U.S.-based Lordstown Motors Corp., a provider of electric light duty trucks focused on the commercial fleet market, and global technology company Hon Hai Technology Group (Foxconn), have reached an agreement in principle to work jointly on Lordstown Motors’ electric vehicle (EV) programs.
Beyond certain customary provisions, the Agreement is non-binding and subject to the negotiation and execution of definitive agreements. The parties have also entered into a subscription agreement, under which Foxconn will purchase approximately US$50 million of Lordstown Motors’ common stock directly from Lordstown Motors at a price of US$6.8983 per share (the average daily volume adjusted price over the past 15 trading days prior to the execution of the Agreement in Principle). Foxconn has agreed to retain these shares for a specified period.
EV production is set at Lordstown Motors’ 6.2 million square foot production and assembly plant in Lordstown, Ohio.
Leverage on Foxconn’s Technology
The agreement between both companies would allow Lordstown Motors to leverage the technology and manufacturing expertise of Foxconn. The goal of the partnership is to present both Lordstown Motors and Foxconn with increased market opportunities in scalable electric vehicle production in North America.
Details of Agreement
Lordstown Motors and Foxconn will use commercially reasonable best efforts to negotiate a definitive agreement, pursuant to which, Foxconn would purchase the Lordstown facility for US$230 million. However, excluded are Lordstown Motors’ hub motor assembly line, battery module and packing line assets, certain intellectual property rights and other excluded assets.
Both entities would also negotiate a contract manufacturing agreement, which would be a condition to closing of the facility purchase. In the agreement, Foxconn would manufacture Lordstown Motors’ Endurance full-size pickup truck at its Lordstown facility. Lordstown Motors would also agree to provide Foxconn with certain rights with respect to future vehicle programs.
Concurrently with the closing under the definitive agreements, Lordstown Motors would issue warrants to Foxconn that are exercisable until the third anniversary of the closing for 1.7 million shares of common stock at an exercise price of US$10.50 per share.
The parties have agreed to explore licensing arrangements for additional pickup truck programs.
Following the closing, Lordstown Motors would enter into a long-term lease for a portion of the existing facility for its Ohio-based employees. Meanwhile, Foxconn would offer employment to be agreed upon Lordstown operational and manufacturing employees.
Step Towards EV Production
Young Liu, Chairman of Hon Hai Technology Group, commented “We have high expectations through this partnership that we will be able to successfully integrate our resources with Lordstown Motors. In addition to achieving the goal of moving ahead our timeline to establish electric vehicle production capacity in North America, it also reflects Foxconn’s flexibility in providing design and production services for different EV customers. This mutually beneficial relationship is an important milestone for Foxconn’s EV business and our transformation strategy. I believe that the innovative design of the Endurance pickup truck, with its unique hub motors, delivers an advantageous user experience and has manufacturing efficiencies. It will undoubtedly thrive under our partnership and business model.”
In addition, this facility would serve as a speed-to-market asset that would also support Foxconn’s partner and customer, Fisker Inc.
Daniel Ninivaggi, Chief Executive Officer of Lordstown Motors Corp., stated “We are excited about the prospect of joining forces with a world-class smart manufacturer like Foxconn. We believe the relationship would provide operational, technology and supply chain benefits to our company and accelerate overall scaled vehicle production and increase employment in the Lordstown facility. The partnership would allow Lordstown Motors to take advantage of Foxconn’s extensive manufacturing expertise and cost-efficient supply chain, while freeing up Lordstown Motors to focus on bringing the Endurance to market, developing service offerings for our fleet customers and designing and developing innovative new vehicle models.”