“GREAT NEWS FOR OHIO! Just spoke to Mary Barra, CEO of General Motors, who informed me that, subject to a UAW agreement etc., GM will be selling their beautiful Lordstown Plant to Workhorse, where they plan to build Electric Trucks. GM will also be spending $700,000,000 in Ohio…in 3 separate locations, creating another 450 jobs. I have been working nicely with GM to get this done. Thank you to Mary B, your GREAT Governor, and Senator Rob Portman. With all the car companies coming back, and much more, THE USA IS BOOMING!”
The move follows GM’s decision to shutter the plant in March, laying off 1,400 workers. Donald Trump opposed the move due to the loss of American jobs. Now he’s reversed course because GM announced its $700 million investment in Ohio along with the GM plant sale.
The GM plant sale is being made to electric truck manufacturer Workhorse Group, assuming the deal actually gets done. Workhorse’s stock is traded as a tiny security that, until today, had a market cap of only $55 million. Workhorse stock is supported by only $763,000 in last year’s revenue and a $33.7 million loss.
That didn’t stop the market from bidding up Workhouse’s stock by some 200%.
Workhorse is backed by a weak balance sheet, with only $1.5 million in cash and $8.3 million in long-term debt. It is unclear where Workhorse will come up with the capital for the GM plant sale, although a “new affiliated entity” is part of the discussions.
The UAW has been perpetually upset with the GM plant sale, preferring GM just reopen the facility and hire back its workers. UAW Vice President Terry Dittes said:
“In response to General Motors’ announcement today, the UAW’s position is unequivocal: General Motors should assign a product to the Lordstown facility and continue operating it.”
The UAW was so angry about the GM plant closing in the first place that it filed a federal lawsuit to prevent it, hence its ongoing anger concerning the GM plant sale. The original pact between the UAW and GM called for any buyer to assume the terms of the collective bargaining agreement – a requirement that Workhorse almost certainly cannot afford.
There are big stakes for Workhorse stock going forward, as it is one of many companies trying to manufacture the new fleet of electric delivery trucks for the United States Postal Service.
There are also stakes for President Donald Trump. Lordstown is in Trumball County, which has traditionally been a district that tilted heavily Democrat. However, Donald Trump won the county in 2016 based on promises that he would kickstart American manufacturing again, particularly in this area.
Following the controversial auto bailout, GM has roared back to life, posting significant revenue and profits over the past several years. While GM has generated net income of $36 billion over the past four years, the company continues to burn cash at a rate of almost $10 billion annually.
Last modified: July 2, 2020 7:37 PM UTC