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G.M. Scales Down Nikola Deal

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Nikola, a start-up electric truck company that had made a big splash on Wall Street, announced a broad alliance with General Motors in September that promised to give the company critical technology, financial support and credibility with investors.

But the news was quickly overtaken by claims that Nikola had exaggerated its capabilities and the firm’s founder quickly resigned from the company. Investors were left to wonder whether Nikola was indeed an automotive innovator and whether G.M. had made an embarrassing mistake in associating with the start-up.

After weeks of talks, the two companies announced they still intend to work together but on a much more limited basis than what they proposed in September.

G.M. still intends to supply hydrogen fuel cells to Nikola for use in the heavy-duty trucks the start-up is developing but has yet to mass produce. But G.M. will no longer make an electric pickup truck for Nikola or take an 11 percent stake in the company — once valued at $2 billion.

News of the scaled-down partnership sparked a sell-off in Nikola’s stock. By early afternoon, it had fallen by nearly $7 a share, or more than 24 percent, to $21.15.

The decline lowered Nikola’s market value to about $8 billion — about a quarter of the value it had just after its market debut in June. At one point, stock market investors valued Nikola at more than they did Ford Motor, one of the world’s largest automakers.

The new agreement gives Nikola access to fuel-cell technology that G.M. has developed but never commercialized. The cells use hydrogen to produce electricity and some experts consider them a better way to eliminate greenhouse gas emissions from heavy-duty trucks than batteries, which weigh a lot and can take hours to recharge.

“I suspect Nikola needed a deal more than G.M. needed the deal,” said David Whiston, a Morningstar analyst. “Nikola needs fuel cells for their core business. For G.M., one supply deal isn’t a big deal either way.”

G.M. has plans to produce its own electric pickup trucks, sport-utility vehicles and cars. Earlier in November, the company said it intended to spend $27 billion on electric vehicles over the next five years.

September’s announcement was widely interpreted as a seal of approval from G.M. It helped lift Nikola’s stock and investor confidence in the start-up’s ambitious plans to develop heavy trucks powered by hydrogen fuel cells and a national network of fueling stations.

But just days after the Sept. 8 partnership announcement, a small investment firm, Hindenburg Research, put out a report asserting that Nikola and its founder and executive chairman, Trevor Milton, had greatly overstated how much technology the company had developed. The report said that the company produced a video in which a truck was rolled down an incline to make it look as if the company had developed a working prototype. Later that month, Mr. Milton resigned.

Weeks after the Hindenburg report, G.M. said it had not closed its deal with Nikola as planned, and the companies continued to negotiate. The deal they announced on Monday was described as “a non-binding memorandum of understanding.” G.M. also said that Nikola would have to “pay upfront” for it to expand capacity to produce hydrogen fuel cells.

“Heavy trucks remain our core business,” Nikola’s chief executive, Mark Russell, said in a statement. “By working with G.M., we are reinforcing our companies’ shared commitment to a zero-emission future.”

G.M. and Nikola also said that they would discuss Nikola’s use of a G.M. battery system called Ultium for fully electric versions of the start-up’s heavy-duty trucks.

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