Can The New Lordstown CEO Save The Company?
Lordstown Motors is an electric vehicle startup. On the 14th of June 2021, CEO Steve Burns resigned among allegations of mismanagement. On the 26th of August 2021, Lordstown named Daniel Ninivaggi as the next Lordstown CEO. After announcing the appointment of the ex-Icahn Enterprises executive, Lordstown’s stock prices shot up 41.4%. Can Ninivaggi restore investor confidence and save Lordstown Motors?
Steve Burns, Founding Lordstown CEO, Faced Allegations of Mismanagement
In March 2021, a Wall Street firm named Hindenburg Research published a tell-all titled “The Lordstown Motors Mirage: Fake Orders, Undisclosed Production Hurdles, And A Prototype Inferno.” The firm alleged that CEO Burns lied about preorders and the company’s capabilities. For example, burns often cited having 100,000 preorders for the Lordstown Endurance electric truck. Hindenburg clarified that many preorders were non-binding letters of intent. In addition, many letters were from shell companies without the means to buy Endurance trucks. To make matters worse, Burns bolstered his total with outdated letters of intent from when he was CEO of the Workhorse Group.
In the same report, Hindenburg asserted that malfunctions plagued the prototype Endurance trucks. The firm revealed that the first Endurance prototype caught fire on its inaugural test drive. They added that the Lordstown factory did not have a way to manufacture batteries. They even interviewed employees who estimated the truck would not go into production for three or four years.
Previous Lordstown CEO Resigned Amid Plummeting Stock Prices
On the day Hindenburg Research published its report, Lordstown Motors’ stock dropped 17%. In the wake of the report, the Justice Department and the Securities and Exchange Commission opened investigations on Lordstown Motors. In addition, Lordstown Motors launched an internal investigation.
On the 8th of June 2021, Lordstown Motors amended its annual SEC report and came clean. The company admitted that it did not have enough money to begin production of the Endurance truck. On the 14th of June, Steve Burns resigned as CEO of Lordstown Motors.
The Announcement of a New Lordstown CEO
On the 26th of August, Lordstown Motors announced its new CEO: Daniel Ninivaggi. Ninivaggi’s past positions include CEO of Icahn Enterprises, the parent company of several aftermarket suppliers including Pep Boys, Auto Plus, and AAMCO transmissions.
After the announcement, Lordstown Motors’ stock shot up 41.4%. In the end, the company’s stock stabilized and closed out the dat at $6.40 a share.
Ninivaggi told CNBC that his focus as CEO would be investor confidence. He specified, “We do that by delivering on our production plan and getting through all of our testing and certification…We need to get the truck out the door, and deliver performance, and commercialize it.”
How Lordstown CEO Daniel Ninivaggi Can Save The Company
The only problem with Ninivaggi’s plan to “get the truck out the door” is that Lordstown Motors has already admitted to the SEC that it does not have enough money to go into production. In addition, Hindenberg Research revealed the Lordstown plant was unequipped to produce batteries. Employees even expressed concern over Burns’ suppliers for components such as in-wheel hub motors.
Perhaps Ninivaggi can woo a single investor with enough capital to launch Lordstown into the production phase. But if the new CEO wants to restore the confidence of all investors, he must first engineer a capable and reliable prototype of an electric truck.
Lordstown aimed for an Endurance with fewer moving parts than any motor vehicle on the road. Burns promised a fleet operator driving the Endurance for 400,000 miles over eight years would spend less than $20,000 total on electricity and repairs. If Lordstown Motors can engineer and manufacture such a truck, American workers will forgive all of the company’s previous missteps.