Lordstown Motors, an Ohio-based electric vehicle manufacturer, filed for chapter 11 bankruptcy in Delaware federal court on June 27, 2023. This filing is unsurprising, as the automotive company has been struggling financially for a long time, with bankruptcy threats surfacing as early as May 2023. So why are we bringing this foreseen bankruptcy case to your attention? Because automotive-related bankruptcies include unique issues that are generally not present in other manufacturing cases, and because it’s important for suppliers, creditors and customers of Lordstown, and any other automotive manufacturer, to understand their rights when bankruptcy hits.
For the reasons explained below, we urge Lordstown suppliers, creditors and customers to contact experienced bankruptcy counsel immediately to maximize their recovery.
It’s important to note that critical opportunities to improve a supplier’s position and deadlines are established very early in a bankruptcy case. Time is of the essence. These opportunities and deadlines include offers of critical vendor status, processes for preferential treatment by filing priority claims if product has been received by the debtor within 20 days prior to the bankruptcy petition and, in some instances, special reclamation claims which must be filed within 20 days of the filing.
There are also unique and somewhat technical issues affecting suppliers that have ongoing long-term agreements, purchase orders and other contracts with the debtor, as these may require the supplier to continue shipping. These long-term contracts, especially for sole-source suppliers, may provide an opportunity to significantly enhance payment of claims arising both before and after the bankruptcy filing.
