Steve Burns, the CEO of General Motors-backed startup Lordstown Motors, has resigned following an investigation into allegations that he and other executives lied about preorders for the company’s electric pickup truck. The startup’s chief financial officer Julio Rodriguez has also resigned.
The resignations come just weeks after Lordstown Motors admitted that it needs more money to execute on its production plans for the pickup truck and its auditor saying the company may run out of cash, despite raising nearly $700 million late last year. It’s one of many electric vehicle startups running into trouble after going public by merging with a special purpose acquisition company.
The investigation found that while Lordstown Motors said on multiple occasions that a majority of the 100,000 non-binding preorders it collected were from commercial fleets, this was not the case. It discovered that “one entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks,” and that other companies on the list “provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed.” The firm’s probe also confirmed that Lordstown Motors paid a company to drum up around 1,000 preorders.
Some preorders were from a firm that lacked the resources to buy the trucks
“We thank Steve Burns for his passion and commitment to the company,” the startup said in a statement. Burns will be temporarily replaced by Angela Strand, who is an independent board member at Lordstown Motors, though she formerly worked at Burns’ previous EV startup, Workhorse. Becky Roof, a certified public accountant and former CFO, will temporarily replace Rodriguez. “We have complete confidence in Angela and Becky, and our expanded leadership team, to effectively guide the company during this interim period,” the company said.
The probe, which was conducted by law firm Sullivan and Cromwell, was launched in March after short-selling firm Hindenburg Research published a report that made a number of allegations of potential wrongdoing at Lordstown Motors. At the heart of the report was Hindenburg’s belief that the EV startup had misled investors about the viability of preorders it touted in late 2020 and early 2021.
The research firm made other claims about Lordstown Motors’ progress on its electric pickup truck, and that one of the startup’s prototypes had caught fire. The law firm says that these other parts of the report are “in significant respects, false and misleading,” and that “the viability of Lordstown Motors’ technology and timeline to start of production are not accurate.” The fire, the firm said, was an isolated incident.
Lordstown Motors is also facing an investigation by the Securities and Exchange Commission (SEC) that was opened following Hindenburg’s report.
Founded in 2019 by Burns, Lordstown Motors bought a recently shuttered GM plant in Lordstown, Ohio in a deal that then-President Donald Trump billed as “GREAT NEWS” for the state. Trump had been putting pressure on GM to do something with the factory, and his administration celebrated the transaction and Lordstown Motors as a result. Lordstown Motors brought the truck to the White House for an event in September 2020, and then-VP Mike Pence attended the reveal of the Endurance pickup truck a few months earlier.
The startup went public late last year and raised $675 million in the process. GM was one of the highest-profile investors, committing $25 million in cash to Lordstown Motors and around $50 million of “in-kind” contributions that helped the startup buy the plant and equipment. It owns around 5 percent of Lordstown Motors and while it had the opportunity to nominate a director to the board during the merger, it ultimately didn’t. GM declined to comment on the resignations.
GM was involved in another EV startup, Nikola, that Hindenburg Research published a report about. That startup also juggled its leadership and is currently under investigation from the SEC and the Department of Justice.
Burns previously ran Workhorse, an electric vehicle startup that’s struggled to get a commercial delivery van business off the ground. The Endurance pickup truck actually began its life at Workhorse. When Lordstown Motors was formed, Workhorse licensed the intellectual property for the truck to Burns’ new startup in exchange for around $20 million. Workhorse owns 10 percent of Lordstown Motors, though the value of that stake has dropped from around $330 million at the end of 2020 to below $200 million.
Workhorse had spent years trying to win the contract for the United States Postal Service’s next-generation delivery vehicle, and had promised Lordstown Motors the right to bid on the manufacturing portion of the deal. But in February, the USPS awarded the contract to defense contractor Oshkosh.