GM Might Have Made a $2 Billion Mistake
In September 2020, GM announced a deal with the relatively unknown competitor to Tesla, Nikola. Which, if you did not know, coincidentally is the first name of the scientist Tesla is named for, Nikola Tesla, and not a very imaginative name.
Trevor Milton founded Nikola in 2014 to help revolutionize trucking. The company seemed like an enticing investment for GM to try to get ahead in the electric car sector. However, it appears this massive investment might have been a huge mistake.
The deal between Nikola and General Motors
GM announced on September 8, 2020 that it teamed up with Nikola to produce the Badger, a fully electric truck with 906-hp, 980 lb-ft torque, and a 600-mile range. The company provided Nikola with the hydrogen fuel cell it developed with Honda, as well as its new lultium battery.
In exchange, Nikola gave GM 11% of equity, which amounted to about $2 billion, as well as agreeing that GM would be the sole providers of hydrogen fuel cells in Class 7 and 8 trucks, excluding Europe. After the deal was announced, Nikola’s stock went up 33%. Two days later things took a turn.
Shady accusations around Nikola
On September 10th, Hindenburg Research released a report, of truly Hindenburg-level disaster. It was titled, “Nikola: How to Parlay an Ocean of Lies Into a Partnership With the Largest Auto OEM in America.” It was backed by an incredible amount of documentation, including texts and emails, as well as a line of whistleblowers ready to step up to the mic.
The many lies pointed out in the aritcle
While many lies were highlighted in the report, there are a few that standout.
For one thing, the Nikola One never actually worked. During the big unveiling, it was actually tied to the stage and was missing parts.
A video of the Nikola One cruising down the road was released soon after the unveiling and was found to also be a lie. Employee texts show that they towed the truck to the top of a hill and used gravity to put the truck in motion.
Milton claimed Nikola’s headquarters to be completely powered by 3.5 megawatts of solar energy from solar panels on the roof. Nope, not even a little true. This was easily shown to be false when people actually looked at the roof using satellite images.
Nikola announced that it would be revealing a “game-changing battery” from Zapgo, which of course did not really exist. In addition, the president of Zapgo, Charles Resnick, was caught using a NASA expense account to acquire sex workers.
Where does GM stand today?
After all of these shenanigans, what is the status of Nikola, GM, and this deal? Well, interestingly, the deal still appears to be in place. Even after the Justice Department launched an investigation into Nikola, Trevor Milton resigned and was subsequently accused of sexual assault by two women, one of whom was his cousin.
While GM did make a statement that “GM strongly condemns sexual harassment and abuse of any kind” it did not terminate the deal. Which, a little awkward, but honestly, there is not really any downside for GM in this deal.
It does not cost GM anything, the company has a lot of ways out of the deal written into the contract, and the Nikola brand is on everything, not GM. And even though it was announced in November that the Badger would not be built, GM and Nikola are still partnering to create electric trucks.
The situation is still on-going and nobody is really sure how things are going to shake out for GM or Nikola. One thing is for sure, GM probably wishes it never got involved in this mess to begin with.