TuSimple Fires CEO Xiaodi Hou Amid Federal Investigation

TuSimple Holdings Inc.,

TSP -45.81%

The self-driving trucking company said Monday that it has fired its chief executive and co-founder Xiaodi Hou.

The San Diego-based company said in a news release and securities filing that its board on Sunday removed Mr. Howe, who was also chairman and chief technology officer.

Mr. Howe has been suspended pending an investigation by board members, the statement said. That review “led the Board of Directors to conclude that a replacement of the Chief Executive Officer is necessary,” the company said in the release.

The board’s investigation found that TuSimple shared confidential information this year with Hydron Inc., a trucking startup that operates primarily in China and is funded by Chinese investors, the securities filing said. The filing also said TuSimple’s decision to share confidential information with Hydron before TuSimple entered into a business deal with Hydron was not disclosed to the board.

TuSimple said it did not know whether Hydron had shared or disclosed confidential information.

In a statement posted on LinkedIn, Mr Hou pleaded not guilty and said his dismissal was “without cause”.

“Unfortunately, the Board’s processes and outcomes are questionable at best,” Mr Howe said. “As the facts emerge, I am confident that my decisions as CEO and Chairman and our vision for TuSimple will be vindicated.”

Mr. Howe’s termination came a day after The Wall Street Journal reported that TuSimple and its management were facing investigations by the Federal Bureau of Investigation, known in the United States as Cfius, the Securities and Exchange Commission and the Committee on Foreign Investment. , on whether the company properly funded the technology to Hydron, according to people familiar with the matter.

TuSimple shares fell 46% on Monday. The company’s stock is down more than 90% for the year.

Investigators at the FBI and SEC are looking into whether Mr. Hou violated fiduciary duties and securities laws by failing to properly disclose TuSimple’s ties to Chinese-backed Hydron, which was founded in 2021 by TuSimple co-founder Mo Chen and says it has developed autonomy. The magazine reports that hydrogen-powered trucks. Federal investigators are also looking into whether TuSimple shared intellectual property with U.S.-developed Hydron, a move that defrauded TuSimple investors by sending valuable technology to an overseas competitor.

Mr. Chen did not immediately respond to a request for comment.

The Journal also reported in July that the board began investigating similar issues, including whether TuSimple incubated Hydron in China without informing regulators, TuSimple’s board or its shareholders. Hydron’s June business presentation, seen by the Journal, named TuSimple as Hydron’s first customer and said TuSimple would buy several hundred hydrogen-powered trucks equipped with self-driving technology from Hydron. A TuSimple spokesperson said the company has considered an agreement to buy trucks from Hydron, but is not a customer of Hydron.

Mr. Howe said in a statement that he was fully cooperating with the board and “I have nothing to hide.”

“I want to be clear that I strongly deny any suggestion of wrongdoing,” Mr Howe said.

TuSimple’s securities filing on Monday said TuSimple employees worked for Hydron and earned less than $300,000. The Board was not aware of it and the members had not approved it. Mr. Chen, who heads Hydron, is TuSimple’s largest shareholder, owning about 11.8% of the company, according to FactSet.

Mr. Hou said he is not selling any part of TuSimple and will continue to hold onto as much of his stake as he can. He owns about 11.3% of the company, according to FactSet.

Mr Howe’s dismissal follows months of turmoil at the company, including the departure of its chief financial officer and chief legal officer. Much of the turmoil began when Mr. Howe took over as CEO in March, former employees said.

In April, one of TuSimple’s autonomous semi-trucks crashed on an Arizona highway. The crash exposed safety and security issues at TuSimple that former employees said led to management being fired, the Journal reported in August.

TuSimple was founded in 2015 and went public in April 2021, raising over $1 billion in funding in the process at a valuation of $8.5 billion. The company develops autonomous driving systems that are intended to be integrated into large units produced by the world’s largest truck manufacturers. Its partners include Navistar International Corp. and there’s Traton, a publicly listed Volkswagen company WHITE

a subsidiary that manufactures trucks.

Ersin Yumer, the company’s executive vice president of operations, will serve as interim CEO while the board searches for Mr. Hou’s successor, TuSimple said. Mr. Yumer previously worked on autonomous vehicle technology at Aurora Innovation Inc.,

Uber Technologies Inc.

and Argo AI, an autonomous driving venture partly owned by Ford Motor Cho.

and the recently closed Volkswagen. TuSimple said that independent board director, SolarCity Corp. and Brad Buss, former chief financial officer of Cypress Semiconductor Corp., will serve as chairman.

Mr. Buss said in an email Monday to TuSimple employees seen by the Journal that the company would continue to work toward its goal of having commercial self-driving trucks on U.S. highways. “We must continue to make the difficult decisions necessary to continue TuSimple’s trajectory toward long-term success and long-term stability,” said Mr. Buss.

TuSimple said it will release its third-quarter earnings on Monday after the market closes. The earnings release was previously scheduled for Tuesday. Ahead of the results, the company said it remained on track to meet full-year guidance announced in August, including ending the year with a cash balance of about $950 million.

Email Heather Somerville at heather.somerville@wsj.com and Kate O’Keeffe at kathryn.okeeffe@wsj.com.

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