General Motors is in talks to sell its Lordstown vehicle factory in Ohio to Workhorse Group, a battery-electric transportation technology company, to produce EV pickup trucks.
It’s a development that could produce a positive outcome for Workhorse, GM and the laid-off workers at the Lordstown factory that stopped producing the automaker’s Chevrolet Cruze in March. Not to mention President Trump, who has promised to bring back manufacturing jobs to the U.S. and was the first to reveal the talks via Twitter.
This good-news story, however, has loads of caveats.
The deal between GM and Ohio-based Workhorse is not settled, according to Jalopnik, which reported the two companies have been in negotiations since the beginning of the year and many details still must be resolved. Tom Colton, who represents Workhorse in the deal, told Jalopnik that they’re in “roughly preliminary discussions.”
GM told TechCrunch that Workhorse had approached the company earlier this year and that talks had progressed enough to now involve other people. In other words, the deal is promising enough to now involve the United Autoworkers Union.
The UAW’s position, however, presents one of many hurdles to the deal. The UAW wants GM to assign a product to Lordstown and continue operating it. It’s unclear if that stance would change if Workhorse committed to making this a union shop. A GM spokesperson indicated that Workhorse was willing to work with the UAW.
Then there’s the matter of money. Workhorse is a small company with fewer than 100 employees that has struggled financially at various points since its founding in 1998. The company, which earlier this year borrowed $35 million from hedge fund Marathon Asset Management, reported just $364,000 in revenue in the first quarter, down from $560,000 in the same period last year.
As of March 30, 2019, the company had cash, cash equivalents and short-term investments of $2.8 million, compared to $1.5 million as of December 31, 2018.
Workhorse, which was once owned by Navistar and sold in 2013 to AMP Holding, does have a customer pipeline for its electric trucks that includes UPS. It’s also hoping to win a contract with the United States Postal Service.
It’s unclear how much GM wants for the Lordstown plant and how Workhorse will find the funds to pay for it. The proposed structure of the deal provides some hints.
Under this potential deal, a new entity led by Workhorse founder Steve Burns would acquire the facility. Workhorse would hold a minority interest in the new entity. This new entity would allow Workhorse to seek new equity without diluting existing shareholder value.
“The first vehicle we would plan to build if we were to purchase the Lordstown Complex would be a commercial electric pickup, blending Workhorse’s technology with Lordstown’s manufacturing expertise,” Workhorse CEO Duane Hughes said in a release issued by GM.
Since last November, GM has been in discussions with the UAW regarding the impact of changing market conditions on the Lordstown facility. These discussions will include this opportunity, GM said.
Lordstown was deemed “unallocated” by GM, a designation that means the company decided to stop producing the Cruze or any other vehicle at the factory. The decision resulted in the elimination of some 1,200 jobs. About a quarter of those workers have been transferred to other GM factories.
In March, GM announced plans to invest $300 million into a Michigan factory to produce a new Chevrolet electric vehicle, reversing a decision to build the EV outside of the United States. The announcement came on the heels of recent job cuts and plant closures by GM, moves that have complicated bargaining with union workers over a new four-year contract and has sparked intense criticism from Trump over the decision to end production at the Lordstown factory.
President Trump was the first to broadcast the GM-Workhorse news via Twitter. GM soon followed with a news release, saying that the move has the potential to bring significant production and electric vehicle assembly jobs to the plant.
“We remain committed to growing manufacturing jobs in the U.S., including in Ohio, and we see this development as a potential win-win for everyone,” GM chairman and CEO Mary Barra said in a statement. “Workhorse has innovative technologies that could help preserve Lordstown’s more than 50-year tradition of vehicle assembly work.”
GM is interested in producing an electric pickup, Barra indicated during the company’s first quarter earnings call. However, GM told TechCrunch that the company’s EV pickup plans are not tied to Workhorse.