Lordstown Motors Corp. has filed Chapter 11 bankruptcy and a lawsuit against Foxconn for its alleged failure to hold up to its commercial and financial commitments to the commercial vehicle fleet startup.

In December, Lordstown announced that its full-size battery-electric pickup truck, the Endurance, had achieved full approval and certification from both the Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), which the OEM called “key conditions to start customer sales.”

Foxconn purchased a Lordstown, Ohio factory from Lordstown Motors earlier in 2022 where the two companies collaborated to build the Endurance. The partnership between the companies began in 2021, according to the lawsuit.

On Tuesday, Lordstown filed suit against Foxconn in U.S. Bankruptcy Court for the District of Delaware for fraudulent conduct that “over time, had the intended effect of destroying the business of an American start-up.” Foxconn is owned by Hon Hai Technology Group, a global technology company headquartered in Taiwan.

“Promising a grandiose collaboration as the premise for stripping away Plaintiffs’ unique and most valuable asset, Defendant Hon Hai Precision Industry Co., Ltd. (“Foxconn”) then embarked on a course of conduct, which is littered with a series of broken promises and repeated refusals to take any action in furtherance of the initially proffered venture, that bears all the hallmarks of bad faith, fraud and misrepresentation,” Lordstown states in the complaint.

In a news release published on Tuesday, Lordstown said it would begin “a strategic restructuring process to maximize the value of its assets: its on-the-road Endurance all-electric (EV) pickup truck and the intellectual property, platform and people that developed it.”

Lordstown describes the Endurance as a springboard for the right OEM or other strategic purchaser into the broader North American EV full-size truck market at a fraction of the cost and time it would take to develop a program from the ground up.

“We remain confident that an orderly, expedited sale process will maximize value for our stakeholders and enable the talent and technology behind the Endurance to find new and supportive ownership,” said CEO and President Edward Hightower. “While in Chapter 11, Lordstown will continue to support our customers. We are grateful for the Lordstown team for their commitment and dedication to our vision and to our customers, suppliers and business partners for believing in the Endurance and in the EV evolution.

“Despite our best efforts and earnest commitment to the partnership, Foxconn willfully and repeatedly failed to execute on the agreed-upon strategy, leaving us with Chapter 11 as the only viable option to maximize the value of Lordstown’s assets for the benefit of our stakeholders. We will vigorously pursue our litigation claims against Foxconn accordingly.”

Among several allegations made in the complaint, Foxconn Ventures, a Foxconn affiliate and another defendant in the suit, is accused of breaching an investment agreement between the two companies with a default notice concerning common stock share value and termination of the agreement. Also, Lordstown says Foxconn hired its manufacturing and operational employees at the Ohio factory as their own.

“Foxconn’s actions led to material damage to the Company as well as its future prospects,” Lordstown said. “In addition, and as a consequence of Foxconn’s material and irreparable harm, Lordstown is commencing a comprehensive marketing and sale process for the Endurance vehicle and related assets.”

The most recent transaction between the companies that fell through, according to the complaint, involved Foxconn Ventures promising to invest $170 million in additional equity capital and work closely with Lordstown on a new vehicle development platform.

Lordstown contends that within one week of the investment agreement execution, Foxconn directed Lordstown to drop the vehicle program.

“Based on Foxconn’s repeated assurances, the Debtors [Lordstown] materially and permanently changed their entire business model to support deep integration with Foxconn and its self-described ‘EV Ecosystem,'” the suit states. “…From the very beginning, Foxconn continually moved the goal posts on development of the Debtors’ next-generation products, constantly shifting the nature of the product, failing to meet funding commitments, and absolutely refusing to engage with the Debtors on any of the various initiatives that Foxconn directed the Debtors to pursue and purported to support.”

Violations laid out in the complaint include common law fraud and tortious interference with a contract against Foxconn as well as several counts of breach of contract against Foxconn Ventures, Foxconn EV Technology, and Foxconn EV System. All of the defendants are accused of equitable subordination.

Lordstown seeks monetary damages in an amount to be determined at trial as well as equitable subordination of any claims filed by and any equity interests in the startup held by the defendants.

Foxconn issued the following statement to Repairer Driven News on Tuesday in response to the bankruptcy and lawsuit filings:

“Hon Hai Technology Group (Foxconn) (‘the Company’) has been holding a positive attitude in conducting constructive negotiations with Lordstown Motors Corp (LMC) and in assisting LMC in finding a solution to its financial difficulties. However, during this time, LMC has
continuously attempted to mislead the public and has been reluctant to perform the investment agreement between the two parties in accordance with its terms.

“Foxconn originally hoped to continue discussions and reach a solution that could satisfy all stakeholders, without resorting to baseless legal actions, but so far the two parties have yet to reach a consensus. Regarding LMC’s litigation announcement today and the false comments and malicious attacks made by LMC in its external statements against Foxconn, the Company reserves the right to pursue legal actions and also suspends subsequent good faith negotiations.”

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Featured image: 2023 Lordstown Endurance (Provided by Lordstown Motors)