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  • William Maley
    William Maley

    The Possible Sale of Lordstown Is Raising Skepticism

      ...There are some very good reasons why people are very skeptical about this deal...

    When General Motors announced that it would be potentially selling its Lordstown plant to electric car start-up Workhorse Group Inc, there was a fair amount of head-scratching. The company is best for their W-15 range-extended pickup (which has been delayed) and electric vans. They are also known for the Surefly octocopter drone their former CEO Steve Burns is trying to sell.

    Why the skepticism? Workhorse isn't looking so good on the financial sheets. Back in March, Trucks.com published a report talking about the various financial setbacks the company has been facing. From their story,

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    Workhorse has almost no revenue, posting just $21,000 for the last three months of 2018, down from $5.2 million in the fourth quarter of 2017. The quarterly loss was $17.7 million, compared to a loss of $11.7 million a year earlier.

    For all of 2018, sales were $763,000, compared to $10 million in 2017. The company lost $36.5 million last year, compared with a $41.2 million loss in 2017.

    Workhorse reduced its loss by spending less on research and development for Surefly and an electric mail delivery van that it would build in partnership with V.T. Hackney. The two companies are one of five teams competing to build the next-generation delivery truck for the U.S. Postal Service.

    With practically no cash to buy parts, Workhorse pledged all of its assets at the end of the year to get a $35 million loan from Marathon Asset Management, a New York-based hedge fund. Workhorse spent most of the first $10 million to unwind a loan deal it signed last July with Arosa Capital. The remaining $25 million can be drawn down as needed, but not for everything.

    The news hasn't gotten any better in 2019. Their most recent financial statement to the SEC reveals the company has $2,847,936 of on-hand cash at the end of March. They also reported a net loss of $6,264,172.

    "Workhorse appears to be a very slow-moving venture that has a lot of risk, and no massive amount of funding. Lordstown is a massive facility, and despite some investments over the years, I don't believe it would be easily converted to build electric pickups without substantial investment," said Jeff Schuster, an industry analyst for LMC Automotive to The Detroit News.

    But Workhorse has a plan for this. Both the News and Trucks.com report that “newly formed entity” would be created and Workhorse would be a minority stakeholder. The entity "would own Lordstown and use Workhorse technology and intellectual property to build a vehicle." Where would the business get the capital to this is unclear. Workhorse spokesman Tom Colton declined to comment when asked about possible funding sources.

    “There’s got to be some big contract behind this because Workhorse’s financials and forecasts just don’t merit a plant that makes 450,000 units a year,” said Kristin Dziczek, director of the labor and industry group for the Center for Automotive Research.

    There is also the issue of utilizing all of that space that Lordstown offers - 6.2 million square feet. Analysis done by LMC says Workhorse would need to produce 410,000 trucks and vans per year to reach full capacity. At the moment, LMC forecasts Workhorse producing between 5,000 to 10,000 vehicles.

    Again, Workhorse may have a solution. Here is GM Spokesman Jim Cain speaking to The Detroit News,

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    "There was also once a little start-up called Tesla building a couple-hundred electric vehicles at a huge plant in Fremont, California," GM spokesman Jim Cain said, referring to Elon Musk's Tesla Inc. operating out of a plant once jointly operated by GM and Toyota Motor Corp. "Workhorse has defined a similar niche in (electric) commercial vehicles; they're one of the finalists to build new trucks for the U.S. Postal Service — there is some substance there."

    As mentioned earlier, Workhorse is one of the five finalists on building new trucks for the U.S. Postal Service. They are teamed up with VT Hackney - a company that builds specialized bodies for work trucks - Emergency services and Beverage trucks to give some examples. The contract is worth $6.3 billion. But Jalopnik reported yesterday that the post office truck would not be built in Lordstown.

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    Tom Colton, who is representing Workhorse in the potential deal, told me last week that they’re not looking to build that USPS vehicle in Lordstown, should they win the contract. He made clear the two are completely separate ventures.

    As it stands, there are a lot of questions and unknowns about this possible deal.

    Source: The Detroit News, Trucks.com

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    No way a company that loses $40 million a year with very small revenue can buy a factory that costs millions to run.  GM has lost money in factories making 300k vehicles or more in a year, these big factories need to be up near capacity to cover all the overhead.

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    The idea that a factory has to use 90 or 100 % of it's floor space to 'be profitable' is erroneous - buildings don't work that way. Operating costs increase as production increases (tho there would be base levels & tiers of cost).

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    7 minutes ago, dfelt said:

    I believe @A Horse With No Name or @Robert Hall suggested they support the obese amount of population there by turning the whole plant into a massive variable food court! :P 

    It was Horse...  it would be nice to see some of manufacturing there.  There are many empty auto plants across NE Ohio..there is a huge empty Ford plant near by the Cleveland airport.... a couple former auto plants have been repurposed as Amazon fulfillment centers. 

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    ^ Fiscally-speaking, ocnblu is correct. They're brimming with 'gee-whiz' and 'feel good-i-ness', but that doesn't pay the electric bill.

    Just read a financial piece stating EVs wouldn't surpass IC vehicles in sales until 2038. And even then, their graph showed inexplicably-escalating future sales to get there. What happened to "2025" ????

    I know; reality.

    Same article also stated passenger EV sales in the US were 6% last year. They weren't- they were 2%. Even on a reduced volume of 15,000,000, 6% would be 900,000 EVs. We're years away from even that level of sales.
     

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    4 hours ago, ocnblu said:

    There is no strength in electric vehicle ventures.

    WRONG Padawan, EV Trucks and SUV's from a motor stand point can easily replace Diesel and give far more HP and Torque than a Diesel motor can deliver.

    We all know Batteries is what is holding EVs back and variety of auto options that should start to be removed as they hit the market. Solid state batteries that have been proven and are just now going into production will be a big deal such as the Toshiba Solid state. 396 mile range solid state battery that fully charges in 12 min is no different than fueling an ICE with much less noise and no toxic exhaust. Places that use green energy sources make it an even better play for the environment as Solar, Hydro or Wind can create much green energy.

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    4 hours ago, dfelt said:

    We all know Batteries is what is holding EVs back

    LOL batteries eh?  BATTERIES?  pfffft

    4 hours ago, dfelt said:

    WRONG Padawan, EV Trucks and SUV's from a motor stand point can easily replace Diesel and give far more HP and Torque than a Diesel motor can deliver

    ?  Oh my... dfelt... when I said "strength" I was referring to market demand.  When market demand is simply not there, of course you will see weakness in a venture's ability to attract investment.

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    6 hours ago, ocnblu said:

    LOL batteries eh?  BATTERIES?  pfffft

    ?  Oh my... dfelt... when I said "strength" I was referring to market demand.  When market demand is simply not there, of course you will see weakness in a venture's ability to attract investment.

    When the type of auto that the public wants is not there of course there is no market demand. Americans want their roomy full size auto's and until the auto industry delivers said auto's the demand will not be there. Once Rivian gets the R1t and R1s full size truck and SUV being built, I expect considerable demand. 

    I also believe that once Ford rolls out their F150 EV based on the skateboard concept that demand will be there. I think allot of folks are waiting. I know I am and once the right EV is on the market, will happily buy.

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    1 hour ago, riviera74 said:

    Remember when the Fremont plant was a GM plant?  Now it is owned by Tesla.

    A question: why can't the Lordstown plant be used to make those solid state battery EVs?

    One reason for the closing down of excess manufacturing capacity is that EVs are simpler to build and use less space than ICE auto's. As companies switch over to EV building, they are gonna have to cut jobs and space needs due to that simple fact.

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    ^ I don't believe that's a major percentage OR factor in plant operating costs. It's not like an EV uses 50% of IC assembly space, it's probably closer to 90%. Not going to move needles except in new EV-only plant construction (which we've yet to see any of).
    Besides, EV brands could use the extra floor space to do extensive and common post-assembly repair work (Tesla) or stockpile unsold production when the next tax credit halving hits (every EV maker). 

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