EV maker Lordstown Motors begins bankruptcy embroiled in disputes

Nu Ride

28/06/2023 23:26

By Dietrich Knauth
       NEW YORK, June 28 (Reuters) - U.S. electric truck
manufacturer Lordstown Motors  RIDE.O  began its bankruptcy case
embroiled in litigation, laying out disputes with estranged
partner Foxconn, rival electric vehicle manufacturer Karma
Automotive, the U.S. Securities and Exchange Commission and
several investor groups during its first court appearance.
    Lordstown filed for bankruptcy protection in Wilmington, 
Delaware on Tuesday, putting itself up for sale after failing to
resolve a dispute over a promised investment from Taiwan's
Foxconn. 
    Lordstown attorney Thomas Lauria told U.S. Bankruptcy Judge
Mary Walrath in Delaware that the Ohio-based automaker had faced
"enormous" litigation costs before the breakdown of its
relationship with Foxconn ultimately caused the company to file
for bankruptcy. 
    Lordstown has alleged that Foxconn broke its promises to
invest $170 million in Lordstown and collaborate with the
company on vehicle development plans.
    "Without the support negotiated for from Foxconn, financial
and otherwise, the debtor is unable to proceed with its
business," Lauria told Walrath. 
    Foxconn attorney Matthew Murphy said that Lordstown's
allegations were "baseless" and that his client should not be
blamed for Lordstown's operational failures. Lordstown had
struggled with higher-than-expected costs, production
shortfalls, and litigation risk well before Foxconn agreed to
purchase Lordstown's Ohio manufacturing vehicle center in 2021,
Murphy said.
    While the breakdown of the Foxconn relationship was the
primary reason for Lordstown’s bankruptcy, Lauria said that the
company also faced investor lawsuits in Delaware and Ohio, a
U.S. Securities & Exchange investigation, and a 2020 lawsuit
filed by rival electric vehicle maker Karma. 
    Karma attorney James Sowka said that his client is
Lordstown's largest creditor, based on a $900 million lawsuit
that had been scheduled to go to trial in California federal
court in September. Karma has accused Lordstown of engaging in
“corporate espionage” by poaching employees and stealing
technology related to Karma’s proprietary vehicle infotainment
system. 
    Several investor groups have also brought claims against
Lordstown, alleging that the electric truck startup misled
consumers and investors. The SEC is investigating those claims
as well, and is engaged in confidential settlement talks with
the regulator, Lauria said. 
    The automaker's main product is the Endurance electric
pickup truck, which is built at a former General Motors
small-car factory in Lordstown for commercial customers such as
local governments. 

 (Reporting by Dietrich Knauth; Editing by Stephen Coates)
 ((Dietrich.Knauth@thomsonreuters.com;))