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'A NEW DAY' | After weeks of dire news, what does Lordstown Motors do? Executives meet the press

15,000 units of its all-electric Endurance pickup truck are expected to roll off the line in the next year, reporters were told Tuesday. As a result, RIDE jumped 12 percent, closing at $10.31, up from its Monday closing price of $9.26.

LORDSTOWNLordstown Motors executives rallied investors Tuesday after confirming the company has “firm orders” for its all-electric pickup truck through next year.

About 15,000 units of its all-electric Endurance pickup truck are expected to roll off the line in the next year, executives told reporters Tuesday. But they'll also be priced a bit higher than expected, due to rising supply costs caused by the COVID-19 pandemic, they said.

Immediately following a midday virtual panel with its executives, Lordstown Motors stock (NASDAQ: RIDE) jumped 12 percent. The stock closed Tuesday at $10.31, up from its Monday closing price of $9.26.

But the stock has appeared to be in a death spiral since its near-record high of $30.75 per share in mid-February. Share prices have fallen 30 percent since a mid-March report alleging the company misled investors about pre-order demand for the Endurance. On Monday, the company said that report was “in significant respects, false and misleading,” but that it did identify accuracy “issues” with statements made about the company’s pre-orders.

In May, the company announced it would halve its initial late-September production run to 1,000 units. Just a week ago, the company announced it doesn’t have enough funding to see the end of next year. On Monday, the company also announced the resignations of founding CEO Steve Burns and CFO Julio Rodriguez.

Tuesday’s hourlong panel with the Automotive Press Association and moderated by Bloomberg's Detroit Bureau Chief David Welch — joined by the company’s interim head Angela Strand, President Rich Schmidt and Vice President of Engineering Darren Post — was a chance to reset the stage.

Schmidt said Burns’ resignation was partially due to an internal investigation into whether the former CEO misled investors on claims the company had “very serious orders” for the vehicle — which were later found to be non-binding, attracting investor lawsuits and a federal securities investigation — but also because it was “the right time” for the company to move from its research and development phase toward production of the Endurance.

Schmidt said Tuesday he was unable to comment on the federal investigation, which is examining the preorder issue as well as the company’s October merger with a special purpose acquisition company. Regulators have already issued two subpoenas.

"It's a new day in Lordstown," said Strand, the company’s new executive chairwoman, who delivered brief remarks in place of Burns on the Tuesday panel.

"I am very comfortable with change and understand the necessity of change, to grow and mature an organization” — but what's not changing is the company's expectation to begin limited production in just three months, Strand said.

"There are no disruptions and there will be no disruptions to our day-to-day operations," she said.

So, is production on track?

The company last week announced a cash crunch may keep it from bringing the Endurance to full-scale production next year — part of a “going concern” alert to investors that the company may not be able to meet its future financial obligations.

The company is still “actively raising money,” Schmidt said Tuesday. He suggested General Motors might be the first money pitch, though it’s “not our only avenue.”

GM spokesperson Jim Cain on Tuesday told the Detroit News the automaker would at least hear them out.

“We are comfortable with our current relationship with LMC and we don't envision changing it, but we are willing to listen to proposals,” he said.

Schmidt didn't specify how much funding the company is seeking. That will depend on “how fast we want to grow.” The company, which currently has more than $400 million in the bank, expects to run out of money in May 2022, Schmidt said.

“We’re trying to have enough reserve in the tank so we can get to the higher volume, to reduce material costs,” he said.

Supply chain disruptions and the rising price of materials, caused by the COVID-19 pandemic, have raised the baseline price of the Endurance from $52,500 to $55,000, executives announced. Once production scales up, they'll start seeing savings on the supply side, they said.

Schmidt said if the electric truck maker is forced to produce at a smaller volume, “it's not going to be profitable enough to sustain." 

The company’s 6.2-million-square-foot Hallock Young Road plant, which it took over from GM in November 2019, is currently equipped to build 20,000 units a year, Schmidt said. Separate manufacturing lines for the Endurance’s hub motors and battery packs were pared down but are able to supply 30,000 vehicles a year, he said.

Burns has said the company has converted some of that prior interest in the truck into new agreements accounting for 30,000 units — enough to fill Lordstown Motors’ production schedule through next year, the company said.

“Those are firm orders,” Schmidt reiterated Tuesday.

Lordstown Motors is not currently focusing on its second product — an electric RV developed in partnership with Camping World, which it announced earlier this year — and is instead focusing solely on getting the Endurance to production, Schmidt said.

What’s happening now at the plant?

Retooling of the 55-year-old plant is about 85 percent complete, Schmidt said Tuesday.

By taking over the “still-warm” former GM Lordstown Assembly Complex, including its workable paint shop and body shop, the company saved hundreds of millions of dollars, Schmidt said. The plant’s also still using GM’s stamping presses, he said.

On the new funding angle, the company expects to court new investors during “Lordstown Week,” the plant’s weeklong open house which starts Monday.

“Next week, many of you will see and experience firsthand the performance of our prototype vehicles and see the vast amount of progress we’ve made,” Strand said Tuesday.

Schmidt, who was previously Tesla Motors’ director of manufacturing, said he thinks Lordstown Motors has a similar investment upside to that electric vehicle leader.

"I think there's a great return-on-investment there. That's why I joined the team — it fits a segment that's not been fit," he said.

"Three months from now, it's going to be a solid deal. Once the trucks start coming off the line, it makes it a very robust investment."

The company is still working through rigorous testing requirements for Endurance components and has met standards for front, side and rear crash testing, said Post, the company’s engineering VP. There is still certification testing to be done in the fourth quarter of this year, before the first units are delivered to customers in the first quarter of next year.

“We feel proud to be a startup and right off the chute, we’ve been able to achieve and meet the requirements,” Post said.

When asked about the risk in selling a vehicle before it’s safety-certified, Post said “we don’t see that major catastrophic risk at this time.” Had the beta vehicles failed during testing, it would be cause for concern.

“We’re just going to be improving upon our good safety performance,” Post said.

An earlier Endurance prototype that reportedly caught fire mere minutes into a January test drive was declared “an isolated event rather than one reflecting a systemic problem” by a special committee formed by the company board to investigate a March report about the company’s prospects.

The committee, which was assisted by two independent firms, concluded the battery pack in the vehicle “had been manually reworked” for the prototype, and that the driver had accelerated beyond the test parameters, causing an electrical overload that ignited the battery.

“The production process now in place and the automation of battery pack assembly are intended to ensure that this type of issue does not recur,” reads the company’s response, issued Monday.

What is so special about the Endurance?

Post said Tuesday the truck’s design is simple — its only moving parts are the four hub motors, one attached inside each wheel, over the braking system. There aren’t any drive shafts or hub shafts on the Endurance — all the propulsion comes from the hub motors, he said.

Though short-seller firm Hindenburg Research cast doubt on the viability of the motors’ design, Post said Tuesday they are integral. They’re also “tough.”

The hub motors can endure 100g of force every 20 seconds. That’s about as much force as in a major car crash, and enough to more than likely break the wheel first, he said. Normal road forces tend to be about half that much force, he said. The company hasn’t broken any hub motors during testing, he added.

Burns has said the vehicle could be expected to keep driving after one of the motors is disabled, as the others will compensate.

Post said Tuesday the hub motors will have “millions” of miles of durability testing by the end of the year and validation testing next year.

When asked whether the high voltage wiring powering the hub motors could flex and break when turning the wheels, Post said “the flexing doesn't happen in that area — it happens somewhere else away from that rotating motor and any potential things that could happen coming up from the road.”

The few moving parts inside the Endurance, which is being marketed toward fleet buyers, also suggests it would be cheaper to maintain over time.

Schmidt noted Tuesday the Endurance’s new base price of $55,000 is higher than its closest electrified competitor. The Ford F-150 Lightning, announced in May, starts at just under $40,000 — but that’s for the base model, which gets up to 230 miles on a single charge, compared to the Endurance's 250 miles. The Lightning has an extended battery pack option, which can get up to 300 miles, according to Ford.

The pricier Lightning model, which executives said is closer in performance to the Endurance, is priced at just under $53,000.

“We’ve engineered this vehicle for work trucks,” Schmidt said, adding that it’s wide enough to accommodate large materials and tools.

Is the company making jobs?

The company currently employs nearly 600 workers — most of whom are at the Lordstown plant, while others are at outposts in Michigan and California — and the biggest wave of new hires is expected in the next three months, Schmidt said.

The team in place now is “solid,” Schmidt said. Many managers like Post have decades of experience under their belts in auto manufacturing — as well as some in aerospace and other related industries.

“We have a very good balance of the original GM team at the factory here, too, that [are] in key management positions,” Schmidt said. “I feel very solid with the team that I have and being able to achieve those targets.”

When asked whether Lordstown Motors would consider allowing workers to organize and be represented by a union — as the United Auto Workers Local 1112 for decades represented former GM Lordstown workers — Schmidt said “we basically don’t really have a stance.”

“This … is not a management decision. This will become more an employee decision.”

Justin Dennis

About the Author: Justin Dennis

Justin Dennis has been on the beat since 2011, covering crime, courts and public education. Dennis grew up in Poland and Salem and studied journalism and communications at Cleveland State University and University of Pittsburgh.
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