Lordstown Motors Corp., the manufacturer of an anticipated electric pickup truck for fleets, disclosed June 14 that CEO Steve Burns and CFO Julio Rodriguez immediately resigned their posts, marking the latest in a series of company setbacks and questions about its future viability.
Lordstown appointed Lead Independent Director Angela Strand as Executive Chairwoman who will oversee the company until it finds a new CEO. Becky Roof was named interim chief financial officer. The company has engaged an executive search firm to identify a permanent CEO and CFO.
The sudden executive shakeup follows Lordstown's recent disclosure in a filing that it needs additional funding to be able to produce vehicles in 2022. The company said on June 9 it “has multiple viable avenues to raise capital including asset-backed financing, equity, equity-related or debt financing, loans (including our in-process application for an ATVM loan)” and is “already in active conversations with multiple parties to do so."
The June 8 disclosure of additional funding needs was part of an amended 10-K filing to its annual report, casting doubt on Lordstown’s ability to meet production targets and timelines for its Endurance all-electric pickup truck. The company is looking to start production in September and build 2,200 Endurance trucks by year’s end.
Further challenging the EV startup is competition from Ford Motor Co. which unveiled its all-electric F-150 Lightning pickup truck on May 26 which it plans to sell under $40,000 compared to an announced price of $52,500 for the Endurance all-electric pickup truck before government rebates.
In a related development on June 14, Lordstown also released the findings of a special internal committee of its board of directors that examined its operations and practices following a March 12 expose from the Hindenburg Research Report. Burns told the Wall Street Journal on March 12 that the short seller report "contained half-truths and lies and that the short seller has a motivation to hurt the stock."
The special committee's most glaring finding is an admission from Lordstown that it "made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate." On two related points, the findings disclose:
- "Lordstown Motors has stated on several occasions that its pre-orders were from, or “primarily” from commercial fleets. In fact, many pre-orders were obtained from (i) fleet management companies or other end users that indicated interest in purchasing Endurance trucks, similar to commercial fleets, and (ii) so-called “influencers” or other potential strategic partners that committed to attempt to secure pre-orders from other entities, but did not intend to purchase Endurance trucks directly."
- "One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks. Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed."
Following the Hindenburg report, Lordstown reported during a 4Q earnings call that it is cooperating with an inquiry from the Securities and Exchange Commission and would form a special committee to probe the claims.
In response to other claims in the Hindenburg report, Lordstown Motors' internal committee responded:
- While Lordstown Motors has repeatedly disclosed that its pre-orders are non-binding, it has highlighted the risk that pre-orders may not be converted to actual orders.
- The committee concluded that while various factors could lead to delays in the start of production, the projected September 2021 start of production remains achievable with the expectation of delivery to customers in 1Q 2022.
- While Lordstown made certain changes to the materials to be used for the doors, hoods, and fenders of its Endurance pick-up truck, there has been no change to its plan to manufacture the vehicle frame from steel.
- Lordstown Motors has begun testing consistent on a timeline that anticipates delivery to customers in the first quarter of 2022, taking into account the potential adjusted production volumes discussed on the company’s May 24 first-quarter earnings conference call.
- The committee concluded that while hub motors have not previously been used at scale in commercially-produced passenger vehicles, the hub motor technology licensed from Elaphe is viable.
- Regarding a Jan. 13, 2021 incident in which a prototype of the Endurance caught fire during a test drive, the committee concluded the incident was an isolated event instead of a systemic problem. A technical investigation found the fire was caused by "non-conforming parts on a battery pack that had been manually reworked for assembly on the prototype." During a test, the driver accelerated beyond the expected parameters for that prototype, and because of the rapid acceleration, the faulty connection point from the manually reworked assembly was overloaded with electric current taht ignited the battery.
As Lordstown Motors plans to move forward, it also further augmented its executive team with the following executives taking on these roles and responsibilities:
- Rich Schmidt, President of Lordstown Motors, will continue to oversee all daily operations, including manufacturing and engineering. Schmidt was promoted to President in November having previously served as Lordstown’s chief production officer. He has over 30 years of automotive industry expertise, including experiences at Toyota and Nissan, Hyundai, Volkswagen, J.D. Power, and Tesla Motors.
- Jane Ritson-Parsons, formerly Lordstown Motors' interim chief brand officer, has been appointed chief operating officer. Jane is an experienced senior global executive who most recently served at Hasbro Inc as its group executive for global marketing.
- Carter Driscoll, formerly Lordstown Motors head of investor relations, has been promoted to vice president of corporate development, capital markets, and investor relations.
Remaining in their current roles are: Tom Canepa, general counsel, Shane Brown, chief production officer, Darren Post, vice president of engineering, and John Vo, vice president of propulsion.