Michigan-based electric vehicle startup, Electric Last Mile Solutions Inc. (Nasdaq: ELMS), which aimed to manufacture battery-powered delivery vans in St. Joseph County, is filing for Chapter 7 bankruptcy. The announcement comes less than one year after the EV company went public via a merger with SPAC Forum Merger III Corp. at an approximately $1.4 billion valuation. The move also comes four months after former Chief Executive Officer Jim Taylor and former Executive Chairman Jason Lua stepped down amid accusations of improper share purchases ahead of the IPO, following an internal investigation.
“Based on the findings of the same Board-initiated investigation that led to the resignations of Mr. Taylor and Mr. Luo, ELMS was forced to withdraw financial guidance and declare the Company’s past financial statements unreliable. The compound effect of these events, along with a pending SEC investigation initiated this year, made it extremely challenging to secure a new auditor and attract additional funding,” the company stated in a news release.
In February, the board of director hired a new leadership team to review its products and commercialization plans, and ability to hire previously announced production targets.
“For the past several months, the ELMS board and the new ELMS leadership team have worked nonstop to address legacy financial, governance and operational matters at the Company, and enormous progress was made, including towards vehicle certification” said Brian Krzanich, ELMS Board Chair. “Therefore, it’s extremely frustrating that we must take this route, but it was the only responsible next step for our shareholders, partners, creditors, and employees.”
In December 2020, ELMS announced plans to restart a 650,000-square-foot auto plant in Mishawaka to manufacture “last mile” battery-powered, urban delivery vans. Up until 2009, the factory produced consumer-grade sport utility vehicle Hummers.
The company announced at the time it would initially launch with 140 workers, increasing staffing to 450 workers when it reached full production. The company forecasted it would employ nearly 1,000 workers within four years, as it expanded to other models.
The plant sits adjacent to the AM General plant which still produces military Humvees.
“Obviously, the last few months have been difficult after their ‘hiccup.’ That action caused stock prices to plummet and create several class action lawsuits,” said Jeff Rea, president and chief executive officer of the South Bend Regional Chamber of Commerce. “We were concerned they were up against the ropes.”
Despite the uncertainty earlier this year, ELMS said it continued to work on raising new sources of capital, while working closely with advisors to assess and improve its liquidity position. However, those efforts were unable to steer the company back on course and ultimately led the board to pursue bankruptcy.
“Unfortunately, there were too many obstacles for us to overcome in the short amount of time available to us. I could not be prouder of what our team has been able to accomplish under very challenging circumstances,” said Shauna McIntyre, who was named interim CEO and president in February. “This is a viable and essential technology, and I am confident that many of our talented employees will play a future role in this energy transition effort.”
Since General Motors (NYSE: GM) stopped production on civilian Hummers 13 years ago. The massive building has seen three other suitors for possible auto production, but none have come to fruition.
In 2017, AM General sold the plant to SF Motors, a subsidiary of China-based Sokon Industry Group, to build electric vehicles. But no vehicles ever rolled off the assembly floor and it still owns the building.
“It hasn’t been without challenges. And, we think, nothing related to the building, the workforce, the community, the Indiana business, climate, all those are factors that attracted people here. But it’s just really been things beyond our control,” said Rea.
Meanwhile, economic development officials in St. Joseph County are still hopeful the property will attract a user.
“The building, which is nearly 21 years old, has seen millions of dollars of investment over the last 5 years and should be well positioned for a new auto related use. While disappointed this project did not work out, we do see a bright future for the site,” said Bill Schalliol, director of economic development for St. Joseph County.
When plans for the new company were announced in late 2020, the Indiana Economic Development Corp. offered ELMS up to $10 million in conditional tax credits and up to $200,000 in conditional training grants based on the company’s job creation plans. It also offered up to $2.8 million in conditional tax credits from the Hoosier Business Investment tax credit program based on the company’s planned capital investment in Indiana.
A spokesperson for the IEDC told Inside Indiana Business that ELMS has not “drawn down” any incentives.