Quarter after quarter of missed production targets finally caught up with Workhorse Group CEO Duane Hughes, ousted Thursday at the electric delivery van maker and replaced by auto industry veteran Rick Dauch.
Workhorse (NASDAQ: WKHS) has produced very few composite body electric vans in each of the past few quarters. Supply chain disruptions are the latest setback following a decision to change battery suppliers and a COVID outbreak that affected 36% of the workforce.
The company failed to meet its 2020 production target of 300 to 400 C-Series vehicles, and it cut its 2021 goal to 1,000 vans from an initial estimate of 1,800. The current-year goal is also suspect since Workhorse produced only 38 C-Series vans in the first quarter.
As part of Dauch's hiring, Workhorse withdrew its guidance until Dauch can "establish a plan to address continuing challenges and opportunities."
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.
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.
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