LG, SK Urged to Settle Dispute

SK Innovation’s battery manufacturing plant under construction in Georgia

SK Innovation, which lost a suit against LG Energy Solution, is now subject to a 10-year import ban related to components and materials for use in battery cells, modules and packs. Under the circumstances, Georgia Governor Brian Kemp has asked U.S. President Joe Biden to veto the USITC ruling.

SK Innovation is currently building electric vehicle battery manufacturing facilities with an annual capacity of 21.5 GWh, which is equivalent to 430,000 vehicles, in Georgia by investing US$2.6 billion. Half of the facilities are already built and prototypes are being prepared there so that the batteries can be supplied for 200,000 Volkswagen vehicles a year from next year onwards. This constitutes 100 percent of electric vehicles Volkswagen will sell in North America.

The German automaker released a statement on Feb. 12 and asked the U.S. government to extend the grace period for the ban to at least four years, saying that it has been victimized by the litigation between LG Energy Solution and SK Innovation. According to the USITC ruling, the grace period is four years for Ford and two years for Volkswagen.


Ford urged the two South Korean companies to make mutual concessions, too. “A voluntary settlement between these two suppliers is ultimately in the best interest of U.S. manufacturers and workers,” Ford CEO Jim Farley wrote on Twitter, adding, “ITC ruling makes way for Ford to bring to market our groundbreaking electric F-150.” Ford is in partnership with both SK Innovation and LG Energy Solution.
 

The South Korean companies are also intending to end the disputes as quickly as possible so that they can concentrate more on meeting the skyrocketing global EV battery demand. However, their views are too different on the amount of settlement money. LG Energy Solution is currently demanding approximately three trillion won whereas SK Innovation is refusing to accept it.

The battery business unit of SK Innovation incurred an operating loss of 420 billion won in 2020 alone and is in desperate need of additional resources for investment. This is why the company is resorting to the veto that can be exercised within 60 days. Without the veto, settlement is the only option for SK Innovation.

LG Energy Solution cannot be overbearing in spite of its winning, either. In the worst-case scenario, its non-settlement with SK Innovation may lead to an appeal and a civil suit in Delaware and this means it will have to do its battery business with litigation risks for five years or so. “LG won the litigation itself, but both are in need of settlement,” said an industry source.

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