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Electric vehicle launch remains on target

LORDSTOWN — Lordstown Motors Corp. remains on target to launch production of its first vehicle later this year, but is getting there slowly as it contends with parts availability, quantity and pedigree issues in its supply chain.

“With approximately 1,500 parts in an Endurance, it is important to complete each build with the proper pedigree of parts,” Edward Hightower, Lordstown Motors’ president / CEO, said. “Completing the build of a vehicle and then having to retrofit it or add a missing (part) or replace an incorrect part can have a negative impact on quality.”

Hightower said Thursday after the company posted its second-quarter financial results it is limiting the first batch of the battery-powered pickup to about 500. Commercial production will start later this year, but with a slow ramp-up to mitigate the parts-related challenges, he said.

“We expect production to accelerate in Q4 with the majority of the initial 500 vehicles built in first part of 2023,” Hightower said.

Previously, the company reported it planned to make 500 trucks by the end of 2022 and 2,500 more in 2023.

Lordstown Motors also continues to deal with the production cost of the pickup outweighing its selling price, but Hightower said there is a plan to drop the cost with spending on hard-tooling, building scale with suppliers and other value-driven methods.

“However, we have held off on the larger hard-tooling and other investments in order to manage our balance sheet and limit the amount of new capital needed to achieve our initial production targets,” Hightower said.

Yet, the company posted its first-ever quarterly profit, driven by the sale of its auto-manufacturing plant to electronics and technology giant Foxconn.

The company reported operating profit of $61.3 million, which includes a gain of $101.7 million from the sale of the Lordstown plant and $18.4 million Foxconn reimbursed Lordstown Motors in certain operating expenses connected to the transaction that closed in May.

Lordstown Motors ended the three-month April-to-June period with $236 million in cash, which is about $32 million more than the end of the first quarter, and it slashed operating expenses to $58.8 million from $88 million in the quarter.

Adam Kroll, chief financial officer, said the future focus is on prudent cash management. The company’s operating loss and capital expenditures in the second half are expected between $140 million and $150 million.

“As we are modulating our production schedule and exercising disciplined cost management, our capital needs this year will lessen significantly from the $150 million we stated previously,” Kroll said. “I anticipate our cash needs for the remainder of 2022 will be closer to $50 (million) to $75 million.

“However, for us to execute our plan to deliver 500 units of the Endurance, we will need to raise substantially more capital to cover operating costs,” Kroll said.

The purchase agreement for the plant was for $230 million and Foxconn reimbursed Lordstown Motors about $57.5 million. The deal also called for Foxconn to be the contract manufacturer of the Endurance and a joint venture agreement to co-develop future electric vehicles and commit $100 million to the new company.

Hightower, also CEO of the joint venture, MIH EV Design LLC, said the first vehicle program under the new company could be announced in coming months.

Lordstown Motors Executive Chairman Daniel Ninivaggi said the company also is exploring partnerships with other original equipment manufacturers (OEMs) “to jointly scale the Endurance.

“As one of the very few full-size all-electric pickup trucks that will be in the market, the Endurance offers other OEMs the opportunity to enter the market quickly and at a relatively low cost since our development work is substantially complete,” he said.

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