Lordstown Motors has no 'viable' business to sell, Foxconn states in court filing
What once seemed like a promising partnership between a local electric vehicle startup and a Taiwanese tech giant has turned into a legal war of words.
Hon Hai, the parent company of Foxconn, is asking a bankruptcy court judge to either dismiss Lordstown Motor's bankruptcy or liquidate the company’s assets instead of allowing it to reorganize.
Lordstown Motors and Foxconn announced last year that the electric truck manufacturer and the Taiwanese electronic manufacturer completed an Asset Purchase Agreement to sell the Lordstown facility to Foxconn as well as enter a joint venture for product development with Foxconn affiliates.
Under the agreement, LMC received $230 million as well as the reimbursement of $27 million in operating and expansion costs.
It was just last month that Lordstown Motors filed for Chapter 11 bankruptcy, claiming Foxconn reneged on a financing deal, leaving it without the money needed to produce its all-electric powered Endurance pickup trucks.
Lordstown Motors also sued Hon Hai alleging “Foxconn's fraud and willful and consistent failure to live up to its commercial and financial commitments to the Company.”
Responding last week to the bankruptcy, attorneys for Hon Hai expressed doubt about Lordstown Motors' reasons for filing.
“…they presented a story that depicts Lordstown as the innocent victim of a fraud perpetrated by Foxconn. This is a fictitious narrative created by Lordstown solely for the purpose of obtaining a tactical litigation advantage. The facts will show that Foxconn acted in good faith, complied with its contractual obligations, and did everything it reasonably could to support Lordstown,” Foxconn stated in its motion, further asserting that there is an absence of “a reasonable likelihood of rehabilitation” for Lordstown Motors.
Foxconn alleges that Lordstown Motors waited to file bankruptcy until the eve of a trade secrets trial against a competitor in which it faced a potential judgment of more than $900 million and faced securities lawsuits alleging fraudulent statements and disclosures of its former founders.
“Lordstown did not seek Chapter 11 protection when it determined that it was fundamentally incapable of building and selling its sole product for a profit, and thus had to wind down operations,” Foxconn stated in its motion.
Claiming that Lordstown Motors has no viable business remaining to sell, Foxconn says LMC plans to stop operations and sell nearly all its assets.
The bankruptcy case comes up again in court on Thursday when a final hearing is scheduled on interim orders.
