What GM's Divestment Of Lordstown Motors Shares Really Means
GM took a loss on its investment, but what was the investment really about?
News is only just beginning to come out about GM selling its shares of Lordstown Motors, the floundering EV truck startup. However, even before GM's latest EV truck, the 2024 Chevrolet Silverado EV broke into view, the sale of GM's 7.5 million shares of Lordstown had already been completed. While some are focusing on the money GM lost in this misadventure, the reality is that the investment was less about getting Lordstown Motors going, and more about offloading the plant for a variety of reasons. It sounds weird, we know, but here's how it all worked out.
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A Timeline Of Events
This story really begins around November of 2018, when GM announced that production of several vehicles was coming to a close and a few of its plants were being un-allocated. The one crucial to our story is the Lordstown, Ohio plant where the Chevrolet Cruze was produced for the U.S. At the time, there was significant political pressure to keep the plant open.
The good news for GM, however, was that around that same time, the company that would become Lordstown Motors, founded by Workhorse's ex-CEO Steve Burns, began to form—a process that would continue into early 2019. The plan was to license an EV pickup truck platform developed by Workhorse called the W-15. This platform, as used by Lordstown, would later become the Endurance—but first, it needed a plant to manufacture it. By the later 2019, Lordstown and GM would come to an agreement and transfer ownership of the Lordstown, Ohio plant to its namesake company.
This agreement saw no significant funds exchanged. All GM did was sign over the mortgage and help fund some of the operating costs and other expenses while Lordstown was busy raising money to get off the ground. In return, what GM gained were positive press for selling the deallocated plant to an American startup rather than closing it entirely, as well as clearing its books of a large property that wasn't in use.
About a year later, Lordstown Motors merged with a Special Purpose Acquisition Company (SPAC). SPACs raise money from other investors with the intention of merging with an existing company or startup. This typically happens with startups more than other existing companies. The key here was that this SPAC was already a publicly traded company, which meant that Lordstown Motors went from privately owned to publicly traded "overnight." As part of the initial public offering (IPO) process, GM contributed $25 million in cash and $50 million in-kind—which was the handover of the plant, its equipment, and GM's help with operational costs—and received 7.5 million shares in Lordstown Motors.
Finally, in the fourth quarter of 2021, GM sold its shares into the open market in a series of trades, ending their investment into Lordstown Motors. GM didn't make a fuss, nor did it release a statement when it happened. It didn't even make a filing of its divestment of its Lordstown shares because those 7.5 million shares only equated to 5 percent or less of a stake in Lordstown Motors. The sale, and the loss, also wasn't filed in the sale of its shares, which did occur in the open market, as the result of the sales were "immaterial to GM's financial results." On or around March 1, 2022, the Detroit Free Press asked about the status of GM's investment after Lordstown reported their quarterly financial results. When it reported on this news, it was a shock as there was no hubbub or even a mention of it when GM released its Q4 report earlier in 2021.
