaker.
"Why would you enable a competitor by giving them the ability to manufacture close to a half million vehicles that might compete in the market against yours?" Dziczek said. "Workhorse makes commercial vehicles and GM doesn’t really compete in that space."
Burns, the former CEO of the electric mobility company Workhorse Group, received a certificate from the Ohio Secretary of State on June 12 for Lordstown Motors Corp. to do business in the state.
The plan is for the newly formed company to use the Workhorse electric vehicle technology to build electric trucks at the Lordstown plant. Cincinnati-based Workhorse would own a small percentage, about 10%, of Lordstown Motors.
“We are just taking one step at a time,” said Jim Cain, a GM spokesman. “We haven’t made any announcements because right now we are just going through the normal process of negotiations between the parties and inspection of facilities and things like that. The next significant development would be when the new company is ready to go public with more of their plans.”
President Donald Trump was the first to announce on Twitter that Workhorse was eyeing the 6.2 million-square-foot Lordstown facility in May. GM later confirmed that it was in discussions with Workhorse and “an affiliated, newly formed entity” — Lordstown Motors — to sell the Lordstown plant.
Burns stepped down as CEO of Workhorse in February of this year, but the company said he would still serve in a consulting capacity. Workhorse promoted the former president and chief operating officer Duane Hughes to CEO. The company declined comment.
On its website, Workhorse says it has more electric vehicles on the road than any other company. It has developed both electric delivery vans and pickup trucks. The company also has developed hybrid aircraft for short flights and delivery drones.
More importantly for the Lordstown site, Workhorse is vying for a $6.3 billion contract to build 180,000 electric deliver trucks for the U.S. Postal Service and potentially partnering with Lordstown Motors to build them in Lordstown. The winning company is expected to be announced later this year. Also in the running for the contract is Auburn Hills-based Mahindra Automotive North America, an Indian automaker that manufactures off-road vehicles in Auburn Hills.
"I have talked to Workhorse and talked to GM about Workhorse," said U.S. Sen. Sherrod Brown, D-Ohio. "Workhorse is legitimate. They are a good company. [But] they can’t scale up anytime soon even if they get the post office contract."
Workhorse reached out to GM at the beginning of 2019, one of several companies to express interest in the Lordstown plant. The complex sits on the north side of the Ohio Turnpike midway between Pittsburgh and Cleveland. It has access to rail and an eager blue-collar workforce living in the Mahoning Valley region.
"They outlined a vision for the plant and we began discussions with them," Cain said. "It progressed to the point where we needed to open the doors a little bit more so they could see the facility and understand exactly what potential it has."
Youngstown/Warren Regional Chamber Chief Operating Officer Sarah Boyarko considers the plant a gem for the area. The chamber focuses on retention and expansion of business in the Youngstown/Warren region, seeking developers and assembling incentive packages for companies interested in investing there.
The chamber has had discussions with Burns, but it hasn't yet marketed the property or created any incentive packages for the property.
"Anything and everything is on the table until we find out what the specific needs are," Boyarko said. "We are kind of in a holding pattern right now but continuing to communicate and feeling confident that there will be a future opportunity in that property."
There are skeptics. They question the prospect of Workhorse purchasing the Lordstown plant, wondering whether Workhorse or an affiliate could muster the financial heft to purchase and use the plant to its full production capacity — nearly 500,000 vehicles per year.
Workhorse sales were just $763,000 in 2018, down from $10 million in 2017. The company attributed the decrease in sales to a decrease in the volume of trucks delivered. In a March filing with the Securities and Exchange Commission, the company said that its capital resources weren't enough to fund operations through the first half of 2019.
In June, the company announced it had received $25 million in financing that would help it move forward with the full-scale production of its N-GEN electric van later this year in Union City, Ind. The company's customers include FedEx Corp. and United Parcel Service of America Inc.
Earlier this week, Vice President Mike Pence used a groundbreaking ceremony for automotive supplier Magna Seating facility near Columbus to tell reporters Workhorse had secured financing for the purchase of the Lordstown plant. But Cain clarified on Friday that the vice president was referring to the $25 million in financing Workhorse had received for production.
Lordstown Mayor Arno Hill and other Mahoning Valley stakeholders met with Workhorse affiliates a few months ago, but he still has unanswered questions.
"My concern is who is the money behind the plant, who is the money behind Workhorse," Hill said. "I am curious to see how much they are going to raise and where it’s coming from."
Ohio State Sen. Sean J. O'Brien, D-Bazetta Township, and a Senate colleague toured the Workhorse headquarters Friday. They sought assurances Workhorse and Lordstown Motors are viable enough to take over the GM plant, a 53-year-old institution in the valley and for years the largest employer in both Trumbull and Mahoning counties.
"I want someone in there who's going to use that plant and use it productively," O'Brien said. "Everyday it’s idle, it's losing it's potential. Everyday it’s sitting there, it hurts."
The preliminary verdict following the tour and a test drive of an electric truck: "I am satisfied that as we move forward this company does have the ability to do manufacturing in the valley provided that they receive the additional financing," he added. "They do seem to have the right product and the right technology."
UAW Local 1112 Vice President Tim O'Hara likens the waiting game on Lordstown's future to "automotive purgatory." He's watched one union member after another move on to plants in Flint, Arlington, Texas, and Bowling Green, Kentucky. O'Hara is retired, but his wife, Denise O'Hara, took a transfer to the Bowling Green Assembly Plant after working at Lordstown for 23 years.
GM "does want to sell the plant,” O’Hara said. “I don’t think their intention is to build vehicles there.”
O'Hara will still stay connected to the plant when he takes on the Local 1112 president title later this month. Current President Dave Green is taking a transfer to GM's Bedford, Indiana, powertrain plant — and both hold out hope GM still will allocate product to Lordstown.
"Maybe that happens," Green said. "But the reality is there's going to be nobody left here. Honestly, if they do put something here I don’t see it happening until 2021."