Failure to launch: Workhorse Group ousts CEO as production delays escalate

Postal Service challenge

The move also comes amid Workhorse’s long-shot attempt to overturn a February decision by the U.S. Postal Service to award a multibillion-dollar contract for Next Generation Delivery Vehicles to defense contractor Oshkosh Truck Corp. (NYSE: OSK). Pursuit of the mail truck business piqued retail investor interest and drove company shares to all-time highs.

The surprising loss of the deal led to Workhorse losing half its share value in two days.

Hughes took over as CEO in February 2019 from Steve Burns, who left Workhorse to found startup Lordstown Motors Corp. (NASDAQ: RIDE) Burns recently was ousted from Lordstown after inflating claims of orders for the Endurance electric pickup truck. 

In one of Burns’ final acts as CEO, Lordstown filed a “going concern” notice with the Securities and Exchange Commission claiming it might not have enough money to survive the year. The Justice Department and the SEC are investigating Lordstown’s claims.

Deep experience

Dauch previously served as CEO of Delphi Technologies, where he spun off autonomous and electric vehicle components supplier Aptiv (NYSE: APTV)  and executed a $3.3 billion merger with BorgWarner (NYSE: BWA) in October 2020. He also was president and CEO of Accuride, a supplier of wheel end systems to the global commercial vehicle industry. 

Dauch spent 13 years at American Axle & Manufacturing (NYSE: AXL), founded by his father, Dick, from the purchase of five former General Motors plants in the 1990s.

“Rick’s proven team leadership capabilities, industry expertise, customer focus and successful operational track record make him ideally suited to lead Workhorse into its next phase of operational ramp-up and growth during this dynamic industry shift to electric last mile delivery services,” Ray Chess, non-executive chairman of Workhorse, said in a statement.

Workhorse shares gained 5% in trading Thursday afternoon. 

Analyst cuts estimate

Cowen analyst Jeffrey Osborne said the hiring of Dauch is a good move for Workhorse, but he lowered his share price estimate from $13 to $8.50 because of ongoing production uncertainty.

“We are taking a more conservative stance in modeling 2Q results and have trimmed our estimates for the remainder of 2021,” he wrote in an investor note Thursday

“Our out year assumptions are largely intact, although we see risk to 2022 should the C1000 series be redesigned or materially changed in order to be more accommodating to automated manufacturing.”

Workhorse is scheduled to report Q2 earnings on Aug. 9.

Related articles:

Workhorse cries foul in screed against Postal Service in award to Oshkosh

Workhorse sues Postal Service over delivery truck contract

Workhorse lawyers up in mail truck contract dispute with Postal Service

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