GM scraps plan to buy stake in Nikola and build its electric pickup

DETROIT – General Motors and Nikola Corp on Monday announced a reworked agreement on a fuel-cell partnership that eliminates an equity stake in the startup for the Detroit automaker in addition to plans for building Nikola‘s electric pickup.

In September, the companies announced a deal to which GM would supply batteries, a chassis architecture, fuel cell systems and a factory to build Nikola‘s proposed Badger electric pickup in return for an 11% stake and $700 million.

But the offer arrived to question after a short seller criticized Nikola like a fraud, something Nikola has denied. Eventually, Nikola founder Trevor Milton resigned, and federal agencies began investigating the fraud claims.

The new agreement, a non-binding memorandum of understanding, is subject to negotiation and a definitive deal, Nikola and GM said in separate statements.

Under the brand new deal, GM will give its fuel-cell system for Nikola‘s Class 7 and sophistication 8 commercial semi-trucks, Nikola said. The businesses are also discussing Nikola‘s potential utilization of GM’s Ultium electric battery system in the commercial trailers.

Nikola‘s shares initially rose almost 8% in pre-market trading, but subsequently turned negative and were down a lot more than 16%. GM shares were marginally down.

Wedbush analyst Daniel Ives inside a research note said the choice by GM not to have a stake in Nikola as originally planned “is going to be viewed as a definite negative” by a few who had hoped that part of the agreement would remain in place.

Nikola said it would refund all previously submitted order deposits for the Badger as that rollout was based upon a manufacturer partnership.

“Heavy trucks remain our core business and we're 100% focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Nikola Chief Executive Mark Russell said inside a statement.

GM said Nikola pays upfront for that capital investment necessary for the fuel-cell capacity. The fuel-cell system is going to be engineered at GM’s technical facilities in Pontiac and Warren, Michigan, and built at its Brownstown Charter Township battery plant in Michigan.

“Providing our Hydrotec fuel cell systems towards the heavy-duty type of commercial vehicles is an important part of our growth strategy,” GM global product development chief Doug Parks said in a separate statement.