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GM-backed Lordstown Motors downplays accusations it faked preorders

It's another headache for GM, which pared down its partnership with Nikola, another electric truck company, after the startup misrepresented its trucks' capabilities.
Image: The Lordstown Motors Corp. Endurance electric pickup truck sits on stage during an unveiling event in Lordstown, Ohio, on June 25, 2020.
The Lordstown Motors Corp. Endurance electric pickup truck sits on stage during an unveiling event in Lordstown, Ohio, on June 25, 2020.Matthew Hatcher / Bloomberg via Getty Images file

Facing a probe by the Securities and Exchange Commission and an internal investigation, officials at electric truckmaker Lordstown Motors tried Wednesday to downplay concerns raised by a new report suggesting they misled investors with phony sales numbers.

Lordstown is one of several startups hoping to gain traction in the emerging market for battery-powered trucks. But short-seller Hindenburg Research last week published a report raising serious doubts about Lordstown’s assessment that it has over 100,000 non-binding production reservations from commercial fleet users for its Endurance pickup.

Shares of Lordstown have fallen by around 24 percent since the report was released less than a week ago.

During an earnings call Wednesday afternoon, CEO Steve Burns said his company is “cooperating” with an SEC probe started in the wake of the Hindenburg report. Lordstown is also launching its own, internal investigation.

An early pioneer in electric mobility, Burns told reporters and analysts that his company is “on track” to bring out the Endurance by September — and that it is already working on a second product, an electric RV-style van, set to reach market during the second half of 2022.

But the call left some fog hanging over Lordstown’s sales numbers. During the lengthy session, Burns and other officials indicated they now have 20,000 "conditional" orders that appear likely to translate into actual sales. As to the original, 100,000 figure, Lordstown President Rich Schmidt suggested that limited manpower has made it difficult to follow up and lock down more orders.

The two executives repeatedly expressed confidence that will happen, noting that Lordstown is now working with one of the country’s larger truck and RV retailers, Holman Motors. If anything, Schmidt and Burns said they are confident enough about the future to approve an expansion of their assembly line in Lordstown, Ohio, aiming to reach capacity for 60,000 vehicles a year by the end of 2020.

That factory started out as a General Motors plant, but was one of three facilities GM announced plans to close in late 2018. The startup got a big break the following year when it was given a chance to purchase the Ohio facility. GM even loaned Lordstown $40 million to help purchase the old Chevy plant. The Detroit automaker subsequently made a $75 million investment.

Lordstown Motors’ second big break came last November through a "blank check" SPAC deal, with New York-based DiamondPeak Holdings. It got the automaker listed on the Nasdaq exchange, trading as RIDE. And it generated a $675 million cash infusion.

If the Endurance meets its September target, it will be "the world’s first all-electric pickup” to go on sale, months before the launch of either the Tesla Cybertruck or the GMC Hummer, the company said.

The money was earmarked to complete development and then launch production of the Endurance, one of an assortment of battery-electric pickups set to come to market over the next several years. If it meets its September target, noted Burns, “It will be the world’s first all-electric pickup” to go on sale, months before the launch of either the Tesla Cybertruck or the GMC Hummer.

The truck takes the unusual approach of using four motors, one mounted in each wheel hub. It is expected to produce 600 horsepower, deliver 250 miles of range and tow up to 6,000 pounds.

For months, industry analysts have raised concerns about the company’s optimistic forecasts.

“I’ve always been dubious about the number of orders they claim, considering they’ve never built a product before,” Sam Abuelsamid, principal auto analyst with Guidehouse Insights, told NBC News.

Hindenburg took things to the next level, zeroing in on specific sales Lordstown said it has made, including one supposedly for 14,000 of the trucks worth $735 million that was purportedly placed by E Squared Energy. But Hindenburg says that firm is a two-man operation, based out of a “small apartment in Texas,” and has no vehicle fleet.

When reached by NBC News, E Squared Energy CEO Tim Grosse said: "We are legitimate and we can help a lot of fleets make the transition. We have a non-binding letter of intent with them, the same thing all the EV companies use. It is standard in the industry."

Grosse said his company is a small group with about a dozen affiliate partners, not staff, and a network of tech providers.

Another order, for 1,000 trucks, comes from another "two-person startup that operates out of a Regus virtual office with a mailing address at a UPS Store,” Hindenburg reported. “We spoke with the owner, who acknowledged it won’t actually order any vehicles, instead describing the ‘preorder’ as a mere marketing relationship.”

As a short-seller, Hindenburg has a vested interested in seeing Lordstown shares tumble, something it confirmed in its report. But the firm earned credibility when it took on another EV startup last year, Phoenix-based Nikola.

Like Lordstown, Nikola used a SPAC deal to raise capital. And it was negotiating a major deal with General Motors when Hindenburg raised serious doubts. Since then, Nikola’s stock has tumbled, the GM deal was sharply pared back and Nikola's founder and CEO stepped down.

What happens with Lordstown now is uncertain. It could depend upon what investors read into CEO Burns’ comments about the lower sales numbers. It might depend on what happens with the SEC probe or the internal investigation.

But, “no doubt about it,” Abuelsamid said, “they’re absolutely facing the fight of their life.”