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Trevor Milton of Nikola Resigns Amid Fraud Claims

Less than two weeks after signing a $2 billion deal with General Motors, the founder of electric truck start-up Nikola Corp. stepped down amid a claim that he had repeatedly lied about the company’s technology.

The resignation of Trevor Milton as executive chairman, announced late Sunday, came after the investment fund Hindenburg Research published a report accusing him of making numerous false assertions about Nikola’s technology, including once producing a video in which a truck was rolled down an incline to make it look as if the company had developed a working prototype.

Hindenburg, a short-selling firm that said it was aiming to profit by betting Nikola’s share price would go down, called Nikola “an intricate fraud.” Its report appeared only days after the company and G.M. agreed to cooperate on production of battery-powered pickup trucks and hydrogen-powered heavy trucks.

Nikola, based in Phoenix, called the accusations by Hindenburg “false and defamatory” and said it would complain to the Securities and Exchange Commission. Nikola shares, which had jumped after the deal with G.M., fell sharply after the Hindenburg report. On Monday, the shares were down 17 percent in afternoon trading, to barely half their value after the G.M. deal was announced.

Bloomberg News reported last week that the S.E.C. was looking into the Hindenburg allegations against Nikola, and The Wall Street Journal reported that the Justice Department was doing so. Neither agency has confirmed that an investigation is underway.

Mr. Milton said in a statement that “the focus should be on the company and its world-changing mission, not me. So I made the difficult decision to approach the board and volunteer to step aside.”

Stephen Girsky, a former vice chairman of G.M. and a member of Nikola’s board, will take over as chairman.

While denying Hindenburg’s accusations, Nikola acknowledged that a 2017 prototype truck that appeared in a promotional video was not operating under its own power. “Nikola never stated its truck was driving under its own propulsion in the video,” the company said in a statement. Nikola said it had since built fully functional models.

The deal with G.M. held the prospect of providing crucial help in assembling a pickup truck that Nikola hopes to introduce by the end of 2022. In exchange, G.M. took an 11 percent stake in the company valued at the time at $2 billion.

G.M. on Monday affirmed its resolve to go forward with the deal. “We will work with Nikola to close the transaction,” the company said in a statement. “Our overall goal is to put everyone in an E.V. and accelerate adoption.”

Nikola listed its shares in June, and at the end of trading Friday was worth nearly $13 billion, although it essentially has no revenue and has not yet sold or produced a single truck.

Analysts have been predicting that traditional carmakers like G.M. would form partnerships with fast-moving electric car start-ups in order to catch up with Tesla, which has a considerable lead in battery technology. G.M.’s deal with Nikola illustrates the hazards of that approach.

Whatever the state of its technology, few companies have experienced Nikola’s meteoric rise. Mr. Milton, 39, is a college dropout who started a security alarm business and then a company that sought to convert diesel engines to run on natural gas before it ran into legal trouble and was sold. In 2014, he founded Nikola with a plan to produce zero-emission semi trucks that run on hydrogen fuel cells and batteries.

His ambitions mirror those of another company that aimed to shake up the automotive industry, Tesla. Mr. Milton even drew on the same source for the name of his company — the Serbian-American inventor Nikola Tesla.

Mr. Milton unveiled a semi truck, called the Nikola One, in 2016, and said it was operational. “It’s not a pusher,” Mr. Milton said at the event, using an industry term for a mock-up vehicle that cannot be driven and must be pushed.

In its report, Hindenburg Research contended that the promotional video showing the moving 2017 prototype and Mr. Milton’s statements were part of “an ocean of lies.” It also accused Mr. Milton of claiming Nikola had proprietary technology, when it sourced components from suppliers.

Hindenburg’s founder, Nathan Anderson, 37, declined to say how much money his company had put into shorting Nikola shares, or how much it had made since the report was released.

Hindenburg has a track record of uncovering investment funds and companies whose numbers don’t add up. In some cases, the discoveries have led to resignations by senior executives or investigations by regulators.

“If someone is lying about a product working when it doesn’t, or a product being complete when it isn’t, that seems like fraud,” Mr. Anderson said. “I think investors deserve honest answers on what they’re actually buying into.”

One question about Hindenburg’s accusations is that they occurred while Nikola was still privately held and before it became bound by S.E.C. disclosure rules for publicly traded companies.

In a message posed on Twitter on Sept. 11, Mr. Milton said Hindenburg’s allegations were “lies,” and noted his company had retained the law firm Kirkland & Ellis to work with the S.E.C. on Nikola’s complaints about the Hindenburg report.

“To be clear, this was not a research report and it is not accurate,” Nikola said in a statement. “This was a hit job for short sale driven by greed.”

In a lengthy written rebuttal to Hindenburg’s claims, Nikola acknowledged the truck shown in the 2017 promotional video was not moving on its own, but it said that a semi truck, called the Nikola Tre, was being produced in a joint venture with Iveco, the Italian truck maker, and said it would be available by the end of next year. Republic Services, the trash hauler, has placed an order for 2,500 electric garbage trucks, Nikola added.

Mr. Milton also posted pictures of what he said are five trucks being assembled in Ulm, Germany. “Do these look fake?” he wrote.

Before Mr. Milton’s resignation, Sam Abuelsamid, an analyst at Navigant Research who follows developments in electric vehicles, said the company’s idea of powering and building a network of fueling stations around the country has merit.

A purely battery-powered semi, something Tesla is betting on, would likely have a shorter range than trucks with hydrogen fuel-cells, and a massive battery that could take hours to recharge — down time that could prove too costly to trucking companies.

“Nikola’s vision actually makes a lot of sense,” he said. “Whether they can execute on that is entirely another story, however.”

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GM, Ford wrap up ventilator production and shift back to auto business

As the COVID-19 pandemic spread to the United States, a number of automakers and other manufacturers announced plans to retrofit factories to help ease the shortage of personal protective gear and ventilators.

Now, two U.S. automakers have fulfilled their separate multi-million-dollar ventilator contracts — together delivering 80,000 of the devices to the U.S. government.

General Motors said Tuesday that it has completed its contract with the U.S. Department of Health and Human Services for 30,000 critical care ventilators delivered to the Strategic National Stockpile. GM said many of its ventilators have been deployed to hospitals. Ford has also completed its 50,000-ventilator contract, Bloomberg reported.

GM and Ford didn’t go it alone. Both automakers partnered with companies to accelerate the ramp up from 0 to thousands of ventilators within five months. GM partnered with Ventec Life Systems to produce ventilators at its engine plant in Kokomo, Ind., using about 1,000 workers. The GM-Ventec partnership grew out of, a coordinated effort of private companies to respond to COVID-19.

Meanwhile, Ford teamed up with GE Healthcare to produce ventilators at the automaker’s Rawsonville Road plant in Michigan. Ford’s $336 million contract wrapped up August 28 when it shipped its final Model A-E ventilator unit. Ford’s contract was supposed to be fulfilled by mid-July, but said it was delayed by new suppliers that were ramping up parts production, according to Bloomberg. The company was granted an extension by HHS.

In the early days of the contracts, GM and Ford were criticized, and even attacked, by President Trump, although ultimately he applauded the efforts.

Both efforts stretched and showcased the capabilities of the automakers to convert portions of factories used to assemble vehicles and parts into facilities cranking out medical devices. Before GM even announced its partnership with Ventec, the automaker investigated the feasibility of sourcing more than 700 components needed to build Ventec’s critical care ventilators called VOCSN. Ventec describes these VOCSN devices as multi-function ventilators that were cleared in 2017 by the FDA.

GM initially estimated it would cost about $750 million, a price that included retrofitting a portion of the engine plant, purchasing materials to make the ventilators and paying the 1,000 workers needed to scale up production, the source said. However, the Trump Administration balked at the price tag, putting a contract with the U.S. government in limbo. Eventually, GM reached a $490 million contract with the federal government to produce 30,000 ventilators by the end of August. Under the contract, GM produced a different critical care ventilator from Ventec called the VOCSN V+Pro, a simpler device that has 400 parts. The other more expensive and complex machine had a multi-function capability.

Ford and GM also produced other medical supplies. Ford, which called its effort Project Apollo, said it produced more than 75 million pieces of personal protective equipment, including 19 million face shields, 42 million face masks,1.6 million washable isolation gowns and more than 32,000 powered air-purifying respirators in collaboration with 3M.

GM said its Warren facility has two production lines for face masks and a third line making N95 face respirators. To date, the facility has produced more than 10 million masks, with production going to employees at GM facilities or donated to community organizations, the company said.

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Automakers Are Making Cars, but Virus Surge Puts That at Risk

Automakers are back to building cars and trucks at full speed — at least for now. But as coronavirus cases rise across much of the country, it may become difficult for the companies to keep at it.

This week, General Motors will lay off a third shift of workers — about 1,250 people — at its truck plant in Wentzville, Mo., where absenteeism has been rising because workers are concerned about the spread of the virus. Union workers at another G.M. plant in Texas, where hospitals have been inundated, have called on the company to shut down their factory.

The auto industry, which accounts for about 4 percent of the country’s economic output, came to a near standstill in mid-March for nearly two months as the first wave of coronavirus cases spiked. Fiat Chrysler, Ford Motor, General Motors, Honda, Toyota and other manufacturers are now running almost all of their plants in the United States on two or three shifts, which amounts to full capacity.

The revival has helped automakers restock depleted dealer lots and cater to a rebound in demand that has been driven in part by people who feel they need a car for social distancing during the pandemic. Car sales in June were down from a year ago but were more robust than what analysts had expected.

But conditions are changing fast. Gov. Gavin Newsom of California on Monday ordered restaurants, wineries, movie theaters and other businesses to halt indoor operations. He stopped short of closing factories — such as the Tesla plant in Fremont that employs some 10,000 workers — but he suggested that he was open to restricting economic activity further if the pandemic worsened.

“We’re going back into modification mode of our original stay-at-home order,” Mr. Newsom said. “This continues to be a deadly disease.”

Regardless of what governors, mayors and other policymakers order companies to do, auto manufacturers will most likely be forced to make changes like reducing shifts and temporarily closing plants, said Erik Gordon, a business professor at the University of Michigan.

“Every plant has a lot of workers, so there will be at least a few workers at every plant that come down with Covid,” he said. “When that happens, other workers will fear that they will be next. No matter what the states allow, it will be hard to keep the plants operating.”

Last month, members of the United Auto Workers union called on G.M. to shut down a sport-utility vehicle factory in Arlington, Texas, in response to the rapid spread of the virus in that state. On Monday, Toyota said it had seen an increase in coronavirus cases among workers at its plant in San Antonio, but the company declined to disclose how many people have taken ill.

Auto plants bring several thousand workers together under one roof every day. Manufacturers have taken a range of precautions to prevent infections among workers, including the use of masks, gloves and face shields. Companies are also monitoring the body temperatures of workers, making time for sanitizing work areas and adding barriers to shield people who need to work close to one another to complete certain tasks.

Credit…Fca/via Reuters

Car companies are reluctant to halt production again, fearing what it would do to their finances just as they were recovering from the shutdown in the spring. Layoffs would also be difficult for workers. The extra $600-a-week supplement to unemployment insurance authorized by Congress in March, which helped many autoworkers, ends on July 31. It is not clear if lawmakers will extend the benefit.

Shortly after factories reopened in May, some automakers temporarily shut down plants after workers — usually just one or two — tested positive for the coronavirus. No automakers have reported widespread outbreaks like those that have affected meat-processing plants.

  • Frequently Asked Questions

    Updated July 7, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.