STEVE BURNS WANTS LORDSTOWN MOTORS TO BUILD THE WORLD’S BEST ELECTRIC PICKUP TRUCK
Cincinnati idea guy Steve Burns has the support of President Trump, General Motors, and big-time investors, but can he deliver?
By Jim DeBrosse – November 20, 2020
In late June, when a prototype of Lordstown Motors’s new Endurance electric pickup truck rolled on stage at the old General Motors plant in Lordstown, Ohio, the cab’s passenger doors popped open and out stepped Cincinnati entrepreneur Steve Burns, the company’s CEO, and Vice President Mike Pence, dressed in a perfectly-tailored dark suit.
Pence took the podium in front of a giant American flag to become the truck’s unofficial pitchman. “It really is an honor to be here, to be able to drive up and help unveil what will soon be the first fully electric pickup truck on the market in the United States of America,” he said. “Ladies and gentlemen, I give you the Lordstown Endurance.” The announcement was met with wild applause from a small but enthusiastic audience of company executives, government leaders, and investors.
In the run-up to November’s presidential election, Lordstown has become as much a political issue as an economic one. During the Republican National Convention in August, a prerecorded video featured Youngstown trucker Geno DiFabio standing with Pence in front of Abraham Lincoln’s childhood home in Indiana, thanking Trump for his handling of GM’s shutdown of the Lordstown plant. DiFabio says GM wouldn’t have sold the plant to Lordstown Motors without Trump in office. “There’s no other president that could have done it,” he said. “There’s no one that has even tried to do it. President Trump’s a doer. He appreciates every one of us, and I know he does. I’ve seen it.”
But Democrats beg to differ. Lordstown Motors’s plan to hire 600 workers is hardly compensation for an assembly plant that once employed thousands. Senator Sherrod Brown says Trump ignored his repeated calls asking the president to intervene when GM closed the plant. In a statement released just prior to Pence’s unveiling of the Endurance, Brown said, “When GM pulled out of Lordstown, President Trump didn’t lift a finger to help, while his tax bill gave GM a 50 percent coupon to ship jobs overseas. The people of Lordstown…don’t need a photo op, they need action.”
Even if Lordstown Motors begins production next year as promised, motorists aren’t likely to see an Endurance zipping past them on the highway with a gun rack in the back window or a tongue-lolling dog in the truck bed. With a price tag of $52,500 and a range of 250 miles per charge, the Endurance is being aimed at the full-sized commercial fleet market whose business owners covet the truck’s fuel economy—the equivalent of a 75-mile-per-gallon gas-powered vehicle.
Known more as a high-tech innovator with strong sales skills than a manager who can bring a successful product to market, Steve Burns has brokered a complex deal to turn his 17-month-old private venture into a publicly traded company with an expected infusion of $675 million in cash. If the deal is finalized, Lordstown Motors will merge later this year with DiamondPeak Holdings, a company formed specifically to purchase Lordstown Motors and raise money for it on the Nasdaq stock market under the trading symbol RIDE. DiamondPeak’s investors have already agreed to pump $500 million into the new company.
Shell companies like DiamondPeak, known as special purpose acquisition companies, or SPACs, are an increasingly popular shortcut to turn private startups into public companies and, critics say, to avoid more serious scrutiny from investors. DiamondPeak was the brainchild of David Hamamoto, an East Coast real estate whiz who’s been at the helm of a dozen different companies. Hamamoto, 59, will remain chief executive of DiamondPeak while Burns will continue as CEO of Lordstown Motors. Burns and Hamamoto did not respond to requests to be interviewed for this story.
Hamamoto and another principal investor in DiamondPeak, Mark Walsh, are well known on Wall Street as real estate dealmakers. Both have had dramatic upturns and downturns in their careers. Walsh was flying high as head of Lehman Brothers’s real estate division, specializing in high-risk subprime and commercial mortgages, until the bubble burst on the housing market and the investment bank went belly-up in September 2008. Even so, Walsh was paid $70 million in the three years before the nation’s economic collapse.
In 2016, Hamamoto merged his NorthStar real estate and assets management companies with the investment management firm Colony Capital, headed by Trump confidante Thomas Barrack, in what was supposed to produce a real estate investment trust valued at $9 billion. The venture sank soon after, but Hamamoto managed to make $27 million selling off his shares. He told industry analysts in August that DiamondPeak looked at “hundreds of companies” before choosing to invest in Lordstown Motors because the company “stood out” as a leader in the manufacture of electric vehicles and light-duty trucks.
Burns will likely need every bit of DiamondPeak’s capital reserves to convert the Lordstown plant from making a traditional compact car like the Cruze to an innovative electric pickup truck worthy of the hype. Lordstown’s other financial backers include General Motors, which is investing $75 million into the company, as well as Burns’s previous Loveland-based startup, Workhorse Group. Together, these investors are expected to pour $675 million into the new company by year’s end.
After more than a year of pursuing investors, Burns and Lordstown Motors now appear to have the financial backing they need to make a go of it, says Sam Abuelsamid, a principal analyst specializing in electric vehicles for Guidehouse Insights. “Whether they’re going to be successful is another story,” says Abuelsamid. “Lordstown Motors really has a big challenge ahead. They’re coming into a very competitive market for electric pickups in the next year and a half.”
If the merger with DiamondPeak proceeds as planned, Lordstown will hire about 600 employees to start building the Endurance. Burns told The Detroit Free Press in August that he plans to build 20,000 vehicles in the first year and, starting in 2022, hire more people to build other electric vehicles, possibly SUVs or a mid-size pickup. In a teleconference with industry analysts that same month, Burns said the merger will allow Lordstown to at least break even by 2022, the first full year of production. By 2024, he said, he expects the company to manufacture 100,000 vehicles and turn a 10 percent profit.
Burns has pushed back the startup date for production multiple times, from late 2020 to early 2021 and most recently to mid-2021. But the earlier the better, Abuelsamid says, if Lordstown wants to emerge a step ahead of its competitors. Although the pandemic-induced recession may end up disrupting the best-laid plans, the field of companies promising to deliver electric pickup trucks over the next three years includes GM, Ford, Tesla, Irvine, California–based startup Rivian, and Phoenix-based startup Nikola Motors.
Automakers and investors are convinced that the lower operating costs and spine-mashing acceleration of electric motors will persuade America’s pickup truck owners to give up their beloved gas guzzlers for what Burns has called “the new normal.” Wall Street is a big believer. Investors are sinking their money into electric pickup companies with a zeal perhaps surpassed only by those pinning their hopes on an effective vaccine for COVID-19. Rivian alone has seen a cash influx of more than $5 billion since the beginning of 2019, including $500 million from Ford and $700 million from Amazon, which plans to use Rivian’s trucks for its delivery fleet.
Tesla’s publicity-savvy CEO Elon Musk has already built predictable anticipation around the company’s new Cybertruck, production of which is slated to begin in late 2022. And even though GM is investing in Lordstown Motors, the Big Three automaker has its own plans for an electric Hummer and full-sized electric Chevy pickup for the consumer market. With an eye to introducing 20 different electric vehicles by 2023, GM is partnering with LG Chem to build a $2.3 billion battery plant in Lordstown, not far from the auto plant.
Meanwhile, Ford is developing an electric version of its best-selling F-150 pickup while also partnering with Rivian, which plans to introduce an electric pickup in summer 2021 (about the same time as Lordstown Motors) that boasts a 400-mile range. Not to be outdone, Nikola touts its Badger electric pickup, to be produced in 2022, as “unlike anything on the market,” with a 600-mile range and an awe-inspiring 906 peak horsepower.
Burns has repeatedly told the media that the Endurance’s “in-hub” electric motors will give it a distinct advantage over its competitors. Rather than a single motor riding over an axle, each wheel of the Endurance will have its own built-in motor, generating 600 horsepower from all four wheels. By comparison, the Dodge Ram’s much-vaunted 5.7-liter Hemi V8 supplies less than 400 horsepower, with about one quarter of the Endurance’s fuel efficiency (an average of 18 miles per gallon). In August, Fiat Chrysler announced it will start making a 700-horsepower version of its gasoline-powered Ram pickup for those who might fear for their manhood against the emerging electric competition. And given that each wheel of the Endurance has its own power source, the truck is less likely to get stuck in mud or snow.
Lordstown Motors purchased the rights to its hub motor design from Workhorse Group, Burns’s previous startup, in exchange for 10 percent ownership of Lordstown and 1 percent of its future gross sales. But perhaps more crucial to its future, Workhorse has been promised the use of part of the massive Lordstown plant to manufacture its own electric vehicles.
Workhorse is one of three finalists vying for a $6.3 billion contract from the U.S. Postal Service to replace its aging fleet of gas-powered delivery trucks with electric ones. An announcement on the 180,000-vehicle deal is expected by the end of the year, and the arrangement to use the Lordstown plant makes Workhorse a serious contender. While the Loveland company’s 250,000-square-foot factory in Union City, Indiana, would be hard-pressed to meet the contract’s demands, Lordstown’s sprawling plant has more than 24 times the capacity.
Lordstown Motors says it already has 27,000 pre-orders for the Endurance, primarily from commercial fleet owners, a market that Burns knows well from his years at Workhorse Group, which he founded in 2007. But while Burns headed up Workhorse, it lost nearly $150 million from its inception in 2007 to his departure in 2019 and produced fewer than 400 vehicles. In an e-mail, Workhorse Executive Vice President Daniel Zito said such performance is not unusual for a startup in an industry “that is capital-intensive and requires significant volume to lower its component acquisition costs. Workhorse was still in the process of raising vehicle volume during Steve’s tenure.”
Before the end of the year, Workhorse hopes to deliver another 300 to 400 of the 1,000 electric vehicles promised to UPS since mid-2018, Workhorse CEO Duane Hughes announced over the summer. But two other innovative ideas Burns developed at Workhorse have yet to get off the ground, including the SureFly personal helicopter, a two-person flyable drone with a 75-mile radius, and HorseFly, a roof-mounted drone aimed at multiplying the delivery capabilities of UPS trucks. After a year of looking for potential buyers, Workhorse sold both designs late last year to the design and manufacturing firm Moog, based in New York. Moog paid $4 million to pick up the assets and liabilities for SureFly and, as part of the deal, became a joint partner with Workhorse in further development of HorseFly.
For years prior to his departure from Workhorse, Burns had also been looking to build an electric pickup truck. So when GM announced the closure of the Lordstown plant in November 2018, he saw the stars align. Workhorse’s innovative truck technology could be combined with the industrial capacity of an already existing auto plant—one that was at the center of a national media storm after Trump blasted GM in a series of tweets for abandoning the plant and its 1,700 employees.
The shutdown gave Burns the opportunity to capitalize on the national attention by luring investors and tapping into the region’s idled supply of skilled workers. Burns left his CEO position at Workhorse in February 2019 and started looking for partners and investors. By November of last year, GM had made a deal with Burns to sell the shuttered plant for $20 million along with a $40 million loan toward the cost of conversion.
Burns has said he will work with union labor at Lordstown and pay wages comparable to those of the Big Three automakers, about $31 an hour. His announcement last November came just two weeks after the United Auto Workers signed a new contract with GM following a 40-day strike. The union failed to get GM to keep the factory open, but it garnered substantial pay increases and bonuses and a promise that GM would invest $9 billion in its U.S. factories. The Chevy Cruze, another small-car victim of America’s preference for roomier vehicles like SUVs, will continue to be made outside the U.S.
Trump was quick to jump on the sale of the Lordstown plant with a pair of self-congratulating tweets. “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!”
Did Trump and the Ohio GOP help with the sale of the plant? Burns, a Trump supporter, certainly wasn’t going to dampen Trump’s enthusiasm. Besides, Trump’s tweets were enough to double Workhorse’s stock value overnight. Hailed as the savior of Lordstown, Burns soon became the subject of a story in The New York Times that was more skeptical, pointing out Workhorse’s troubling financial history and calling Burns “a corporate cipher.”
But among his family, friends, and a small group of Cincinnati investors, Burns’s reputation for innovation and can-do persistence has inspired loyalty and confidence. “Steve has a way of always finding a way no matter what the challenge,” says Joe Lukens, a friend of Burns and one of his long-time financial backers. “That’s why I’ve always had to invest in him. There’s no ‘no’ in his vocabulary. He’ll be juggling 20 different things that don’t make it to the end, but that 21st thing will.”
Burns graduated from Archbishop Moeller High School in 1977 before going on to Ohio State University and earning a degree in electrical engineering. The father of five lives with his family in Maineville. Burns first made his mark as a software entrepreneur, launching a startup for handling the digital flow of newspaper classified ads. The company was purchased by media giant Gannett, owner of The Cincinnati Enquirer, in 1994.
Workhorse’s Zito worked with Burns in their early days at Gannett and beyond. “If Steve sees a niche [in the market] that people aren’t serving, he acts quickly to figure out a way to be a leader in that niche,” he says.
One of those niches Burns saw early on was voice recognition technology. In 2004, he created a startup called MobileVoiceControl—a predecessor to Siri back in the days when people were still chatting on Blackberries. Burns sold the company a year later to Massachusetts-based Nuance Communications, which then used some of his patents to create Siri for Apple. Burns and Zito continued to work for Nuance for several years, even though Burns’s real passion lay elsewhere.
Zito remembers the two of them “sitting side-by-side in our cubicles at Nuance Communications, probably around 2005 or so, and Steve sits back in his chair and he says, Dan, I’m going to start an electric vehicle company. And I said, What!? That had been his dream for a while. I don’t know where it started.”
The leap from developing software to manufacturing electric trucks is not as dramatic as many people might think, Zito says. “What underlies [electric] vehicles is software” that controls starting and stopping the motor and regulating the flow of energy from the batteries, he says. “If you think about it, modern cars and trucks are computer rigs running around on four wheels.”
Burns left Nuance in 2007 to start AMP, which first specialized in converting conventional vehicles from gas to electric power. But by adding $25,000 for the conversion to the price tag of a $50,000 luxury car, AMP failed to find enough takers to be profitable. Burns then got a break in 2010 when Navistar, a Chicago-based manufacturer of mostly diesel trucks with a plant in Springfield, went looking for a partner to build electric vehicles for UPS. Burns came on board with AMP, later acquiring Navistar’s Workhorse truck brand and changing his company name to Workhorse Group. In 2016, UPS ordered more than 300 trucks from the Indiana plant Workhorse acquired from Navistar.
An investor in Burns’s earlier startups, including MobileVoiceControl, Lukens owned 13 percent of Lordstown Motors as of May of last year, according to The New York Times. Burns and Lukens are both Moeller grads—the football standout was two years behind Burns— but the two didn’t get to know each other until their sons played on the same soccer team at St. Margaret of York in Loveland. Lukens is best known in Cincinnati as the former president of Neace Lukens, one of the city’s largest insurance agencies, which he sold in 2011.
Lukens says he’s confident that Burns will make a success of his plans for converting the Lordstown plant. But in a May 2019 story in The New York Times, he questioned whether Burns was the right person to run Lordstown Motors. “At some point in time, the company needs to be handed over to an operational person,” Lukens told the paper. Lukens says he doesn’t remember making the comment.
While at Workhorse, Burns had a habit of hiring relatives and friends as his top executives, which several former employees say led to favoritism and a lack of professionalism. “Friends and family company ran [sic] by delirious and unprofessional individuals,” a former project engineer wrote in an anonymous company review on Indeed.com. Another former engineer posted on the same website: “The place is a joke. If you [are] part of the family, you have a secure job. If not, you could be thrown out like trash at any moment.”
But Zito doesn’t think hiring people you know is necessarily a liability. “It really reduces the number of unpleasant surprises,” he says. “We think it’s an asset to find people who are like-minded and fit in with us.”
Burns has brought many of the same people from Workhorse to fill key positions at Lordstown Motors, including the new company’s chief operating officer; human resources officer; manufacturing engineer; and marketing manager, his daughter Brittney. At the same time, though, he has also pulled in two recruits with General Motors experience (chief engineer and human resources director) and a new chief production officer with experience at Tesla. The new company maintains offices across the street from Workhorse headquarters in Loveland.
Burns has touted the acquisition of the old GM plant as a key advantage for his new company in beating competitors to the market. But auto industry analysts are less optimistic. “GM has likely already removed some of the valuable equipment from the plant and transferred it to other GM locations,” says Arun Kumar, managing director in the Chicago office of AlixPartners, a worldwide consulting firm. “The power train assembly for electric vehicles, which is very different from the ones used for internal combustion engines, will require significant new investments” for new equipment and converted space.
But with the promise of $675 million for making Burns’s dream of an electric pickup come true, long-time partner Zito says the odds of succeeding are in Burns’s favor. “I think that everything is there to be successful,” he says. “I think the funding is there. The plant is certainly there. And the willingness to work hard is there. If anybody can do it, I think Steve can.”