President Donald Trump announced on Twitter on Wednesday that tiny electric truck developer Workhorse Group will buy the giant General Motors Lordstown Assembly plant in Ohio.
GM confirmed that discussions are taking place, but the transaction is far from complete.
The automaker, which earned Trump’s ire when it announced plans to close the factory in November, said it is in discussions with Workhorse and an affiliated, newly formed entity to sell the company’s Lordstown Complex. GM built the Chevrolet Cruze at the factory but plans to stop selling the car. Production ended in March.
Upon final agreement, the entity, led by Workhorse founder Steve Burns, would acquire the facility. Workhorse would hold a minority interest in the new entity.
The companies provided no information about where the capital would come from to purchase and operate the factory. Workhorse is struggling financially and has never earned a profit. The company, based in Cincinnati, has just 125 employees.
Tesla Inc. paid $42 million to purchase a shuttered Toyota factory in Fremont, Calif., in 2010. The price of aging auto plants can vary wildly, though. Electric pickup truck developer Rivian paid just $16 million in 2017 for a 2.6-million-square-foot former Mitsubishi plant in Illinois.
In his tweet, Trump said: “GREAT NEWS FOR OHIO! Just spoke to Mary Barra, CEO of General Motors, who informed me that, subject to a UAW agreement etc., GM will be selling their beautiful Lordstown Plant to Workhorse, where they plan to build Electric Trucks.”
In a joint statement, GM and Workhorse said the move could bring significant production and electric vehicle assembly jobs to the plant.
“This potential agreement creates a positive outcome for all parties involved and will help solidify the leadership of Workhorse’s role in the EV community,” said Duane Hughes, chief executive of Workhorse.
If the deal is completed, Workhorse would restart production at the plant with a “commercial electric pickup, blending Workhorse’s technology with Lordstown’s manufacturing expertise,” Burns said.
Workhorse has tried to bring its W-15 electric pickup to production, but its efforts have been delayed by the company’s financial setbacks. The truck is powered by lithium-ion batteries mounted to the floor of the truck, creating a low center of gravity. The batteries power dual electric motors that give the W-15 about 450 horsepower and 80 miles of all-electric range.
Workhorse accepted thousands of deposits for consumer and commercial versions of the W-15 pickup truck. The company revealed a slight redesign in 2018 that featured a modified chassis and new bumpers. There have been few updates since the 2018 redesign.
Trump said the deal requires United Auto Worker approval. GM said it is discussing the transaction with the union.
“We remain committed to growing manufacturing jobs in the U.S., including in Ohio, and we see this development as a potential win-win for everyone,” said Mary Barra, GM’s chairwoman and chief executive. “Workhorse has innovative technologies that could help preserve Lordstown’s more than 50-year tradition of vehicle assembly work.”
Upon final agreement the parties could begin immediately to prepare the facility for new production, the automaker said. GM also announced it is creating 450 new manufacturing jobs in Ohio at its plants in Toledo, Moraine and Parma.
Shares in Workhorse closed at $2.65 Wednesday, surging 215 percent from its Monday close of 84 cents. Trading in the shares was halted briefly following the president’s tweet. The company website also crashed.
Workhorse has been struggling financially for several years. It said on an earnings call Monday it expects to begin production on its lightweight NGEN1000 delivery truck by the fourth quarter. Workhorse has a plant in Indiana that it purchased from Navistar International Corp.
Workhorse reported first-quarter income of $364,000, down from $560,000 in the first quarter of 2018. Research and development spending dropped 42 percent to $1.4 million from $2.3 million because Workhorse spent less on its prototype for the U.S. Postal Service Next Generation Delivery Vehicle and its SureFly personal helicopter.
The Surefly business is up for sale. Workhorse plans to use money from that to focus on the electric truck business, Hughes has said. It has a pending order from United Parcel Service for 950 trucks once UPS finishes testing an initial 50-truck order.
POSTAL SERVICE CONTRACT
Trump’s tweet led to speculation that his administration might press the U.S. Postal Service to choose the Workhorse/VT Hackney team as the winner of the next-generation delivery vehicle contract. It is one of five teams competing for a contract expected to be worth $6.3 billion.
The Postal Service in March finished testing prototypes of trucks for the mail truck program. But the closely followed competition’s winner has not been announced. The agency expects to issue a request for production by early fall.
Investors are asking whether the Trump announcement could be an indicator that Workhorse is likely to be a vendor for the Postal Service program, said Jeffrey Osborne, an analyst with Cowen Co., said in a note to investors.
“Our model always had no assumption of success with the U.S. Postal Service and continues to be the case now,” Osborne wrote.
Osborne said he does not know where Burns or Workhorse would get the money to operate Lordstown, but its skilled workforce “could set Workhorse apart from all of the new entrants in the Class 4-6 electric vehicle market.”
The W-15 pickup program also could be accelerated if a Lordstown deal is reached, he said.
Another analyst, Antti Lindstrom of IHS Markit, said Burns’ declaring the W-15 as the first product for Workhorse to build at Lordstown “is a head scratcher.”
“My first instinct is they would be looking for volume product that they already have lined up for the market,” Lindstrom said.
Other analysts also said Workhorse must be thinking it has some need for a large factory.
“For a small company like Workhorse to get a plant of this scale it must have ambition for big things. For GM, it lets them declare a sort of political victory even though the outcome for the workers is still unclear,” said Michael Ramsey, the automotive research director at Gartner Inc.
The move also represents a vote of confidence in electric vehicles.
“It’s worth noting that the president appears excited about building electric trucks in the United States,” said John Boesel, president of the clean transportation technologies coalition Calstart.
“There is a tremendous global opportunity for the companies that lead in electric powertrain and vehicle technology. It would be very beneficial if the administration would support this market by backing the legislation pending in the U.S. Senate that would address the EV tax credit issue, and reward the firms that are actually building electric vehicles in the United States,” Boesel said.
Workhorse is running operations on a credit line from Marathon Asset Management, a hedge fund that loaned Workhorse $35 million last year. Workhorse recently extended until May 31 the terms of the agreement. It used $10 million to get out of earlier loan agreements. The remaining $25 million will be used to buy parts to make trucks for UPS and other customers, Hughes told Trucks.com.
Workhorse also agreed to sell current shareholders 3,957,432 shares of common stock at 74 cents a share. That raised $2.9 million for working capital and general corporate purposes.
Automakers are showing increasing interest in electric pickup trucks.
Ford invested $500 million in electric truck and SUV developer Rivian last month and said it will jointly develop a vehicle with the company. Ford also plans an electric version of its F-150.
Tesla Chief Executive Elon Musk has said a pickup truck is on his short list of future vehicles.
GM reportedly talked to Rivian about an investment but then pulled out. But Barra said in April that the automaker planned to design an electric pickup truck.