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MarketScreener Homepage  >  Equities  >  Nyse  >  General Motors Company    GM

GENERAL MOTORS COMPANY

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GM Sells Closed Factory In Ohio -- WSJ

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11/08/2019 | 02:48am EST

By Mike Colias

General Motors Co.'s closed Lordstown, Ohio, assembly plant -- which became a flashpoint for President Trump and unionized workers angry over the company's factory closures -- has a new owner.

The auto maker has sold the factory to a new electric-truck maker, Lordstown Motors Corp., for an undisclosed amount, the startup company said Thursday. Lordstown Motors said it is seeking investment to begin production in late 2020 of electric pickup trucks, aimed at business and government customers. Its first model will be called the Endurance.

GM said the sale to Lordstown Motors could help the area become a hub for electric-vehicle manufacturing. GM has said it also will invest in a nearby factory that will make battery cells for electric vehicles.

GM disclosed in May it was in talks to sell the plant to the newly formed manufacturer, saying the move would preserve jobs as the auto industry transitions from traditional gas-powered vehicles to those running on electricity. That news was lauded by President Trump, who had urged GM to keep the factory open and salvage jobs in the politically pivotal state.

During recent contract negotiations, officials with the United Auto Workers -- the union representing workers at the factory -- unsuccessfully pressed GM to earmark a different model to the Lordstown plant to keep it open. Instead, the new four-year contract ratified by GM factory workers last month after a 40-day strike paved the way for GM to close or sell the plant.

The electric-truck startup plans to use union labor but has yet to have contract discussions with the UAW, said Steve Burns, Lordstown Motors' chief executive. The union said it is committed to ensuring good, well-paying jobs at the plant.

The Lordstown factory will employ roughly 400 workers to start, Mr. Burns added. He expects pay to be competitive with wages workers had been making under GM ownership, which ranged from about $17 an hour to $30 an hour.

Even so, battery-powered vehicles require fewer parts and are less complex to assemble, which means the factory likely will employ far fewer employees than the roughly 4,000 who worked at the GM plant a few years ago.

The sprawling, 6-million-square-foot plant in northeast Ohio was opened in 1966 and once was home to marquee GM models, including the Chevrolet Bel Air and Impala.

The factory survived GM's 2009 bankruptcy thanks to the auto maker's plans to redouble efforts in small cars. But GM gradually laid off Lordstown workers in recent years amid an industrywide collapse in sedan sales, as buyers flock to sport-utility vehicles.

GM's decision nearly a year ago to close the Lordstown factory and three other U.S. plants as part of a restructuring sparked a backlash from Mr. Trump, the UAW and elected officials in Ohio. GM said it no longer needed the factory because of poor sales of the Chevrolet Cruze compact car built there.

Mr. Burns, who has started software companies and co-founded another electric-truck company more than a decade ago, is working to raise at least $300 million to jump-start the manufacturer. He hopes to attract strategic investors, similar to the approach of Michigan-based Rivian Automotive, an electric-truck maker that has drawn investment from Ford Motor Co. and Amazon.com Inc.

Mr. Burns said the company intends to eventually fill the plant, which has capacity to produce about 500,000 vehicles annually. GM made roughly half that number of Cruzes in recent years before sales declined. GM closed the factory in March.

GM and Lordstown Motors didn't disclose the sale price. In the past, closed automotive plants have changed hands for relatively small sums.

Rivian in 2017 bought a shut Mitsubishi Motors Co. factory in Illinois for $16 million. In 2010, Tesla Inc. paid $42 million for its Fremont, Calif., factory, which had been jointly owned by GM and Toyota Motor Co.

Lordstown Motors will use much of the plant's existing equipment, including the paint shop and robotic welding machines, which will save on costs, Mr. Burns said.

"The plant is still warm from when it made the last Chevy Cruze," he said. "That gets us to market a lot faster and dramatically lessens our [capital expenditures]."

Mr. Burns is the co-founder of Workhorse Group Inc., a Cincinnati-area electric-truck maker formed more than a decade ago. The company has a 10% stake in Lordstown Motors, Mr. Burns said.

Lordstown Motors will face competition from Rivian, which recently landed an order for 100,000 vehicles from Amazon, as well as GM and Ford, which both have electric pickup trucks in the works and large commercial-vehicle portfolios.

Mr. Burns said an exclusive focus on electric vehicles for fleet buyers will help his company compete. "Things are changing so fast, it really requires a nimble company to take advantage of that," he said.

Last month, Lordstown Motors hired Rich Schmidt, a former director of manufacturing at Tesla, as production chief.

Write to Mike Colias at Mike.Colias@wsj.com

Stocks mentioned in the article
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FORD MOTOR COMPANY 1.01% 9.02 Delayed Quote.16.73%
GENERAL MOTORS COMPANY 0.65% 35.54 Delayed Quote.6.25%
MITSUBISHI CORPORATION -0.12% 2922 End-of-day quote.-1.42%
MITSUBISHI MOTORS CORPORATION -0.40% 492 End-of-day quote.-13.99%
NISSAN MOTOR CO., LTD. -0.22% 675.1 End-of-day quote.-21.14%
TESLA INC. 1.67% 335.89 Delayed Quote.0.93%
TOYOTA INDUSTRIES CORPORATION -0.16% 6440 End-of-day quote.30.89%
TOYOTA MOTOR CORPORATION -0.54% 7727 End-of-day quote.25.03%
WORKHORSE GROUP INC. -4.80% 2.875 Delayed Quote.444.51%
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Sales 2019 137 B
EBIT 2019 8 580 M
Net income 2019 6 281 M
Finance 2019 4 076 M
Yield 2019 4,36%
P/E ratio 2019 8,06x
P/E ratio 2020 5,73x
EV / Sales2019 0,34x
EV / Sales2020 0,29x
Capitalization 50 779 M
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