The CEO and CFO of electric truck maker Lordstown Motors resigned this week amid allegations the company misled on the amount of pre-order demand for its product, and after news that it needs a cash infusion to begin its planned production this fall.
In a statement, the company called the resignation of CEO Steve Burns and CFO Julio Rodriguez part of its transition from research and development to commercialization. But the shake-up follows an internal review that found pre-order demand for the company’s inaugural product, the Lordstown Endurance, an all-wheel-drive light-duty truck, softer than originally indicated.
Among other things, at least one of the entities submitting a big order for the truck lacked the funds to make good on its promise. In addition to the internal review, the Securities and Exchange Commission is looking into the matter.
Critical allegations
The company’s internal review was spurred by a report by Hindenburg Research, a short seller, that alleged the company’s biggest pre-orders were misleading. The orders were non-binding and the companies submitting them put no money down and didn’t have the means to pay for them.
"After months of denials, Lordstown is finally beginning to acknowledge its precarious financial state and that its earlier production projections were nowhere close to reality," Hindenburg said in a statement.
Lordstown said the Hindenburg report was inaccurate in several respects, according to The Wall Street Journal.
In its announcement of the management change, the company said it holds itself to the highest standards.
“We remain committed to delivering on our production and commercialization objectives, holding ourselves to the highest standards of operation and performance and creating value for shareholders,” said Angela Strand, a company board member who, it was announced this week, is serving as executive chair. “I am excited to lead the passionate and dedicated team of Lordstown employees and to work with our valued customers, suppliers, investors and partners.”
Promising start
The company, launched in 2018 by Workhouse Group, captured the public imagination after it bought, and changed its name to reflect, a shuttered General Motors plant in Lordstown, Ohio, to manufacture the truck. It later got a break on its deal to buy the plant from GM.
The company generated additional attention when it raised some $675 million in a merger with special purpose acquisition company (SPAC) DiamondPeak Holdings, which took the company public in late 2020 at a $1.6 billion valuation. GM is one of the investors.
Its image took a hit earlier this year when one of its prototype trucks caught fire. The company attributed the incident to human error and said the problem was addressed through automation.
Interim executives
In addition to announcing the resignations of Burns, who founded Workhouse Group, as CEO and Rodriguez as CFO, the company said Strand, the new executive chair, would act as CEO until a permanent replacement is hired.
The company also said Becky Roof will serve as interim CFO. The company didn’t provide background information on Roof but in a LinkedIn profile, Roof is identified as a managing partner at AlixPartners LLC with a background in interim C-suite services, including as interim CFO of Eastman Kodak.
