GM postpones signing of contract with Nikola because it is likely renegotiating

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General Motors has pushed back the closing date of its ongoing partnership with Nikola Corp., most likely to renegotiate terms after Nikola’s share price fell.

The Phoenix-based electric truck company faces allegations of fraud, but GM has said it intends to close the deal with the company.

On Tuesday, GM released a statement that said, “Our deal with Nikola has not been closed. We are continuing our discussions with Nikola and will provide further updates when appropriate or necessary. “

GM was tentatively scheduled to reach a 10-year deal on Wednesday. The deal would allow GM to share the technology and parts with Nikola in exchange for inventory and achieve further savings.

But this closing date of September 30 was still only an “early” date, according to Nikola’s US Securities and Exchange file. The record also states: “The subscription agreement may be terminated by the company or by GM Holdings if closing has not occurred by December 3, 2020.”

Nikola released a statement saying he would continue to work with GM to secure the deal.

Some analysts have questioned whether GM should strike a deal, or at least renegotiate its original deal with Nikola, after a report from a short seller alleged Nikola had committed “complex fraud” in the past.

Even before this report, Bloomberg reported that when Nikola showed his Nikola One semi-trailer in 2016, Nikola falsely stated that it was a working prototype even though it didn’t work and was missing parts. essential parts.

To add to this, recently released reports indicate that Nikola founder Trevor Milton, who resigned on September 21, is accused by two women of sexually assaulting them when they were under 18. He denied both allegations.

“Even more mass sales”

“Given Nikola’s drop in equity, Milton’s departure and a fraud investigation, I can’t imagine GM agreeing to the original terms of the deal and I suspect they are looking for much more equity from Nikola, ”Morningstar’s David Whiston mentioned. “They can get it too because if GM pulls away then I think this news would probably lead to another sell off in Nikola’s shares.”

A GM spokesperson declined to comment beyond the company’s statement released Tuesday and GM is not providing any new target date for the shutdown beyond the stated SEC filing that includes the Dec. 3 deadline. .

Another industry observer agreed with Whiston.

“When GM initially negotiated the deal with Nikola, it received shares worth $ 2 billion. Now, due to the irregularities of ex-president Nikola, the value of that share has dropped by half, “said John McElroy, host of Autoline.tv.” There is no doubt that GM is renegotiating the deal to make up for this loss. Nikola will likely accede to GM’s demands as losing him as a partner would be devastating for the startup. “

Nikola’s share price on Tuesday traded at $ 17.85 at 10:23 am The stock closed at $ 17.88. That’s down from $ 37.57 on September 10.

GM executives have remained loyal to the partnership, announced on September 8, with Nikola. GM CEO Mary Barra told Wall Street that GM has done extensive due diligence on the company.

In the initial deal, which former GM vice chairman Steve Girsky helped secure, GM would build the all-electric Nikola Badger pickup, which is expected to hit the market in late 2022. Nikola will give GM 2 billions of dollars in actions and other costs. advantages. GM has the right to appoint a director at Nikola.

Following:GM takes $ 2 billion stake in Nikola to make electric pickup trucks

Then there’s the key provision that allows GM to keep 80% of the regulatory electric vehicle credits generated by the Badger pickup it will manufacture for Nikola, once that pickup starts selling.

Render of the Nikola Badger electric pickup, which GM will help design in a partnership with Nikola Corp.  announced on September 8.

The remaining 20% ​​of the credits will be transferred to Nikola, but GM has the right of first refusal to buy them at current market rates. Credit provisions are all the more valuable as environmental regulations tighten and their failure to comply can result in astronomical fines.

Girsky replaces Nikola’s president following Milton’s resignation.

Now Girsky must quickly find a permanent chairman who the shareholders trust, McElroy said.

“It also needs to spotlight Nikola CEO Mark Russell and his leadership team to show the company is more than Trevor Milton,” McElroy said. “Nikola must also publicly demonstrate its technology, like GM has done with its EV Day and Tesla with its Battery Day. Nikola must prove to the public that it is more than smoke and mirrors.”

GM’s other partners

GM has announced that it will bring at least 20 new electric vehicles to market by 2023. To make this happen in the most cost-effective manner, GM is forging a number of partnerships.

Just days before announcing its deal with Nikola, GM said it had signed a non-binding memorandum of understanding with Honda to establish a North American automotive alliance. The two will share platforms and vehicle technologies in North America starting next year.

In April, GM and Honda announced that they would jointly develop two all-new electric vehicles for Honda that will be installed on GM’s global electric vehicle platform powered by GM’s Ultium batteries, but Honda will design the exterior and l inside the vehicle.

In July, GM announced its partnership with EVgo, the world’s largest public fast-charging network for electric vehicles, to triple the size of the U.S. public fast-charging network.

All of these partnerships will ultimately benefit consumers.

“The huge savings for both (sides) can be used to roll out future EVs at much lower prices and further stimulate demand, resulting in even lower unit costs over time,” said David Leggett, analyst automotive at GlobalData, a data and analytics company. “The key is to share the very high development costs of this advanced technology and lower the prices for consumers.”

Nikola controversy

But none of GM’s other partnerships have received negative press like Nikola has encountered.

On September 10, a report by Hindenburg Research accused Nikola of being a “complex fraud”. Nikola has disputed the allegation, but federal authorities are investigating.

A day after his resignation, Milton’s Twitter account @nikolatrevor was deleted. His spokesperson declined to comment.

Trevor Milton, former Chairman and CEO of Nikola Corp.

Following:Nikola’s ex-CEO mysteriously disappears from social media after abrupt resignation

Milton has agreed to hand over around $ 166 million in equity and a two-year, $ 20 million advisory contract as part of his resignation, but he keeps $ 3.1 billion in stock, according to a file from the DRY.

Girsky, who facilitated the deal with GM, said he was putting his reputation on the line, insisting that his team at investment firm VectoIQ carefully vetted Nikola before presenting a deal to GM.

VectolQ injected $ 700 million into Nikola and oversaw its public listing. Girsky’s interview requests are pending.

Following:If Nikola catches fire, GM could only be scorched, analysts say

Contact Jamie L. LaReau: 313-222-2149 or [email protected]. Follow her on twitter @jlareauan. Read more on General Motors and subscribe to our automotive newsletter. Become a subscriber.

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