General Motors is seeking a higher equity stake in Nikola Corp. in return for sharing its fuel cell and battery technologies as well as building the Badger, a heavy-duty electric pickup, for Nikola.

Two people familiar with the deal told the Free Press that lawyers for GM and Nikola have been meeting daily. GM originally agreed to an 11% equity stake in Nikola, but given a dramatic plunge in Nikola’s stock price, those terms could be on the table for renegotiation, they said. Both people have asked to not be identified because of the sensitivity of the negotiations.

The GM logo is seen on the top of the center tower at the GM Renaissance Center in Detroit. (Photo: Patricia Beck, Detroit Free Press)

The companies announced the deal Sept. 8. At that time GM’s 11% agreed-to equity stake in Nikola would have been worth about $2 billion. But after a short seller’s report accused Nikola of fraud, its stock price plummeted.

The deal with GM was expected to close by Sept. 30, but on Tuesday, GM said it had not closed on it and was continuing discussions with Nikola.

“GM has one overarching interest: The GM business and the GM brand,” said Jacob Frenkel, a former federal prosecutor and chair of government investigations and securities enforcement at the law firm Dickinson Wright in Washington, D.C. “If Nikola advances both, even under intense scrutiny, there very well could be a business relationship going forward. If GM senses reputational or business risk, any agreement is bound for the shredder.”

Both sides hope to reach an agreement soon, the people said. The companies have until Dec. 3 to close the deal or either firm could terminate the deal , according to Nikola’s U.S. Securities and Exchange filing. 

Boardroom changes

Meanwhile, Nikola said Thursday that it has appointed Steve Shindler as a new independent director. The Nikola Board of Directors has also named Shindler as chair of the audit committee. Board member Lonnie Stalsberg has decided to retire after more than three years on the Nikola board, the company said.

Shindler recently served as CFO of VectoIQ Acquisition Corp., the New York acquisition company that former GM Vice Chairman Steve Girsky ran. Girsky is now Nikola’s chairman after founder and former chairman Trevor Milton resigned Sept. 21.

“We are pleased to welcome a leader of Steve’s caliber to the Nikola board,” said Girsky in a statement. “With his strong financial acumen, Steve’s talents will complement the diverse skills and experience of our current directors. Importantly, I know Steve shares our vision of leaving the world a better place.”

Terms under consideration

There are four key parts of the GM-Nikola deal that could change in renegotiations, said one of the people familiar with it.

  • GM’s agreement to provide its Hydrotec fuel cell technology to Nikola for use in commercial electric trucks.
  • GM’s agreement to provide its proprietary Ultium battery system to Nikola for use in commercial electric trucks.
  • GM’s agreement to make the Badger pickup, due to market by the end of 2022.
  • GM’s equity stake in Nikola for doing the above.  

GM has said it will achieve some $4 billion in benefits in the deal as it commercializes its technologies.

On Wednesday, Nikola put out a statement highlighting key elements of its business strategy and vision to show Wall Street it has a plan and set milestones.

But, while some Nikola commercial trucks are mentioned by name in the statement, the Badger is not. Nikola also said it was rescheduling an in-person Nikola World event in Arizona where it was set to reveal the Badger Dec. 3-5. But it said that change is due to COVID-19 and Nikola said it will provide progress updates for all the vehicle across its portfolio.

Nevertheless, the news has some speculating that GM is backing out of wanting to make the Badger as part of its deal, leaving Nikola to either table the vehicle or find another manufacturing partner. 

A spokesman for GM declined to comment on this story. A spokeswoman for Nikola said when the company has something to announce, it will. 

Nikola would offer customers either a hydrogen fuel cell option or a battery-electric option on the Badger. The hydrogen fuel cell option would make the Badger the first of its kind in a pickup. The only other such vehicle is the Toyota Mirai midsize car. 

And there is a lucrative provision in the deal for GM to make the Badger.

GM would keep 80% of the electric vehicle regulatory credits generated by the Badger pickup, once that pickup starts selling. The credit provisions are especially valuable to GM as environmental regulations stiffen and not meeting them can result in astronomical fines.

More: This provision in GM’s deal with Nikola could yield the biggest benefits

A lawsuit?

On Sept. 10, just two days after GM and Nikola first told the world about their pending deal, Hindenburg Research published a 67-page report accusing Nikola of being an “intricate fraud.” Nikola has disputed the claim.

Now the U.S. Securities and Exchange Commission and Department of Justice are examining the allegations against Nikola, according to media reports.

To add to that, Milton, Nikola founder and the former chairman who initially penned the deal with GM, quit and now published reports say two women accuse him of  sexually assaulting them when they were under the age of 18. He has denied both allegations.

The continued bad news has crushed Nikola’s stock price, taking it from $37.57 on Sept. 10 to $24.11 at closing on Thursday.

But the stock price did get a 17.72% lift during Thursday’s trading, likely off Nikola’s Wednesday mission statement.

Still, the headlines have cast a cloud over the pending deal with GM. How Nikola handles it could determine whether a deal gets done, said Frenkel. 

“Nikola’s response to the Hindenburg report was to describe the report as ‘false and defamatory,’ ” said Frenkel. “If the report in fact was false and defamatory, then it is reasonable to expect that there will be a lawsuit, no different than other companies have filed in the past. The absence of a lawsuit following such a comment, despite the prospect of civil discovery, also could reflect negatively on the company.”

‘Kick the tires’ again

But GM leaders have stood firm that they do plan to go forward with a partnership. 

GM CEO Mary Barra has told Wall Street that GM did thorough due diligence on the Phoenix-based electric truck maker. 

But given all that’s transpired, it can safely be assumed GM is conducting due diligence again, Frenkel said.

“GM is a beneficiary of a report such as the Hindenburg,” Frenkel said. “It enables them to specifically come back and kick the tires again, and to kick them harder in the due diligence process. The relationship was at an early enough stage that such allegations would cause GM or any other major corporation to rethink and re-evaluate the relationship.”

More: GM takes a $2 billion stake in Nikola to make electric pickup trucks

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Contact Jamie L. LaReau at 313-222-2149 or [email protected]. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.

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