By Dietrich Knauth
NEW YORK (Reuters) - U.S. electric truck manufacturer Lordstown Motors began its bankruptcy case embroiled in litigation, laying out disputes with estranged partner Foxconn, rival electric vehicle manufacturer Karma Automotive, the U.S. Securities and Exchange Commission and several investor groups during its first court appearance.
Lordstown filed for bankruptcy protection in Wilmington, Delaware on Tuesday, putting itself up for sale after failing to resolve a dispute over a promised investment from Taiwan's Foxconn.
Lordstown attorney Thomas Lauria told U.S. Bankruptcy Judge Mary Walrath in Delaware that the Ohio-based automaker had faced "enormous" litigation costs before the breakdown of its relationship with Foxconn ultimately caused the company to file for bankruptcy.
Lordstown has alleged that Foxconn broke its promises to invest $170 million in Lordstown and collaborate with the company on vehicle development plans.
"Without the support negotiated for from Foxconn, financial and otherwise, the debtor is unable to proceed with its business," Lauria told Walrath.
Foxconn attorney Matthew Murphy said that Lordstown's allegations were "baseless" and that his client should not be blamed for Lordstown's operational failures. Lordstown had struggled with higher-than-expected costs, production shortfalls, and litigation risk well before Foxconn agreed to purchase Lordstown's Ohio manufacturing vehicle center in 2021, Murphy said.
While the breakdown of the Foxconn relationship was the primary reason for Lordstown’s bankruptcy, Lauria said that the company also faced investor lawsuits in Delaware and Ohio, a U.S. Securities & Exchange investigation, and a 2020 lawsuit filed by rival electric vehicle maker Karma.
Karma attorney James Sowka said that his client is Lordstown's largest creditor, based on a $900 million lawsuit that had been scheduled to go to trial in California federal court in September. Karma has accused Lordstown of engaging in “corporate espionage” by poaching employees and stealing technology related to Karma’s proprietary vehicle infotainment system.
Several investor groups have also brought claims against Lordstown, alleging that the electric truck startup misled consumers and investors. The SEC is investigating those claims as well, and is engaged in confidential settlement talks with the regulator, Lauria said.
The automaker's main product is the Endurance electric pickup truck, which is built at a former General Motors (NYSE:GM) small-car factory in Lordstown for commercial customers such as local governments.