LORDSTOWN — Lordstown Motors Corp. expects to halve its first round of production, slated for September, claiming it needs more cash than initially planned.
“The worst, worst case: We’re still making pickup trucks this year,” CEO Steve Burns told investors during a Monday afternoon conference call, following market-close.
It’s the first time executives have admitted the company won’t reach its September mass-production goal — which was disputed in a damaging report published in March by a short-selling market research firm — and that it’s now aiming for “limited” production.
"We're saying if we don't get any funding — which is not in our thought process — if we don't, we might only make half," Burns said.
That's about 1,000 units, he said. If the company lands the funding, he expects the company to hit its initial target of 2,200 units.
First deliveries of the vehicle are expected in the fourth quarter of this year, executives said.
Lordstown Motors stock (NASDAQ: RIDE) dipped from its $9.58 close on Monday to $8.85 in after-hours trading. The stock has fallen more than 45 percent since the short-seller report by Hindenburg Research, which has also been cited in numerous class-action lawsuits filed against the company by investors.
When asked whether Lordstown Motors may consider selling itself to reach its capital goals, Burns said the company is in preliminary talks with "large strategic investors that would, of course, bring something more than funding."
Burns is also positive on the company's chances to land an Advanced Technology Vehicle Manufacturing loan from the U.S. Department of Energy — the same loan that helped Tesla Motors get established, he said.
"Selling [the company] is not anywhere in our vernacular," he said.
Executives also announced a net loss of $125 million in the first quarter of 2021. Whereas Lordstown Motors projected in March to have $200 million on-hand by the end of the year, it’s now projecting to have up to $75 million.
Research and development costs are expected to balloon to as much as $290 million, up about $100 million from the company’s March projections.
Burns said supply chain disruptions caused by the COVID-19 pandemic have forced the company to develop more of the Endurance technology in-house.
The company also expects $15 million more in administrative costs.
“Of course, we don’t like cost overruns. We don’t like supply chains that are bouncing around a bit, but that’s just the nature of this business,” he said. “What we are excited about is strong demand for our product.”
The company in early January announced it had secured 100,000 "pre-orders" for the Endurance, which it later walked back and re-framed as “non-binding letters of intent.” It's since begun converting that interest into vehicle purchasing agreements, most of which include down payments that come due 90 days from the vehicle's manufacturing date.
“We are continuing to work on establishing relationships with fleet management companies that we believe can be the basis for meaningful revenue, once the truck is ready for sale, and we can demonstrate its performance according to our expectations,” Burns said.
The company has landed about 30,000 of those agreements to date, he said.
Last week’s announcement that Ford Motor Co. is electrifying its F-150 truck — and dubbing it Lightning — was a “watershed” moment for the electric vehicle industry — proof that electrification is now mainstream, Burns said Monday. That truck is expected to release in spring 2022 with an about $40,000 price tag, more than $12,000 cheaper than the Endurance’s.
“We’ve taken the attitude that ‘first-to-market’ is everything,” Burns said. “A vehicle this size with this cab, this range, is a very popular item. It’s not just a niche item now, it’s really gone mainstream.
“We think first-mover advantage is really important.”
As during their March reports, executives failed to comment directly on the investigative report published by short-seller firm Hindenburg Research, which alleges the 100,000 pre-orders for the Endurance are largely fictitious and that the company is far behind on its September production goal.
A special committee formed by the company's board of directors to investigate the Hindenburg report is still reviewing the allegations, Burns said Monday. He expects the committee will report before the end of the second quarter.
"Pending the release of those results, neither the special committee nor the company is in a position to comment further on the short-seller report," Burns said.
To date, the company has finished 48 of the 57 "beta" prototype vehicles it planned to build for testing. Those vehicles have passed "two of the most difficult crash tests," the frontal and pole tests. The company expects a five-star crash rating for the Endurance.
“These are critical milestones for us,” Burns said.
Retooling of stamping, assembly, body and paint shops inside the company's 6.2-milion square-foot facility along Hallock Young Road — the former General Motors Lordstown Assembly Complex — is "nearly complete," according to the company's statement.
Installation of the plant's battery pack manufacturing line has begun. Installation of its hub motor line is expected to begin in July.
“We believe once all lines are built and commissioned that we should be the largest manufacturer of hub motors in the world,” said Lordstown Motors President Rich Schmidt.
Here is the text of the Lordstown Motors Corp. statement from Burns issued before the call today:
“We are proud to have built 48 out of 57 of our beta vehicles and are on schedule to conclude the beta program approximately by the end of June. We are incredibly satisfied with beta vehicle test results so far. We recently passed two of the most difficult crash tests and, as such, believe we remain on track to deliver a 5-star rated vehicle. We were also pleased with the mechanical performance of our Endurance at the San Felipe 250 race in Baja, Mexico last month, despite challenges that arose in predicting energy usage in the Mexican desert. We look forward to progressing along our path to commercialization as the beta program concludes this quarter, and conversations with future potential customers are expected to pick up.
"However, we have encountered some challenges, including COVID-related and industry-wide related issues, as we progress toward our start of production deadline. These include significantly higher than expected expenditures for parts/equipment, expedited shipping costs, and expenses associated with third-party engineering resources. We secured a number of critical parts and equipment in advance, so we are still in a position to ramp the Endurance, but we do need additional capital to execute on our plans. We believe we have several opportunities to raise capital in various forms and have begun those discussions.
"We are excited to showcase our plant, vehicle, technologies and strategy at our upcoming Lordstown Week during the week of June 21 as we host investors, customers, partners, suppliers and the media at our Lordstown, Ohio facility.”