As the Securities and Exchange Commission now requests voluntary information from the Lordstown Motors electric truck startup, more details about the arrangement between the company and one of its key supporters, General Motors, come to light. A big bonus in the deal for GM was a claim to most of Lordstown Motors’ future federal emissions credits.
As part of SEC filing of Lordstown Motors for the previous fiscal year, the company revealed that the General Motors supporter kept the option to buy the first three years of emission certificates from the startup, the reduced credits being valued at 75 percent of the normal price of the trading market. Details and a clip from the recording were highlighted by Sean O’Kane from Verge on Twitter:
The US government has set a cap on “permitted” emissions from car manufacturers and created a emissions trading program or allowances to allow car manufacturers that exceed the maximum limit to exchange credits with other companies with reserve credits. This allows high-emission car manufacturers such as Jeep, Ford and Chevy to continue to produce large volumes of pickups well above the corporation’s emission limits, as they can buy loans from companies such as Tesla, which do not uses none of its vehicle emissions credits because it produces purely electric cars.
At the time of GM’s somewhat surprising decision to support Lordstown Motors, it appeared to be an attempt to reassure former President Trump’s administration by securing more US factories in Lordstown, Ohio, Assembly plant. And the business quickly followed the development of GM EV trucks. It was never clear what the motivation for the deal was for GM, but getting a huge bag of low-emission loans brings the business into a clearer focus.
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If Lordstown’s initial plans to go into production by the end of 2021 are effective, GM’s first three years of emission credits would make it possible to sell more V8 engines in vans, SUVs and sports cars. Basically, the idea for GM was to turn Lordstown into its own Tesla-like credit machine, instead of having to buy them elsewhere.
The move is brilliant on paper, because in addition to having more room to play with V8 engines for a few more years, GM would also benefit from the EV pickups that Lordstown sells because of its investment. This also allows GM to break Lordstown technology and platform for its own vehicle brands.
The only problem now is that Lordstown Motors is in hard water with the SEC and is under a cloud after a research firm claimed to have falsified orders and misled everyone about its production capacity and timing. GM will not receive reduced credit if Lordstown never produces trucks, so we’ll just have to see if the investment pays off.