One of the stranger dramas that’s played out during Donald Trump’s presidency is that of the former General Motors factory in Lordstown, Ohio. In a bid to cut costs and move away from sedans, GM announced in 2018 that it was closing the plant (along with two others) and laying off its workers there. Trump scorned the automaker over the decision — that is, until, in May 2019, GM decided to sell it to a struggling electric truck startup called Workhorse.
All of a sudden, it was “GREAT NEWS FOR OHIO,” Trump tweeted, breaking the news. Except it wasn’t exactly Workhorse that was buying the plant. Workhorse has been in trouble over the last two years, despite having previously secured deals to supply electric (and electric-assisted) commercial vans to companies like Ryder and UPS. It’s one of four companies in the running to build the United States Postal Service’s new generation of mail trucks, but its business has come to something of a standstill as it awaits the results of that bid. Instead, Workhorse’s founder and former CEO Steve Burns started a new company called Lordstown Motors, and that company is what will build electric pickup trucks at the former GM factory.
GREAT NEWS FOR OHIO! Just spoke to Mary Barra, CEO of General Motors, who informed me that, subject to a UAW agreement etc., GM will be selling their beautiful Lordstown Plant to Workhorse, where they plan to build Electric Trucks. GM will also be spending $700,000,000 in Ohio...— Donald J. Trump (@realDonaldTrump) May 8, 2019
But it won’t be just any electric truck: Lordstown Motors plans to build a simple electric work truck that’s based on intellectual property developed by Workhorse for its own pickup, the W-15 — a project that had stalled out as Workhorse started to run out of money. Burns paid Workhorse $15.8 million to license the IP, according to documents filed with regulators this week, and his former company will also earn 1 percent of each truck sold by Lordstown as well as 1 percent of any equity raise.
Burns explained this whole situation in a bit more detail during a recent phone interview with The Verge. He said creating a new company will make it easier to take on the $450 million he thinks Lordstown Motors needs to reconfigure the GM factory and get the pickup, called Endurance, into production (especially since Workhorse is publicly traded and its investment options are more limited). He explained why he’s pursuing the same Department of Energy’s Advanced Technology Vehicles Manufacturing loan that helped put Tesla on the map a decade ago, despite the fact that no one has received money from the program since 2011.
He also believes that starting out with a factory will help Lordstown avoid the “carnage” that other EV startups, like Faraday Future, Seres (formerly SF Motors), or even to some extent Lucid Motors, have encountered on their own rocky paths to production.
This interview has been lightly edited for clarity.
You’ve said you were considering hiring some of the UAW workforce that was in the plant before. But last I read, you hadn’t actually had any talks with them yet. Is that something that’s still on the table?
We have now spoken to the union. Again, it is up to the workforce whether they want to be represented by a union. So it isn’t our call, but in case they do, we will embrace it and make sure the union knows what we’re trying to accomplish and see how we can work together to hit it out of the park. The culture of the place is union, you know, the history. So we anticipate that to happen, to have union representation. But like I tell everybody, I’ve started four firms before this. And what I’ve learned is workers are the backbone. You’ve got to treat them well, whether they’re represented or not. If you don’t treat your workers well, you’re not going to have a successful business. So we intend to, either way, make sure they realize they’re the backbone of the company.
You’ve mentioned wanting to pursue the Department of Energy’s (Advanced Technology Vehicles Manufacturing) loan as a way to get the ball rolling with your production plans. And I saw that you have had some conversations with the DOE. It’s been a while since somebody has gotten money from that program. Do you have a ballpark of what the chances are that you could even get money from this program as long as it stays around post 2020 budget approval?
Yeah. You know, I’m the founder of Workhorse, and I think I founded that 13 years ago, so I’ve seen a lot of companies come and go that were hanging on, waiting for that loan, basing their company’s success on that loan. So I just want to say we... our business plan does not contemplate getting that loan. That loan’s nice to have, but it certainly isn’t something we would... you know, any loan to begin with, much less a government loan, is unpredictable. So it’s not something we have to have. It will accelerate things. And we’ll make more cars faster and hire more people if we get it. But it certainly isn’t the basis of our business plan.
It’s been a while since they lent any money out. So we met with the new secretary of the Department of Energy. And you know, we did it because... I think most people recognize we’re all here because of Tesla. Tesla led the way and pioneered a lot of stuff. And people think electric vehicles are a big part of the future. I think it’s because of them, to be honest with you. But I really think Tesla’s here because of the Department of Energy loan that they got. So in some respects, you say a government loan did actually launch a) a company, and then b) a huge transformation in the world. So I wanted to meet those people that did that. And so we met with them at the top levels, and we said, obviously, we don’t waste anybody’s time, our time or their time. That facility was put into place in the Bush era to help OEMs reconfigure factories to make more fuel-efficient vehicles. We’re kind of a poster child for that, [with] what we’re trying to accomplish here. So I think it’s something we’re very well-suited for. But by no means is our success contingent on it.
If that’s not the basis of the business plan, then can you give me an idea of what is?
Somewhat traditionally, you know, raising money through sales of equity. I think we’ve announced that in addition to traditional equity-based financing, we’re very interested in having strategic partners that both invest and can bring a lot more than just financing. So that’s how we intend to do it. And that’s the plan we’re moving down with. And we’re on target for all that.
The strategic partner side of this is really interesting to me. There are obviously a lot of EV startups out there who have had some trouble trying to get to market. And I know that is one way that they’re looking to be able to make the leap to production. We’ve seen some strategic partners come down and partner with folks like Rivian and things like that. Even FCA and Foxconn in an interesting way. Is that a zero-sum game? Or is it more like the autonomous vehicle space right now where everybody seems to be willing to partner with anybody else as long as it gives them a hedged chance of success with one of the companies down the road?
You know, it’s interesting. Again, forming an electric vehicle company 13 years ago, we weren’t seeing that. We weren’t seeing the large firms come in and invest and support the small startups. I think the OEMs weren’t used to it because there were no small car companies to partner with. To your point, we’re seeing a trend where you are seeing the big OEMs, for whatever reason, decide to have a hand in the smaller companies that are breaking into the space.
And one has to think that, you know, with the technology changing so quickly under our feet every day, I think it’s much easier for a nimble, smaller company that doesn’t have any legacy to protect to adopt it or at least, you know, engineer for it. So I think that’s why they’re doing it. But whatever reason they’re doing it, we’re happy they’re doing it because it gives everybody comfort. It gives the other investors comfort, it gives the people who are buying our vehicles comfort. You know, it’s just the way it should be. And it’s finally happening. And we’re excited to be part of that trend.
Have you had any conversations with potential strategic partners yet?
I assume you can’t tell me who?
How much money do you need to get into production?
You know, I think we’ve been transparent with that. We need about $450 million. In most circles, $450 million is a lot of money. In automotive, conventional people are saying that’s not enough. We’ve seen people spend billions and still not make it in the space. But a) we already have the multibillion-dollar factory, so we don’t have some big [capital expenditure] coming. We are picking a very traditional vehicle, a body-on-frame pickup truck. We’re not reinventing the top of the vehicle too much because that’s so well-proven for fleets and what they need. And we’ve done this before at Workhorse. So we feel that’s going to get us there.
So is the idea to chart out where every penny of that $450 million would be going and that once you can get into production, the revenues that are coming in are going to serve as a sort of flywheel to keep you moving forward? Or would you get into production and still need to raise more money to be able to expand?
This is designed to get us into production for our ramp, right? Now, I could not say that if we hit it out of the park and we want to ramp faster or get to the next vehicle faster or all that, and it made sense to take in more financing, I’m sure we would. But I’m very used to, from my Workhorse days, having to build a product, get to market, build it at a price point you can make money on, and assume that that’s the last money you’re ever getting, the initial funding. So we’ve been cognizant of that fact, and that’s why we picked the $450 million, and we believe it to be sufficient.
I saw you recently told another outlet that you were maybe a couple weeks away from being able to repay GM for the [$40 million] loan for the factory. Have you repaid that yet?
I can’t... I got a little pushback for even saying that. We shouldn’t even really talk about our financing other than to say we are on track with our financing goals.
Less specifically on the GM side, then, can you say how you’re paying that back in the first place, knowing you guys aren’t generating any revenue right now?
From investor input. So we’re raising investor money, and one of the first uses of that is to clear up that mortgage.
At a really high level, what is it that you think about this plan that will succeed, knowing how much trouble some other startups have had trying to get into production over the last couple of years?
Again, since I’ve been in this space a while, I watch all that closely. You know we’ve seen a lot of people trying to out-Tesla Tesla. Make a high-end, fast [electric] sedan. That is a very tall order. We’re building for the commercial market. Full-sized pickup trucks for the worker. That lane is clear. Nobody else is in that lane. There are a few startup truck companies coming out. They’re starting in the luxury segment. You know, the premise of new technology starts in luxury and moves downstream.
We, because we’re using a very simplistic design, with hub motors, we are not changing the top of the truck too much. So we have a body-on-frame scenario and we really try not to reinvent anything that we don’t have to. So all the software is ours, of course, the chassis and the suspension are designed to handle, you know, the uniqueness of hub motors. But the simplicity of not having... there is not a gear in this vehicle. There’s not a drive shaft. There’s not an axle. There’s not a U joint. This is an extremely simple vehicle, even compared to a Tesla. So it is the simplest vehicle. If you’re going to have four wheels, you can’t do any simpler than only those four wheels are the only moving parts. And to have a computer basically precisely controlling each wheel suddenly get better traction than any pickup truck ever made, you’ve got better handling. Without a V8 up front, we intend to be the safest in the crash test of any pickup truck ever made.
So in addition to telling fleets this is the most economical vehicle you can buy, because fleets look at things in total cost of ownership, we also say it’s the best pickup truck you buy. If your local fleet is using pickup trucks, of which there are a lot of those, this is just the most economical, safest, and greenest, best-handling vehicle, you can put your people in, and that’s pretty compelling. And again, I’m not trying to make an all-aluminum lightweight sports sedan.
If Ford came out with a new F-150 and said it got 75 miles per gallon, they’d somehow changed the laws of physics and done that. That would be a worldwide phenomenon. I mean, who would buy any other pickup truck? And that’s essentially what we have. Now, are we smarter than Ford? No. We just started. But starting with a clean sheet of paper and just putting four hub motors on a rail... and not that it’s trivial, it’s a lot of software [work]. It’s a lot of suspension [work], but it’s the simplest vehicle ever made.
So that’s how we’re going to make it where others have not. Most of the others, the carnage... conventional wisdom is you build something, you get some orders, you start to say how you’re going to make this in quantity, you set a price point. And then you look at, okay, now we’ve got to build the factory. And boom, that’s where it stops. None of the carnage that has happened over 20 years, except for Tesla, nobody got to a factory. And we’re starting with a factory. So it’s really kind of cool to know there isn’t this big $2 billion raise we’ve got to do later. And that’s a great comfort.
Why go this route with this new company as opposed to pursuing this truck with Workhorse and the momentum that you’d built up there over more than a decade? And was this something that you were planning when you left Workhorse to begin with?
No, I mean... the W-15 [electric pickup truck] at Workhorse was born out of... we were making a new vehicle for the [United States] Post Office bid. And we thought, well, if we don’t get the Post Office [contract], I had to be able to justify this risk. What else could we do with this technology? So that’s where the pickup truck was born. But when I started Workhorse and we went into vehicles like UPS, those large vehicles are [by regulation] very light. No crash testing, no airbags. And so something a smaller company could do, us raising $400 million to build a commercial 7,500-pound light-duty pickup truck is not something Workhorse could do. They couldn’t raise that sort of... being public, it was just impossible for them to do that. So that’s why we’re doing it from the outside, and we licensed some of their technology. And it gave us a great jump-start, and we’re off running.