With founder Trevor Milton gone, Nikola Corp. (NASDAQ: NKLA) Chief Financial Officer Kim Brady tried to clear a cloud of confusion over what the startup electric truck maker does and doesn’t do.
Allegations that Milton misled investors about the company’s technological accomplishments led to his sudden resignation. A battering of the company’s stock followed a brutal Sept. 10 report by short seller Hindenburg Research. Nikola shares closed about 3% higher on Tuesday.
Milton exited the company, which he started in 2014, with billions of dollars worth of stock. He is legally bound from talking any more about the company without permission, His company Twitter account was deactivated Tuesday.
Brady became the first executive to appear in public since FreightWaves reported Milton’s departure Sunday night.
A traditional chairman enters
In an online discussion with analysts from ISI Evercore, Brady said Nikola “is Trevor’s baby. But it became increasingly clear that the attention was being focused on Trevor rather than the company as well as the company’s mission.”
Former General Motors Co. Vice Chairman Steve Girsky will chair Nikola’s board of directors. But he will leave daily decisions to CEO Mark Russell and his executive team. After ceding the CEO role to Russell in June, Milton participated in day-to-day operations as executive chairman. In leaving, he forfeits a two-year consulting contract that would have paid him $10 million a year.
“He’s very well grounded in Nikola,” Brady said of Girsky, who led Nikola public through a four-month reverse merger process with his VectoIQ special purpose acquisition company. “Steve actually brought an army of former GM engineers to perform due diligence.”
Fending off critics
Nikola has tried to fend off criticisms leveled by Hindenburg Research and other detractors by lining up its major partners to vouch for its legitimacy.
“You saw a statement by GM supporting Nikola as well as Bosch and CNHI confirming they are manufacturing our [Nikola Tre] prototypes right now, which will be completed by the end of September,” Brady said. A second batch of test trucks will be manufactured between October through the first part of 2021, he said.
“We have a plan to place some of those test trucks with potential customers,” Brady said.
The support comes even as the possibility of federal investigations looms. The U.S. Securities and Exchange Commission (SEC) and the U.S. attorney for the Southern District of New York reportedly are looking at Nikola, though neither agency confirms it.
“We have not heard anything,” Brady said. “When there’s more to disclose, we’ll disclose.”
Dissecting the Nikola Tre
Brady painstakingly and calmly tried to explain Nikola’s business.
“Ultimately we are an [original equipment manufacturer]. Most of our components will be manufactured by third parties even if it’s our design and engineering,” he said. “It’s important to distinguish that. I understand that somehow some people believe we were looking to manufacture most of our components.
“That’s simply not true. No one does that in the automotive industry.”
Reading from a single sheet of paper on his lap, Brady dissected the Tre model. It is based on and dimensionally similar to the IVECO S-Way that debuted in 2019.
For example, Nikola uses the cab and chassis of the S-Way. IVECO integrates the electronic brakes and steering. Nikola carries those over to the Tre as well. Nikola influenced the design of the battery pack, its cooling and electronics. The batteries themselves come from suppliers. Nikola also designed the infotainment system and functional safety system.
“It’s really a very coordinated process and we have never represented that we make every component,” Brady said. “We don’t, and we don’t want to, manufacture most of the components.”
Using validated parts
“We are using validated and homologated IVECO parts where we can access them at the IVECO price. So almost 85-90% of the content is IVECO. But these are commodity parts that have a value of 15%. Nikola is responsible for electric propulsion components that represent about 15% of volume but about 85% of value.”
Bosch and Nikola co-developed the fuel cell system. It goes into production after the battery-electric Tre. Bosch will manufacture fuel cells for Nikola in Europe. GM’s Hydrotec fuel cells are expected to be used for the Nikola Two model targeted for production in Coolidge, Arizona, in 2023.
“[Bosch] recognized early on that when it came to design, innovation and disruption that it would be far better off in working with a small company like Nikola,” Brady said. “It will take billions of dollars to manufacture it and scale it.”