Two Lordstown Motors execs resign, investigation finds pre-order 'misstatements'
Lordstown Motors announced on Monday that Chief Executive Officer Steve Burns and Chief Financial Officer Julio Rodriquez have resigned from the company.
The revelation came on the same day that LMC disclosed that a special committee looking into a damaging report by Hindenburg Research found “issues regarding the accuracy of certain statements regarding the company’s pre-orders.”
According to a news release from the company, Lead Independent Director Angela Strand has been appointed Executive Chairwoman of the Company and will oversee the organization's transition until a permanent CEO is identified, and Becky Roof will serve as Interim Chief Financial Officer.
Burns, who has been the main force in building the startup electric pickup manufacturer in the former GM Assembly Plant in Lordstown, has resigned as Chief Executive Officer and from the Company's Board of Directors. Chief Financial Officer Julio Rodriguez has also resigned, effective immediately.
That news release gave no reason for the resignations. However, a second news release reported the findings of a special committee of LMC board members on the March 12 report by Hindenburg Research which claimed the company made misstatements about the demand for the Endurance pickup truck, the viability of the truck’s technology, and LMC’s ability to start production as planned in September.
Although the committee concluded that Hindenburg’s report was false and misleading, it did find some credence in claims about inaccurate pre-order disclosures made by LMC.
The committee found that while Lordstown Motors stated that its pre-orders were from, or "primarily" from commercial fleets. In fact, according to the committee investigation” many pre-orders were obtained from fleet management companies or other end users that indicated an interest in purchasing Endurance trucks, similar to commercial fleets, and so-called "influencers" or other potential strategic partners that committed to attempting to secure pre-orders from other entities but did not intend to purchase Endurance trucks directly.
“One entity that provided a large number of pre-orders does not appear to have the resources to complete large purchases of trucks. Other entities provided commitments that appear too vague or infirm to be appropriately included in the total number of pre-orders disclosed,” according to the committee’s filings.
“Lordstown Motors has obtained tens of thousands of pre-orders from fleets, fleet management companies, or other end users. If converted to orders, this demand will comprise substantially all of the Company's expected production volume through 2022. According to the committee's findings.
The committee’s investigation challenges Hindenberg’s questioning of the Endurance technology and the company’s production timeline.
The investigation concluded that while some factors could lead to delays in the start of production, the projected September 2021 start of production remains achievable with the expectation of delivery to customers in the first quarter of 2022.
The committee also discounted Hindenburg’s questions about the viability of the Endurance technology using individual motors on each of the truck’s wheels.
Admitting that while hub motors have not previously been used in commercially produced passenger vehicles, the committee claims that the Endurance has been engineered to address any ride or durability issues.
The committee also addressed a fire that destroyed an Endurance prototype during a test drive on January 13, 2021.
Calling the fire an “isolated event”, the committee reports that the driver traveled faster than the expected test parameters, causing a power overload and the battery to catch fire.
The allegations in the Hindenburg report are included in several class-action lawsuits filed by investors against Lordstown Motors and some executives. Those lawsuits are being consolidated in U.S. District Court.