TuSimple on Monday announced that its board of directors terminated Dr. Xiaodi Hou, the CEO, president and chief technology officer of the company, and removed him from his position as chairman. The move comes after the Wall Street Journal reported that the seven-year-old driverless trucking company was being probed by the FBI, Securities and Exchange Commission and Committee on Foreign Investment in the U.S. (CFIUS) over improper ties to a company with Chinese connections.
The autonomous logistics firm said Dr. Ersin Yumer, TuSimple’s executive vice president of operations, has agreed to serve as interim CEO and president during an executive search. Brad Buss, lead independent director, will be chairman of the board.
TuSimple, which has successfully completed driver-free proof-of-concept test runs, made the employment decision after the Audit Committee’s ongoing investigation indicated to the board that Hou could no longer continue to lead the company. The company went public last year in April and saw its share price plunge nearly 46 percent by late Monday on news of the CEO’s dismissal.
According to TuSimple’s SEC filing Monday, the company’s investigation found that “employees spent paid hours working on matters for Hydron Inc. (f/k/a Turing Auto),” which the company believes to have “significant operations” in China. TuSimple co-founder and former executive chairman Mo Chen, who founded Hydron and is a director and CEO, “has an equity interest in the Company of greater than 10%,” the filing went on to say.
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“This related party transaction was not presented to, or approved by, the Audit Committee as required by the Company’s Code of Conduct,” it said.
The conflict stems from TuSimple sharing “confidential information” with Canada-based Hydron, which operates in China, Hong Kong and Delaware, while it was considering the parts maker as an original equipment manufacturer, or OEM, candidate and without notifying its Audit Committee and Government Security Committee. What’s more, the sensitive information was shared prior to TuSimple and Hydron firming up customary non-disclosure agreements, the filing said, and the company has no way of knowing if its partner “shared, or publicly disclosed, the information before entering into that agreement.”
TuSimple “believes based on the Audit Committee’s ongoing investigation that the information shared is not related to the intangible assets or patents reflected on the Company’s balance sheet,” it aded. “At this time, the Company has not been able to determine the value, if any, of such information.”
Buss, meanwhile, credited Xiaodi for his “many contributions to TuSimple.”
“His knowledge and vision have been invaluable to the development of TuSimple’s industry-leading technology and the growth of the company,” he said in a statement. “As we look ahead, I am delighted that Ersin has agreed to help us shepherd the company through the next phases of its development. Transparency, good judgment and accountability are critical values to our company. We take these values extremely seriously.”
Yumar said he looks forward to working with the board and the TuSimple team to continue to move the company forward.
“The leadership team firmly believes in the benefits of our technology and is committed to the company’s commercialization roadmap,” he added.
The board has engaged Russell Reynolds Associates to identify a new CEO with relevant experience.
TuSimple is a global autonomous driving technology company headquartered in San Diego, with operations in Arizona, Texas, Europe, and China. Founded in 2015, TuSimple is developing a commercial-ready, fully autonomous (SAE Level 4) driving solution for long-haul heavy-duty trucks.
The company aims to transform the $4 trillion global truck freight industry through the company’s AI technology, which makes it possible for trucks to see 1,000 meters away, operate nearly continuously and reduce fuel consumption by 10 percent or more relative to manually driven trucks.
When TuSimple filed its IPO last year, CFIUS identified it as a company meriting review because of its ties to China and because autonomous driving technology is considered a critical technology for the Department of Defense. Twenty of TuSimple’s 70 semi-trucks operate in China.
The company’s principal stockholder of Class A shares is Sun Dream, an affiliate of Chinese media firm Sina Corp., with 20 percent ownership. CFIUS alerted TuSimple this month that it was probing the Sina Corp. investment, according to the filing.