How to Lose $5.5 Billion in 2 years - YouTube

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is sponsored by Discovery+.

- It's September of 2020,

Donald Trump is still the 45th President

and tweeting a lot.

We are six months into a global pandemic.

A lot of people are still struggling.

But not everyone.

In September of 2020, Lordstown Motors,

an electric truck startup company based out of Ohio,

had a peak market value of $6 billion.

As of March, 2022, Lordstown Motor's market value

is now worth $412 million.

So how in the hell do you lose 5.5 billion

in this quick of a time span?

And who exactly is behind Lordstown?

And what does GM have to do with them?

Today on "Wheelhouse,"

let's talk about the ill-fated Lordstown Motors EV startup,

and how it all came crashing down in just 700 days.

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- Let's start from the top.

Our first act of this story starts in a little town

called Lordstown, Ohio.

Located in Mahoning Valley,

Lordstown sits just an hour away

from Cleveland and Pittsburgh,

with a current population of about 3,200 people.

Despite its small size, the Lordstown assembly plant

was operated by General Motors from 1966 to 2019.

The Lordstown assembly plant

manufactured many GM cars over the years.

But one of the more recent popular models

to come out of this factory was the Chevy Cruze.

GM made the Chevy Cruze in Lordstown for about eight years,

from 2011 to 2019.

Chevy Cruze, not to be confused with Penelope Cruz,

first made it to the U.S. market in 2010

to replace the discontinued Cobalt.

The Cruze is marketed as a solid compact

four door passenger sedan.

And for five years straight,

the Cruze sold 200,000 plus units per year.

This was great, but like most good things,

the reign of the Cruze had to come to an end,

and the money it was making for GM plummeted.

GM discontinued the Cruze in 2019,

claiming they wanted to focus exclusively on the Malibu

and spend more time building electric vehicles

such as the Bolt EV.

This end of an era did not pan out well

for the Lordstown complex,

as this meant GM had to close the plant.

This was not only gonna be damaging

for the employees of the factory,

but the economy for the surrounding area.

But not to worry, because Lordstown, Ohio

had a savior on the horizon, and his name was Steve.

Stephen P. Burns, AKA Steve Burns,

was CEO of Workhorse and eventually Lordstown Motors.

But more on him a little later.

Workhorse, formally known as AMP Electric Vehicles,

needed a place to manufacture the W-15 EV pickup truck.

In 2017, the W-15 was teased as a concept.

It was a range extended electric pickup truck.

The Workhorse W-15 was set to sell for $52,000

and have a 60 kilowatt hour battery pack,

promising a range of 320 miles.

In 2018, Steve Burns founded Lordstown Motors.

And in early 2020, Workhorse confirmed

they had transferred the W-15 in a licensing agreement.

The W-15 was now the Lordstown Motors Endurance.

Meanwhile, with the discontinuation of the Chevy Cruze

at the Lordstown assembly plant,

GM needs to keep this factory open to save face,

and essentially make themselves look good.

So the GM plant in Lordstown, Ohio

becomes the Lordstown Motors plant in 2019.

In this transaction, GM gives Lordstown Motors

$75 million total, and then received 7.5 million shares

in the startup.

It stated that as part of the initial

public offering process,

GM contributed $25 million in cash and $50 million in kind.

This $50 million figure was attributed

to the handover of the plant, its equipment,

and GM's help with operational costs.

$75 million to the typical human is a lot of money,

and 7.5 million shares in the stock of a company

sounds like a lot to the average Joe.

But this was technically less than 5% of company ownership.

This help GM extended to Lordstown Motors

was hardly any skin off their own back,

and GM received great press for investing in a startup

rather than just letting the plant die.

Plus this avoidance of a shutdown

was keeping the economy in Mahoning Valley going.

All in all, this was a great transaction

for Lordstown Motors because they basically

got this plant for free.

Let's quickly jump forward to late 2021.

GM turned around and sold

all their shares in Lordstown Motors

when the stock took its final, fatal plummet.

GM did this quietly, despite the small loss they took

from selling all their shares.

Jim Cain, the executive director

of finance, sales and corporate development communications

at GM stated, quote,

"We invested in Lordstown Motors

to help them complete the purchase

of our former assembly plant

and return it to vehicle production.

We sold our small stake in the company

in the fourth quarter of 2021."

And then basically nothing else was mentioned to the media.

A complete mic drop moment.

So back to the question of why?

Why did GM do this?

And why did Lordstown Motors stock plummet?

Well, remember Steve Burns, old Stevie, Stevie CEO?

Let's look into this guy.

Steve Burns, not the actor,

was the original CEO and founder of Lordstown Motors.

Before he landed at Lordstown,

he had a rather lengthy history

of founding and co-founding startup tech companies

and marketing companies

and then turning them around and selling them.

The first company of this kind he founded

was called Over the Link/ADLINK,

and he sold it to Gamut Co in 1994.

He later founded PocketScript

and sold it to Zix Corp in 2002.

And then in 2007, he co-founded Amp Electric Vehicles.

Amp was a developmental stage

vehicle electrification company,

meaning they made cars electric

that weren't previously electric.

They first experimented with adding battery electric power

to two-seat roadsters.

Over the next eight years,

Amp would go on to produce the 100% electric Amp Sky,

which took the popular Saturn Sky

and turned it into an all-electric model.

Amp electric vehicles had a promising run,

but in the March of 2015,

Amp changed its name to Workhorse Group.

Steve Burns then became CEO of Workhorse.

It was a company specializing

in making electric delivery trucks.

It was during this time at Workhorse

that the previously mentioned W-15 was created

as a prototype for Burns' vision of an all-electric pickup.

In 2019, Steve Burns stepped down as CEO at Workhorse

and into the CEO position at Lordstown Motors

as the W-15 model from Workhorse

quickly became the Endurance.

GM hands over the 785 acre,

6.2 million square foot Lordstown assembly plant

where Lordstown Motors plans to build

the Lordstown Endurance.

The Endurance was believed to be

the world's first full size, all electric pickup truck

designed to serve the commercial fleet market.

And this would transform the Mahoning Valley

into the epicenter of electric vehicle manufacturing,

according to the vision of good old Steve.

We'll dive into the details of the Endurance a little later.

First, we need to talk about SPAC mergers, okay?

Steve has his new company and his new manufacturing plant.

And about a year in, Lordstown Motors merges

with an SPAC in 2020.

SPAC stands for special purpose acquisition company.

And they are defined as a company whose main purpose

is to raise money from other investors,

with the intention merging with

an existing company or startup.

They are a lot of times referred to

as blank check companies, okay?

The public SPAC deal was huge,

and overnight Lordstown Motors became publicly traded stock

which meant money.

Lordstown Motors value soared to $4 billion.

They saw even more growth in their stock

when Steve announced that they secured

over 100,00 pre-orders for the Endurance in early 2021.

This was a huge deal for a new startup.

100,000 pre-orders, imagine that.

That's incredible.

In early 2020, Lordstown Motors released a series

of YouTube videos with the intent to create traction

around the new Endurance EV prototype

and give a behind the scenes look

into the new and improved Lordstown assembly plan

under the eyes of the startup.

All these videos were narrated

by none other than Steve Burns.

In the main video that was released,

Steve says, quote.

- The mission of Lordstown Motors

is to empower or the working spirit.

Everything we do is with the worker in mind.

Both our worker that's making the truck,

and the worker that's gonna drive that truck.

- The video then teased that the truck would arrive in 2020

with speculation of running prototypes in April

and production to follow in November of that year.

I mean, a lot of us had high aspirations

for the year of 2020 in February, but damn, dude.

Regardless of what we all know now

what was to happen in 2020,

this was an extremely ambitious timeline nonetheless.

Considering that the acquisition of the factory

was in late 2019, they needed to retool

the entire 6.2 million square foot facility.

That's a lot of retooling.

Also, Lordstown Motors was not only promising

to have the first all electric truck

for the commercial fleet market,

they were attempting to bring to market

the first passenger vehicle within in-wheel hub motors,

which was an untested technology in pickup trucks.

For those that don't know,

in-wheel hub motors put a motor on each wheel.

Its overall goal is to have less wasted motion,

as all the energy goes directly into the wheels.

It's pretty complicated.

Lordstown Motors did not deliver the timeline promises

that it made in 2020, but they remained optimistic.

On January 11th, 2021,

they put out a press release to the public saying,

"Lordstown Motors surpasses 100,000 pre-orders

for the Lordstown Endurance."

Around the same time, Steve Burns was on record

to many media outlets touting this fact,

as well as all the progress

that was being made on the Endurance.

Things were looking up.

As all this positive news was coming out

about Lordstown and the Endurance,

we didn't know about a little incident

that happened in January of 2021, one night in Michigan.

A working prototype for the Endurance caught on fire

while being test driven by Lordstown Motors employees.

There are some pretty gruesome photos

of the aftermath of the fire.

And I have to say, those Lordstown employees

are lucky have survived this accident.

It was clear the prototype was not ready for human drivers.

The company stated the accident was due to human error

while putting the vehicle together.

And now that process has been automated,

which should fix the issue.

That's comforting.

Information detailing crash and other rumors

was not released to the public

until March 12th, 2021,

in statements from a Hindenburg research report

on Lordstown Motors.

This is where sh(beep) really goes downhill.

But what the hell is the Hindenburg Report?

What did it mean for Lordstown Motors?

The Hindenburg Report broke the news

about the Endurance prototype catching on fire.

As it happens, the fire wasn't even the worst thing

going on at Lordstown.

Turns out pretty much everything was a sham.

All the juicy pre order numbers

that Burns and Lordstown touted to incite investors,

including General Motors, were fake.

Burns eventually acknowledged the report,

but left no comment.

However, a few days after hearing about it,

he did quote himself, quoting none other

than my girl Tay-Tay, quote,

"I quoted Taylor Swift to somebody the other day.

Haters gonna hate hate, hate, hate, hate.

You gotta shake it off."

You know, what, Steve?

Corny.

As the investigation continued,

press releases continued to pour out from Lordstown Motors.

On May 24th of 2021, Lordstown Motors reported

a first quarter net loss of 125 million capex funds

of 53 million and cash of 587 million.

In June, Lordstown announced it received

notice of delinquency for late filing,

which I assume is bad.

And then finally, on June 14th,

Lordstown Motors reported the results

of the special committee investigation

of Hindenburg research report.

The same day, this press release surfaced.

Steve Burns was finally toast

and resigned as CEO of Lordstown Motors.

And 2021 continued.

Workhorse, Steve's other company,

said they now sold most of their stake in Lordstown Motors.

Lordstown Motors suffered major financial hemorrhaging

and was unable to produce their EV pickup truck

at their own plant.

It was time to phone a friend,

so they called upon Taiwanese manufacturer Foxconn

to step in and buy the factory.

On September 30th of last year,

it was disclosed that Lordstown Motors

entered into an automatic investment plan with Foxconn.

As a sign of confidence in the deal,

Foxconn purchased $50 million of common stock

directly from Lordstown at a price of $6.89 per share.

Foxconn is one of the largest manufacturers

of electronics in the world.

Will they be able to help Lordstown

actually get a working product out this year?

I guess we'll see.

This brings us to today.

GM has washed their hands of Lordstown,

Burns is out, and the new acting CEO of Lordstown Motors

is a guy named Daniel Ninivaggi.

And despite the crash in burn in the company's value,

they keep on going.

Lordstown Motors recently tweeted

from their booth at Work Truck Week in good spirits.

In another press release, yes, another one,

Lordstown Motors promises, quote,

"The truck launches production in commercial sales

in the third quarter of 2022."

Only time will tell if they can finally deliver.

So yeah, to sum it up, if you lie about the number

of pre-orders on your product,

continually make false promises to public,

and generally avoid telling the truth

about the state of your company,

you too can blow $5.5 billion in 700 days.

The end.

- Last night, I had a dream.

I was on this ranch.

There were horses everywhere.

Not just regular horses, big, beautiful,

sturdy, buff horses.

That place is called Buff Horse Ranch.

Now, unfortunately, that was just a dream.

But these shirts we made are 100% real and 100% cotton.

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