When hot electric-truck startup Rivian Automotive Inc. goes public next week seeking a valuation of roughly $70 billion, one of the biggest winners is likely to be a 118-year-old Detroit giant. Ford Motor Co. could make a windfall of more than $7 billion from the deal, as an investor with a 12% stake.

But it wasn’t supposed to happen this way. More than two years ago, Ford’s biggest rival, General Motors Co., was poised to make the critical investment in Rivian.

The...

When hot electric-truck startup Rivian Automotive Inc. goes public next week seeking a valuation of roughly $70 billion, one of the biggest winners is likely to be a 118-year-old Detroit giant. Ford Motor Co. could make a windfall of more than $7 billion from the deal, as an investor with a 12% stake.

But it wasn’t supposed to happen this way. More than two years ago, Ford’s biggest rival, General Motors Co., was poised to make the critical investment in Rivian.

The story of how Ford outmaneuvered GM to cut its own deal illustrates the high-stakes battle under way as old-school auto companies race to transform themselves into major players in the electric-vehicle age. The mission culminated in a four-hour-long negotiation aboard a private jet that ended with executives scurrying for cover at a suburban Detroit airport, worried about being spotted by GM.

Ford, which was founded in 1903, and GM, founded five years later, have long battled over everything from pickup trucks to sports cars. It is a competition heightened by proximity: Ford’s suburban Detroit headquarters, in Dearborn, Mich., is roughly 9 miles from GM’s in downtown Detroit. Their rivalry has renewed urgency because of advances made by electric-vehicle pioneer Tesla Inc. —the world’s most valuable auto company—and the new threats to Detroit’s profit engine.

Ford and GM are investing in battery factories, establishing new electric-vehicle business lines and partnering with tech giants and startups to access digital innovations. Both have ambitious goals. GM—which was earlier than Ford to pledge a shift to electrics and to commit to producing its own batteries—targeted Tesla in October when it said it plans to take the lead in electric-vehicles sales and would release a new electric SUV priced at about $30,000, undercutting the cheapest version of Tesla’s Model 3 sedan. Ford, in turn, has committed to spend $30 billion on electric vehicles through 2025.

The moves amount to a major bet on electric cars even as large, gas-powered trucks and SUVs continue to fuel the Detroit auto makers’ profits. Electric-vehicle sales still account for a small portion of overall vehicle sales globally, but are rising sharply. Globally, electric sales more than doubled in September from a year earlier, accounting for 9% of total vehicles sold, according to a Morgan Stanley research note. They accounted for 3.6% in the U.S., the bank said.

Electric-truck maker Rivian plans to go public in the fall and is seeking a valuation in the tens of billions. But why are investors excited for this IPO and what makes their offering different from other EV startups? WSJ’s George Downs explains. Illustration: George Downs The Wall Street Journal Interactive Edition

Rivian’s sizable IPO valuation underscores the premium investors are willing to pay for the growth prospects of plug-in vehicles. Rivian, which has raised $10.5 billion in the private markets since the start of 2019, recently began selling its first all-electric pickup truck—a model that targets well-established names such as the Ford F-150 and Chevrolet Silverado. Another high-profile backer is Amazon.com Inc., which recently disclosed that it holds a roughly 20% stake. Amazon founder Jeff Bezos showed off his commitment to the company as he went to space in July; he and fellow astronauts rode to the launch site in a Rivian SUV.

This account of how Ford was able to take its own chunk of Rivian—at GM’s expense—is based on interviews with current or former executives at Ford, Rivian and GM as well as people close to those executives.

Following Tesla’s lead

The Irvine, Calif., company that became Rivian Automotive was founded by RJ Scaringe in 2009, the same year he finished his doctorate in mechanical engineering at Massachusetts Institute of Technology.

The son of an engineer, Mr. Scaringe has said he was obsessed with cars from a young age as he grew up in Florida, working on restorations in a neighbor’s garage and storing spare parts around his bedroom. As he grew older and learned of cars’ negative environmental impacts, he decided to dedicate himself to finding a sustainable future for his childhood love.

Mr. Scaringe, now 38 years old, doesn’t dress like a Detroit auto executive. He prefers the fleeces of Patagonia—the eco-conscious outdoor apparel brand that Mr. Scaringe has on occasion said his company aspires to emulate—over more traditional suits. A former Patagonia chief executive also sits on Rivian’s board of directors.

Rivian’s founder, RJ Scaringe, has said he was obsessed with cars from a young age. He started the company the same year he finished his doctorate in mechanical engineering at MIT.

Photo: Carlos Delgado/Associated Press

The company that evolved into Rivian originally set out to make a sports car. It pivoted in recent years to electric pickup trucks and SUVs, where it saw both a bigger market and a chance to have a bigger environmental impact.

“Not only is that the fastest-growing and most popular segment, but it’s also by far the least sustainable,” said Mr. Scaringe in an interview last year. Mr. Scaringe declined to be interviewed for this story.

The startup has churned through cash while retooling a factory in Normal, Ill., that Rivian purchased from Mitsubishi Corp. in 2017. From the start of 2020 through this June, the company posted an operating loss of roughly $2 billion and estimated a loss last quarter of between $725 million and $775 million, according to a company filing.

Rivian has said it would launch three models by year’s end. The first, an electric pickup called the R1T, began being delivered to customers in September. A midsize SUV called the R1S is set to follow in December, along with an electric delivery truck designed and built for Amazon. The e-retailer has an order for 100,000 of the trucks, which Rivian said in filings it plans to deliver by 2025.

Rivian trucks are assembled at a factory in Normal, Ill.

Photo: TNS/Zuma Press

All three vehicles are set to be produced at the Illinois factory. The company has plans to expand that facility and has also said it is scouting locations for a new factory elsewhere.

In many ways, Rivian is following Tesla’s lead. It plans to sell vehicles directly to consumers, bypassing the traditional dealer network, and build its own network of fast-chargers for drivers to use. That, it hopes, will help address a key concern for car buyers: not having enough places to plug in their vehicles.

‘Things can change quickly’

Ford and GM became interested in Rivian at a time when both heavyweights were nervous about the rise of Tesla; they knew that aligning themselves with fledgling companies could give them access to hot EV technology while also satisfying Wall Street’s appetite for future revenue sources.

One of the first interactions between top executives at Ford and Rivian was in September 2018, when Ford’s then-president of global operations, Joe Hinrichs, met with Mr. Scaringe at what was then the startup’s headquarters in suburban Detroit, according to Mr. Hinrichs.

A manufacturing specialist who grew up in Columbus, Ohio, Mr. Hinrichs got his start in the auto industry with GM, where he became a plant manager. He joined Ford in 2000 and later held executive posts across the company where he did everything from jump-start Ford’s growth in China to negotiate with the Trump administration on fuel-economy regulations.

Joe Hinrichs, who was then Ford’s operations chief, wooed Rivian while the EV startup held talks with GM. ‘Just because you got engaged to someone doesn’t mean you need to marry them,’ he said he told Rivian’s founder.

Photo: Nick Carey/Reuters

Roughly a decade and a half older than Mr. Scaringe, Mr. Hinrichs was affable and well-liked inside Ford; he was also comfortable at the bargaining table, having previously led talks with the United Auto Workers. The two had been connected by former GM Chief Executive Rick Wagoner, an early Rivian investor and a mentor to Mr. Hinrichs when he was at GM in the 1990s.

Mr. Scaringe, using a whiteboard, briefed Mr. Hinrichs on his vision for Rivian and the two later toured the firm’s design studios. Mr. Hinrichs said Mr. Scaringe saw Rivian joining with two partners—a technology company and a major auto maker that could help with engineering and manufacturing techniques.

Ford’s leadership team wanted to get a closer look at Rivian’s approach, learn from its startup culture and potentially use its technology to underpin at least one future electric model, Mr. Hinrichs said.

Executives at Ford saw potential in Rivian but the timing wasn’t right for Ford, Mr. Hinrichs said. After missing earnings targets, the auto maker was under pressure from Wall Street to boost cash flow. Still, he wanted to stay close to Mr. Scaringe.

“I told him, ‘Listen, things can change quickly,” Mr. Hinrichs said.

Serious in Seattle

Across town, GM was also interested in Rivian. It already had its own electric-vehicle system and plug-in pickup trucks in the works. Executives viewed a Rivian partnership as a strategic investment that could allow GM to work on parallel tracks to potentially get trucks to market faster, according to people familiar with its strategy at the time.

By early 2019, Mr. Scaringe had talks with GM Chief Executive Mary Barra and President Mark Reuss about a deal, these people said. GM and Ford weren’t the only ones pursuing the truck upstart; Amazon in February that year led a $700 million funding round in Rivian.

GM’s headquarters, pictured above, is just miles from the Ford offices in Dearborn, Mich.

Photo: Jim West/Zuma Press

The endorsement of the tech giant stoked interest at Ford. Executive Chairman Bill Ford Jr. met with Mr. Scaringe at Rivian’s headquarters, where the MIT grads chatted about the industry, people with knowledge of the meeting said. Mr. Scaringe would later say in a Wall Street Journal interview that he had long respected Mr. Ford’s environmental bent.

In early March 2019, Mr. Hinrichs said he invited the vegan Mr. Scaringe to dinner at an upscale steakhouse in suburban Detroit. There, Mr. Hinrichs said, Mr. Scaringe told him Ford might be too late: Rivian was in late-stage negotiations with GM. Sensing hesitancy about GM, Mr. Hinrichs said he urged the young executive to reconsider.

“Just because you got engaged to someone doesn’t mean you need to marry them,” Mr. Hinrichs said he told Mr. Scaringe.

He also offered Mr. Scaringe another chance to talk. Mr. Hinrichs said he told Mr. Scaringe that in the coming weeks if Rivian hadn’t come to terms with GM they could meet in Seattle, where both executives had separate appointments scheduled, and Mr. Scaringe could catch a ride back to Detroit on Ford’s Gulfstream jet.

Rivian’s talks with GM by then were already at an advanced stage, according to the people with knowledge of the discussions. Rumors had leaked in the press, and preparations had been made to announce the deal, these people said.

But Rivian executives had doubts. They felt GM’s terms could be onerous in the future, according to some of the people familiar with the negotiations, and figured Ford might make a more-flexible partner.

Once in Seattle, Mr. Scaringe still hadn’t come to terms with GM, and he took Mr. Hinrichs up on his offer to fly back to Detroit on Ford’s Gulfstream, Mr. Hinrichs said. The two executives spent the four-and-a-half-hour flight texting and emailing with their teams as they worked on terms, Mr. Hinrichs said.

The Ford plane landed at the corporate-jet terminal in suburban Detroit in the evening, according to Mr. Hinrichs and another person who was on board.

As the plane taxied toward a hangar used by both Ford and GM, executives on board spotted another jet outside the hangar with two GM-made black Cadillac Escalades waiting nearby. Mr. Hinrichs said he sensed Mr. Scaringe didn’t want to be seen by GM executives, so Mr Hinrichs requested that a Lincoln Navigator be pulled alongside the plane. When the door opened, Mr. Scaringe dashed down the plane’s steps and into the Navigator, keeping his head down as Mr. Hinrichs loaded their luggage, said Mr. Hinrichs and the other person who was on the flight.

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The talks between Ford and Rivian’s teams stretched late into the night before a deal was completed around 4 a.m., Mr. Hinrichs said. It was announced in April 2019. Ford’s original investment was $500 million, and Ford chipped in more during later funding rounds to reach $1.2 billion. That means it could realize a return of more than $7 billion on its investment. The valuation of roughly $70 billion sought by Rivian in its IPO could change based on investor feedback and market conditions.

More than two years later, Mr. Hinrichs is no longer with Ford; he retired in 2020. Executives from both companies say the strategic Ford-Rivian partnership remains intact, but some aspects are scaled back. Ford has canceled plans for a Lincoln SUV using Rivian’s platform and recently gave up its seat on the startup’s board. GM, meanwhile, soon will roll out its own electric pickup truck, the GMC Hummer, that will compete with Rivian’s truck.

Ford, if it decides to sell its Rivian stake, could use the IPO proceeds to pay down debt or finance an overseas restructuring, said Morningstar analyst David Whiston : “There’s no shortage of potential uses for a cash infusion like that.”

Write to Mike Colias at Mike.Colias@wsj.com and Ben Foldy at Ben.Foldy@wsj.com