Lordstown, which owns a former General Motors (NYSE:GM) factory and counts GM among its investors, is planning to have its Endurance pickup truck in production by the end of 2021.
Who is Lordstown Motors?
Readers may recall that Lordstown Motors is the company that took possession of the former GM factory in Lordstown, Ohio.
In its heyday, GM's Lordstown plant employed about 10,000 workers. But GM idled the factory in 2019 amid slumping demand for its product,
the compact Chevrolet Cruze sedan -- a decision that led to some strong expressions of concern from President Trump
and that was a factor in the United Auto Workers' strike against GM later that year.
GM resolved the issue by selling the plant to Lordstown Motors at a value price,
and by offering some assistance to the new company as it worked to get its electric pickup ready for production.
That factory gives Lordstown a notable advantage over rivals including Nikola, which has an electric pickup prototype, but as of now, no place to build it.
The Endurance, unveiled in June, has already drawn interest from commercial-fleet operators.
Lordstown said that it has over 27,000 pre-orders for the truck, representing more than $1.4 billion in potential revenue.
Lordstown is led by Steve Burns, the former CEO of electric-delivery-van maker Workhorse Group (NASDAQ:WKHS).
How Workhorse fits into this deal
Workhorse didn't just give Lordstown its CEO. It also licensed some of its designs and technology to the company. In exchange,
Workhorse received a 10% stake in Lordstown, along with an agreement that protects that stake from dilution for two years.
Workhorse is also entitled to a 1% fee on all debt and equity raised to fund Lordstown during that two-year period.
Simply put, while Workhorse isn't named as an investor in the deal with DiamondPeak, it stands to benefit:
10% stake will be worth about $160 million at the post-merger company's pro forma $1.6 billion valuation,
and possibly much more as Lordstown ramps up to production next year.
What should investors make of this?
My take is that while any vehicle start-up is a risky investment, Lordstown is a no-nonsense company with a promising product.
The Endurance is a sturdy four-wheel-drive pickup with some innovative features, notably a complete motor unit at each wheel.
That should simplify manufacturing, lowering costs and maintenance, which is important to fleet customers.
John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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