Charged EVs | Is Workhorse’s deal to buy Lordstown plant from GM to build electric pickup too good to be true?

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News travels by strange paths these days. The world first learned of a tentative deal for electric truck maker Workhorse to buy GM’s idled Lordstown, Ohio plant via a self-congratulatory tweet by the President of the US.

If the deal goes through, it could be a win-win-win-win:
Workhorse might receive a windfall like the one Tesla got when it acquired the
former NUMMI factory in Fremont for a song; at least some of the 1,600 GM
workers who got laid off in Lordstown might get new jobs; GM would get some good
PR for preserving jobs and encouraging EV adoption; and finally, EVs in general
would get some good PR, demonstrating that they can be job creators, not job
killers.

“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,” said Workhorse
founder Steve Burns.

However, there are reasons why companies prefer to reveal
news of this sort themselves, once everything is finalized. It turns out there
are a number of issues that need to be worked out before electric trucks start
rolling out of Lordstown.

GM and Ohio-based Workhorse have been in negotiations since
the beginning of the year, but Workhorse representative Tom Colton told Jalopnik
that the companies are in “roughly preliminary discussions.” The fraught
relationship between automakers and unions may come into play. The United
Autoworkers Union naturally wants GM to keep the Lordstown plant open, although
a GM spokesperson indicated that Workhorse would be willing to work with the
UAW.

There’s another pesky little problem – Workhorse doesn’t have anywhere near enough money to buy the plant, or at the moment, enough business to take full advantage of it. The company, which seemed to be a potential superstar at the time we featured it in our May/June 2017 issue, now has fewer than 100 employees, and although it does have high-profile customers including FedEx and UPS, it generated sales of only $763,000 in 2018. (The Cincinnati Enquirer sarcastically noted that this is a fraction of the yearly figure for a typical McDonald’s). Prior to the President’s blurt about the GM deal, Workhorse appeared to be on the verge of bankruptcy. “Our existing capital resources will be insufficient to fund our operations through the first half of 2019,” the company recently stated.

However, Workhorse has a potentially valuable card in the hole – the US Postal Service is planning to replace its aging fleet of Grumman LLV delivery trucks, and a prototype that Workhorse built in partnership with commercial truck specialist VT Hackney is one of four vehicles (and the only electric vehicle) in the running. The USPS’s process of selecting a vehicle has already taken four years, but according to Trucks.com, a final decision is expected by this fall. The contract calls for 180,000 trucks to be delivered over several years, and the total value could be as much as $6.3 billion.

Workhorse will not be acquiring the GM plant directly – a
complex arrangement would create a new entity led by Workhorse founder Steve
Burns, of which Workhorse would be a minority owner.

Ohio politicians are cautiously optimistic about the deal. “It’s
still too early to tell whether the sale is good news for workers,” said Ohio Senator
Sherrod Brown.

“We have a lot of questions,” said Lordstown Mayor Arno Hill. “We’d like to find out how many people will be employed and the level of investment. We’re very optimistic that we could be on the leading edge of something here.”

Sources: GM, New York Times, Cincinnati Enquirer, Jalopnik, CleanTechnica, Barron’s



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