GM is backing away from an agreement to take a stake in electric automaker Nikola Corp., marking the collapse of a deal that has been problematic since it was announced just two months ago.
Nikola shares fell nearly 25% on Monday.
GM has instead signed a nonbinding memorandum of understanding to supply Nikola with its Hydrotec fuel cell system. This supplier agreement replaces its previous transaction announcement made on September 8, 2020 to take an 11% stake in Nikola and produce a fuel cell pickup for the company by the end of 2022. The investment was valued at $2 billion at the time.
GM will no longer build the Badger pickup truck for Nikola, essentially ending that program. Nikola said it was going to focus on its zero-emissions commercial trucks and will be returning customer deposits for the Badger. The company had received $6.9 million in refundable customer deposits for the Badger as of September 30, according to its latest quarterly report filed with the U.S. Securities and Exchange Commission.
Speculation that GM would pull the plug on the deal has been rampant almost from the start. Just days after GM announced the investment, noted short-seller Hindenburg Research accused Nikola of fraud. The U.S. Securities and Exchange Commission opened an inquiry in the matter and within two weeks Nikola’s founder Trevor Milton had stepped down as executive chairman.
Stephen Girsky, a former General Motors executive who was already on the company’s board and who introduced Nikola to GM, took over as executive chairman.
Nikola’s troubles aren’t over. GM’s wording in its announcement suggests as much. GM describes the nonbinding MoU as a “potential agreement.” If it goes through, GM would engineer its Hydrotec fuel cell system to the specifications mutually agreed upon by both companies. It is expected that the potential arrangement would be “cost plus,” meaning that Nikola would pay upfront for the capital investment for the capacity. The companies are also discussing the potential of a supply agreement for GM’s Ultium battery system for Nikola’s Class 7 and Class 8 trucks.
Doug Parks, GM executive vice president of global product development, purchasing and supply chain, said supplying the Hydrotec fuel cell systems to the heavy-duty class of commercial vehicles is an important part of GM’s growth strategy and reinforces the company’s commitment toward an all-electric, zero-emissions future.
GM’s Hydrotec fuel cell system will be engineered at its Michigan technical facilities in Pontiac and Warren and manufactured at its Brownstown Charter Township battery assembly plant, the company said.