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,
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,
"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.
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.