COLUMBUS, Ohio -- Ohio has a lot riding on the success of Lordstown Motors.
Last year, Gov. Mike DeWine declared the electric vehicle startup “the future” while visiting the plant, the site of a shuttered General Motors assembly plant near Youngstown, about six months before state officials approved it for $20 million in tax credits.
Secretary of State Frank LaRose last week was the latest in a procession of state officials who, after touring the plant, lauded the company’s promise for the economically beleaguered Youngstown area. JobsOhio, the state’s private economic-development arm, has pledged $4.5 million in grants to the company.
Former President Donald Trump even touted the company’s Endurance electric pickup truck prototype at an event at the White House last year in the heat of the presidential campaign.
But as Lordstown Motors has been gearing up to produce its first vehicles by September, the politicized company has faced mounting questions about its viability. Its stock plunged on March 12 after a prominent investment firm betting against the company’s success released a scathing research report that said the company had “misled investors both on its demand and production capabilities.” That quickly led to an inquiry from the U.S. Securities and Exchange Commission followed by a shareholder lawsuit.
“I would say getting to market with a new product was always going to be a challenge,” said Mike Ramsay, an analyst for Gartner Inc. who studies the auto industry. “It would have been beforehand, and it is even more so now after that report.”
“There were absolutely some very serious questions about the company’s viability long before the Hindenburg Research report,” said Sam Abuelsamid, an electric-vehicle industry analyst with Guidehouse Insights.
Lordstown Motors CEO Steve Burns has tried to brush off the report, saying the company’s heavily promoted pre-order numbers always have been understood to be non-binding. He even quoted Taylor Swift song lyrics while talking to local media during a plant visit earlier this month.
“Whatever anybody thinks of us in the world, the main thing is we are going to be the first electric pickup truck in the U.S., full-size, and that starts in September and really, for a lot of people, it starts in 12 days,” Burns said, according to The Vindicator.
“There is always haters. I quoted Taylor Swift to somebody the other day, ‘Haters gonna hate, hate, hate, hate.’ You’ve got to shake it off,’” he said.
Company officials didn’t return requests for comment for this story.
Elected officials from the Mahoning Valley meanwhile say they’re still expecting Lordstown to help seed a “Voltage Valley” renaissance. The company’s plant is next to a massive, under-construction battery plant that’s a joint venture between General Motors and LG Chem, a Korean conglomerate, that’s looking to hire 1,000 workers.
“How can you not be for hope?” said state Sen. Michael Rulli, a Republican who represents the area.
Seeding the ‘Voltage Valley’
Lordstown Motors was founded in 2019 after General Motors closed the Lordstown plant, which had been operating since the 1960s, and employed about 4,500 people while manufacturing Chevy Cruzes. The closure was the latest development in the well-documented, decades-long decline of manufacturing in the Mahoning Valley.
Amid social media scolding from Trump, GM that year arranged to sell the 6.2 million-square-foot plant to Lordstown Motors, run by Burns, the former co-founder of Workhorse, a Cincinnati-area electric truck startup. Workhorse, which recently lost a bid to provide electric vans to the U.S. Postal Service, retains a stake in Lordstown Motors and licensed its technology that forms the basis of the Endurance truck.
At the time the deal was announced, Burns said the new company would begin production in late 2020. It would make an all-electric pickup truck featuring hub motors, turning each wheel independently instead of using a rotating drive shaft like most cars.
“We’re essentially reinventing electric vehicles,” Burns said, according to the Associated Press. “The wheel is the motor. The only moving parts on this truck are the wheels. It’s a super, simple vehicle.”
Instead of selling its trucks to individual customers, the company planned to sell vehicle fleets to companies, governments and other employers. There is a rising demand for electric work-related vehicles from organizations interested in promoting sustainability and reducing fuel and maintenance costs, said Abuelsamid, the electric-vehicle analyst.
“There are a lot of challenges associated with it, but the potential benefits of fleets going electric is huge and they recognize that, and there’s a lot of interest in going that direction,” he said.
Lordstown Motors moved the goalposts on its production targets, saying it no longer could begin production in 2020 in part due to the coronavirus pandemic.
But the company unveiled the Endurance prototype in June at an event featuring then-Vice President Mike Pence, and as it geared up to lobby the state government for law changes and tax credits, hired Gov. Mike DeWine’s 22-year-old grandson as an in-house legislative lobbyist. And it announced it in August would become a publicly traded company by merging with what’s called a special-purpose acquisition company.
SPACs raise money from investors with no specific business plan, instead promising to buy a company within two years. The process offers companies more flexibility in describing their business to investors, and is faster than the normal process of going public, which takes more than a year. The deal gave the company $675 million to work with.
Shares hit the market on Sept. 23, the same week Lordstown Motors showed off an Endurance prototype on the lawn of the White House at an event with Trump and Sen. Rob Portman. The next day, Trump traveled to Cleveland to debate then-Democratic nominee Joe Biden in the first of three debates of the presidential campaign.
Shares debuted at $24.40 each, but plunged to $13.07 on Nov. 2, the day before the presidential election. But riding hype from investors looking for the next Tesla, Lordstown Motors peaked at $30.75 a share in February.
Lordstown Motors’ stock already was trending down, and was at $17.71 a share when Hindenburg Research released its report.
‘A prototype inferno’
Hindenburg Research, named for the famous blimp disaster, is a short seller, which means it places massive bets that pay off when a company’s stock goes down. It had made a name for itself within the auto investing industry in September 2020, memorably revealing in an online report that a promotional video for Nikola, another electric-vehicle startup, featured a truck that was rolling downhill since it couldn’t move under its own power. That report called Nikola an “intricate fraud” and contributed to the company’s founder’s resignation.
The report on Lordstown Motors alleged that the company’s oft-mentioned 100,000 pre-orders were “largely fictitious,” boosted by marketing companies that were paid to generate non-binding orders, including from some firms that had no obvious way to pay for the trucks. The report quoted anonymous former employees who predicted Lordstown Motors is three to four years away from production, and questioned whether it could manufacture its own battery packs, as the company has said it will do, given that production equipment was months from arriving.
The report also included interviews with city officials in Kent and Ravenna, which had been marked down for pre-orders, as well as the leader of Clean Fuels Ohio, an advocacy group that rounded up 500 pre-orders. Sam Spofforth, Clean Fuels Ohio’s executive director, called the orders “promotional” and nonbinding.
Tyler Fehrman, a lobbyist for Clean Fuels Ohio, said Hindenburg reached out to his organization through an intermediary representing itself as a research firm interested in learning about advances in the electric vehicle industry.
“They also said our conversation will be confidential, and none of that turned out to be true,” he said. “They misrepresented who they were and what they do. And had we known they were essentially a short-seller group trying to discredit Lordstown, we wouldn’t have done the interview.”
Among the company’s touted 100,000 pre-orders were 15 trucks attributed to Ravenna, a Portage County city with a population 11,000. The purchase would cost around $787,000, with each truck retailing at around $52,000.
“We would never commit to buying 15 trucks from anywhere,” Ravenna Mayor Frank Seman told cleveland.com / The Plain Dealer in an interview. “I put the brakes on a snowplow last year because we weren’t sure about our funding because of COVID.”
Kent, also in Portage County, was marked down for 15 pre-orders too, according to the Hindenburg report. City Manager Dave Ruller said in an email the city’s interest was tentative, and much smaller than 15 trucks.
“We have a relatively small fleet but we said we were definitely interested to try out a few of the crewcabs when they’re available, but public procurement would require competitive bidding and we could not commit to purchasing anything,” he said in an email. “We gave them a letter that expressed our interest but was short of committing to purchase anything.”
A splashier, but perhaps less significant, section of the Hindenburg report detailed an early Endurance prototype that burst into flames minutes into its first road test in January in Michigan. The report cited Youngstown media and police records obtained through records requests. The incident gave the Hindenburg report its partial title: “a prototype inferno.”
Burns addressed the fire during a conference call last week with investors, the company’s first as a publicly-traded company.
“We discovered we had a human error and we corrected it,” Burns said. “I don’t want to dismiss it, but in the business of electric vehicles, it does happen. With thermal, you’ve really got to be careful.”
During the call, Burns disclosed the SEC inquiry. He said he wouldn’t field questions on the investigation or the Hindenburg report. So one analyst asked about the amount of road testing Endurance prototypes had gone through. Burns said the number was “probably 20,000 miles.”
“That’s nothing,” Abuelsamid, the electric-vehicle analyst, told cleveland.com / The Plain Dealer. “And for other trucks, if you look at Ford 150s, Chevy Silverados, those things get millions of miles of testing on vehicles that aren’t even radically different from one generation to the next. And we’re talking about a completely new technology.”
“If I were running a business, I would have a really hard time making a case to invest in a big fleet of trucks in a company I didn’t know if they’d be around in a year,” Abuelsamid said.
‘Hatchet job’
U.S. Rep. Tim Ryan, a Democrat who represents the Youngstown area and is considering a U.S. Senate run in 2022, didn’t mince words about the short-seller report. He called it “bull----.”
“I mean it was just to me, it seemed like a hatchet job for people to make money,” he said. “And look, I mean they’re threatening the status quo. And a lot of people are going to bet against them, figuratively and literally. It comes with the territory. You don’t get to the top of the mountain without a bunch of people trying to drag you down.”
The progress of Lordstown Motors, said to have hundreds of workers on its campus, is a closely followed topic in the Mahoning Valley. So is the Hindenburg Research report, according to Rulli, the Republican state senator from the area.
“It’s the number-one topic on talk radio,” Rulli said. “I’ve done four or five talk radio interviews. I’m knee deep in this topic.”
Rulli, who has introduced several bills in Columbus aimed at helping the electric-vehicle industry, said he’s visited the plant recently. He said he’s seen the company’s robotic assembly line putting together a series of 57 “betas,” advanced prototypes that are supposed to be done this month. He said the company is close to conducting crash tests for federal regulators.
Based on what he’s seen, Rulli said he thinks Lordstown Motors will be producing thousands of Endurance trucks sometime this year or perhaps early next year.
“They’re way way way far along,” he said. “Whoever wrote that article has never been in that plant. That is a fact. Anyone who was in that plant would read that article and think it was garbage.”
Rick Stockburger, who runs Brite Energy Innovators, a Warren business incubator that helps support start-up companies in the electric vehicle space, was among those who toured the Lordstown Motors plant last Monday.
He said his organization’s co-working space, which features a hip brewery on the first floor, is regularly home to people from out of town who are waiting for “possible” interviews with Lordstown Motors or Ultium Cells, the company behind the giant car battery factory that’s under construction. He estimated the company has 500 workers.
“I can say with very good firsthand knowledge that these guys are real, and right now they’re employing a lot of talent in the Mahoning Valley that are coming from all over the country to be part of job creation and e-mobility,” he said.
Lordstown Mayor Arno Hill said he took the Hindenburg report “with a grain of salt.”
“I will tell you that some of the sensationalists around me think it’s more than what it is right now. I’m waiting to see further judgment,” Hill said.
Hill said he’s also toured the plant and been impressed with what he’s seen.
“I’m not saying I knew all the orders were not firm orders, they were showing interest, and you read a lot of the media saying they did that to raise funds. They may have. I can’t address that. But right now, I’m taking a ‘wait and see’ attitude, and I’m still very optimistic,” he said.
If Lordstown Motors ends up disappointing the region, there is historical precedent.
In 1987, the first Avanti rolled off the assembly line in Youngstown. The car was a revival of a luxury model manufactured by Studebaker in the 1960s, according to Vince Guerrieri, an Ohio reporter who grew up in the area. The factory closed four years later.
Even the Chevy Cruze, brought to Lordstown under former Gov. Ted Strickland, was a disappointment. But it had been cheered by thousands when the first car rolled off the line, according to a 2010 General Motors press release in which a company official declared the car and Lordstown as marking “the rebirth of the U.S. economy.”
“I think this is, people feel like, cautiously optimistic. Because not to be a therapist, but we’ve been hurt a lot. We’ve been burnt,” Ryan said. “Blimp factories were supposed to come, and Trump was going to open the steel mills again.”
“But I think it’s becoming more and more real every day. And I feel confident about the whole thing, I really do.”
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