Nikola Is Having A Bad Month: GM Contract Now Potentially In Jeopardy

from the it-pours dept

Nikola Motor Company, to put it mildly, is having itself a bad month. First came the bombshell reports from a hedge fund that founder Trevor Milton lied in 2016 when he told the world that the company had a fully functional Nikola 1 electric semi truck. Worse than that, it was revealed that a promotional video in 2018 showing the truck rolling down a lonely highway, was actually showing a Nikola 1 rolling down a hill, since the truck couldn't actually move under its own power. Milton resigned after those reports, but the hits kept coming. Two women have come forward claiming that Milton inappropriately groped them when each was fifteen, with one of those women being his cousin. For the record, Milton has denied both allegations.

But the fallout appears to be continuing. September 30th was supposed to be the date by which Nikola's notable contract with General Motors was to have closed. That deal appears to be in limbo, however, with regulatory filings indicating that both sides now have until December to sign the deal or terminate it.

A GM spokesman confirmed the delay in an email to Ars. "Our transaction with Nikola has not closed. We are continuing our discussions with Nikola and will provide further updates when appropriate."

Also this morning, Nikola published a revised overview of the company's business strategy. It discussed Nikola's plans to manufacture semitrucks in Europe and the United States, build a network of hydrogen fuel stations, and even plans for an electric all-terrain vehicle. But conspicuously missing from the document was any mention of the Badger pickup truck—the one that GM was supposed to manufacture for Nikola under the now-delayed partnership.

Nikola also announced today that it was indefinitely postponing Nikola World, the December event where Nikola was planning to debut the Badger. Nikola blamed the COVID-19 pandemic and related social distancing rules for the delay.

So a lot of bad, without a lot of clarity as to the reasons for any of this. In the absence of clear communication, speculation is the sport of the day. Some are suggesting that GM doesn't want to be associated with the company right now, with all of the bad PR currently in play. Others are noting that the deal between Nikola and GM is very much one-sided in favor of GM, but the recent issues have lowered the value of the deal. The chief example of this is that GM was to be paid by Nikola in stock worth $2 billion at the time the deal was written. In the last month, Nikola's stock price has dropped such that the value of that stock is now less than $1 billion. So, part of this might be GM now trying to negotiate for better terms that reflect the original deal.

Either way, while the risks in the deal for GM are small, the reputational risks are very, very real.

So the financial risk for GM was quite small. GM wasn't putting any money into Nikola. GM was supposed to do engineering work on the Badger in exchange for those Nikola shares, but if Nikola failed GM would likely be able to repurpose some of that work for use in a future GM-branded electric pickup truck.

But the deal also creates some reputational risk for GM. If, hypothetically, more evidence of fraud or other misconduct came to light that led to Nikola's failure, GM could be tainted by association even if its financial exposure was small. GM's name wouldn't be on the Badger pickup truck, but customers would know GM manufactured the truck, and some of them might blame GM if the Badger didn't work well.

Which brings us back to our original post on Nikola, the theme of which is that you cannot risk your reputation like this. Chances are, you're going to get found out and, when you do, the consequences will vastly outweigh any benefit you get from your fuckery.

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Filed Under: electric trucks, trevor milton
Companies: gm, nikola


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  1. identicon
    dickeyrat, 2 Oct 2020 @ 3:05am

    "...Jeapordy"?? The headline writer is obviously lysdexic.


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