Electric truck-maker Lordstown Motors is seeing its troubles go from bad to worse, with the exit of its CEO and CFO today sending its stock plummeting. Chief executive officer Steve Burns, and chief financial officer Julio Rodriguez, both resigned, with Burns also stepping down from his position on the company’s Board of Directors.
Lead Independent Director Angela Strand is now Executive Chairwoman of Lordstown, and will be at the helm until a new CEO can be found. Becky Roof, “a certified public accountant and seasoned financial executive,” will serve as Interim Chief Financial Officer.
Lordstown portrays the change as a positive one, as the company “begins to transition from the R&D and early production phase to the commercial production phase of its business.” Nonetheless, the reality is that it’s a tough period for the automaker startup. Only last week, Lordstown admitted that there was “substantial doubt” about whether it could even continue to operate, or indeed build a production electric truck.
Signs that an impending collapse was possible began in March 2021, after a report published by Hindenburg Research. An admitted short-seller of Lordstown Motors stock, it alleged that the company had misled investors around just how quickly production of the Endurance EV pickup could begin. Hindenburg also claimed that Lordstown had upsold the technology in the electric truck, and exaggerating just how advanced its systems were.
In a response today a Special Committee – engaged by Lordstown though apparently operated independently by law firm Sullivan & Cromwell LLP – pushed back at the allegations. It countered that, though delays to the start of production could still occur, Lordstown’s current September 2021 start-date “remains achievable with the expectation of delivery to customers in the first quarter of 2022.”
It also challenged suggestions that Lordstown’s hub motors – a key part of the Endurance truck, which package the drivetrain component into the wheels of the EV rather than on the axle – aren’t viable. Although it concedes weight and the maturity of the motor technology are both issues, the Special Committee also denies they’re deal-breakers.
“The Special 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,” it argues. “The Endurance was engineered to address the unsprung vehicle mass attributable to in-wheel motors, including through tuning of the suspension, reinforcing the vehicle structure, and utilizing a heavier truck chassis. These measures are expected to alleviate any ride or durability issues that might otherwise arise.”
As for claims that Lordstown Motors had claimed more preorders for Endurance than actually existed, there things get murky. “Lordstown Motors has obtained tens of thousands of pre-orders from fleets, fleet management companies, or other end users. If converted to orders, this demand will comprise substantially all of the Company’s expected production volume through 2022,” the Special Committee points out. However, it adds that “Lordstown Motors made periodic disclosures regarding pre-orders which were, in certain respects, inaccurate.”
That included suggestions that commercial fleets were the primary source of pre-orders, which in fact was untrue, and that some of those with pre-orders either apparently lack the resources to follow through with purchases, or are too vague about that being likely to happen.
“One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks,” the Special Committee found. “Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed.”
Lordstown Motors shares are down more than 17-percent today, at time of publication, though still not quite as low as they had reached in mid-May 2021.