Earlier this month, President Trump tweeted that GM would be selling its shuttered Lordstown, Ohio plant to electric truck maker Workhorse. But a new report paints a concerning picture of what’s happening at Workhorse, casting doubt on both the deal and the company itself.
While Trump’s tweet seemed to frame the agreement as a formality, a subsequent press release from GM on the same day only noted the carmaker was “in discussions” with Workhorse and “and an affiliated, newly formed entity.”
That entity, headed by Workhorse founder Steve Burns, “exists almost entirely on paper,” The New York Times reports. The unnamed entity would need at least $300 million to get the Lordstown plant back up and running.
“It’s a gargantuan task” when it comes to raising the money, Burns told the Times. “There is no running away from it.” He wouldn’t say if any investments had been secured.
Adding to that task, Workhorse reportedly only had $3 million in cash by the end of March, and the company, which the Times refers to as “barely hanging on,” looks to be in dire need of new investments:
Between its founding in 2007 and the first quarter of 2019, Workhorse lost nearly $150 million. It has produced a total of 365 vehicles since its inception, fewer than Lordstown can churn out in a day. Last year, Workhorse’s revenue totaled $763,000, about $62,000 less than the combined salaries of its top three executives.
Workhorse sold 1,000 electric vans to UPS last year, but the company has an even bigger opportunity as a finalist to supply delivery trucks to the USPS. That contract is worth an estimated $6.3 billion.
Even getting to that point might be tough, however, as the Times notes that in a recent filing, “Workhorse said it needed $22 million to make vehicles for UPS, DHL and other customers.”
Workhorse has received a $35 million line of credit for Marathon, however, which should give the company some time, and should cover for those orders.
Commercial customers also seem to be satisfied. Workhorse has sold vehicles to Ryder and Chris Nordh, senior director for advanced vehicle technologies at Ryder, told the Times:
“Their products have really performed well. I don’t get calls from the field about problems with the trucks.”
GM and Workhorse both seem intent on finding a way to complete the deal, but not everyone is as optimistic. Stephen Baksa, a major Workhorse shareholder, said Burns has spent too much time on other projects unrelated to electric trucks. That includes an electric helicopter called SureFly. Workhorse’s website also showcases a drone delivery system called HorseFly.
Baksa told the Times, “I have watched this comedy act evolve, but the time has finally come for these guys.”
Workhorse also unveiled a plug-in hybrid pickup truck in 2017.
It’s never easy for an electric vehicle startup, and Workhorse really seems to be up against it right now. Upon the first word of the GM deal, we suspected the company would need a lot of help to make it happen. Needing at least $300 million to start a new venture, while the company itself is in need of funding to complete its existing orders…it’s not an ideal situation, to say the least.
However, we’re not willing to write an obituary based on one report. It’s a matter of funding, and all it takes is the right partner. Both GM and Workhorse pointed to Rivian as example of what can happen. Perhaps Workhorse will find an investor that can give the company the boost it needs. (GM?)
It’s also worth nothing that major fleet operators have shown interest in Workhorse, and if the company can leverage more of that interest into additional investments, maybe the GM deal isn’t as doomed as it may appear.
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