By David Shepardson and Tiyashi Datta
(Reuters) -Lordstown Motors warned on Monday it might be forced to file for bankruptcy due to uncertainty over a $170 million investment deal with its major shareholder Foxconn, sending shares of the Ohio-based electric truck maker down 23%.
Foxconn struck a deal in November to take a near-20% stake in the money-losing U.S. firm for up to $170 million. It has since invested $52.7 million and is balking at purchasing additional shares, citing a breach of their agreement, Lordstown said.
Foxconn said in a statement that it would fulfill its obligations under the agreement and remained open to continuing talks and working together to reach a mutually acceptable outcome.
The dispute is a fresh setback to the U.S. company, which has a dwindling cash balance and production challenges. The company said in February that it had made only 37 trucks for sale and recalled 19 vehicles delivered to customers or being used internally.
"There is substantial doubt regarding our ability to continue as a going concern," Lordstown said in a filing, referring to its dispute with Foxconn over the investment deal.
Without a resolution with Foxconn, other funding or new partners, it could be forced to file for bankruptcy or cease operations, it said, adding the company was in talks with the Taiwanese firm to seek a resolution.
It rejected Foxconn's allegation of a breach of its agreement, saying the claim was based on a delisting notice Nasdaq had sent the Ohio-based automaker.
Lordstown said last month the notice had no immediate impact on its stock listing and it had until Oct. 16 to regain compliance with Nasdaq's rules.
"Foxconn's actions are completely unwarranted. Their course of conduct has resulted in material — and what is becoming irreparable — harm to the company," Lordstown said in a statement.
"In the absence of a timely resolution, we will take all actions necessary to protect our business interests and enforce all of our rights and remedies."
Shares in Foxconn, formally called Hon Hai Precision Industry Co Ltd, closed up 1.4% on Tuesday in Taipei, outperforming the broader market.
Lordstown shares, which at one point tumbled more than 50% on Monday, closed down 23%, or 12 cents, at 40 cents, in heavy trading. They were down a further 5% in after hours trading.
The investment deal follows a separate $230 million sale of Lordstown's Ohio plant to Foxconn last year, as the Taiwanese contract manufacturing firm diversifies into electric vehicle manufacturing for a fresh revenue source.
Lordstown began production of its Endurance electric pickup trucks in the factory last September in collaboration with Foxconn.
The former GM plant is one of the highest volume single-line vehicle assembly plants in the world. It could build about 320,000 vehicles a year, excluding overtime.