Hon Hai Precision Industry Co (鴻海精密) yesterday said that it was continuing negotiations with Lordstown Motors Corp, despite the US electric pickup truck maker allegedly breaching an investment agreement struck in November last year in which Hon Hai would take an almost 20 percent stake in the automaker.
Hon Hai’s comments come after Lordstown, which disputes the breach, said in a regulatory filing on Monday that it could be forced to file for bankruptcy protection due to uncertainty surrounding Hon Hai’s investment.
In November, Hon Hai, also known as Foxconn Technology Group (富士康科技集團) globally, and Lordstown reached an agreement in which, through a private placement, the Taiwanese company would spend US$70 million to buy Lordstown’s Class A common shares and US$100 million to acquire the automaker’s Series A preferred shares.
Photo: Reuters
The investment deal would have given Hon Hai control of all of Lordstown’s outstanding preferred stock and 18.3 percent of its common stock.
However, Lordstown on Monday said that it had received a notice from Hon Hai on April 21 that it would pull out of the agreement if an issue related to the automakers’ NASDAQ listing was not resolved within 30 days.
Lordstown said that Hon Hai believes the investment deal has been breached because the automaker’s share price fell below US$1 for 30 consecutive trading days, triggering a delisting notice from the NASDAQ exchange.
Hon Hai said in a statement yesterday that although Lordstown had failed to observe the terms of the investment deal, it would continue talks with the automaker to reach a resolution acceptable to both sides.
Lordstown on Monday said that it expects Hon Hai to honor the terms of the agreement, which it says are still in effect.
The automaker said that the “previously disclosed” NASDAQ notice had posed no immediate effect on its stock listing, adding that it had until Oct. 16 to regain compliance with the stock exchange’s rules.
In May last year, Hon Hai paid US$230 million to buy an Ohio factory from Lordstown, making the state its first electric vehicle manufacturing hub in the US.
On Feb. 23, the factory paused production and delivery of the Endurance pickup truck to address what it described as “performance and quality issues with certain components.” Production resumed in the middle of last month.
Lordstown also voluntarily recalled 19 of the 31 vehicles it had produced up until January — only six of which had been delivered to customers — to address a “specific electrical connection issue that could result in a loss of propulsion while driving.”
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