South Korean battery cell manufacturers SK Innovation and LG Energy Solution have reached a settlement in their year-long legal dispute. Both companies agreed to stop all legal proceedings in the US and South Korea and to refrain from suing each other for the next ten years.
Under the settlement, SKI will pay LG Energy Solution 2 trillion won (just under 1.5 billion euros), divided into lump-sum payments and ongoing royalties. This means that the import restrictions on SK Innovation in the USA imposed by the US Federal Trade Commission in February, including the possible effects on customers Volkswagen and Ford, are off the table, as is SKI’s threatened withdrawal from the US battery business.
There is great relief among the affected partners of SK Innovation. Ford immediately released a statement saying: “We are pleased that SK Innovation and LG Energy Solution have settled their differences. This allows us to focus on delivering a range of Ford world-class battery electric vehicles for our retail and fleet customers, while also supporting American workers, the economy and our shared goal of protecting the planet.” Volkswagen Group of America chief Scott Keogh also added similar things: they are pleased that both battery suppliers have settled their differences. Now that the contentious issues have been resolved, VW is concentrating on the start of US production of the all-electric SUV ID.4 in 2022.
For about two years, SK Innovation and LG Chem, or rather their new battery division LG Energy Solution, were involved in a legal dispute in the USA, and both companies also overlapped with patent infringement lawsuits in South Korea. The legal dispute in the USA, however, was preparing to shake up the eMobility strategies of Volkswagen and Ford. The claim was that SK Innovation poached employees from LG Chem, who allegedly passed on LG Chem’s proprietary know-how for the development and production of batteries to SK Innovation. LG Chem claimed, among other things, that SK Innovation had only won the contract to supply battery cells for Volkswagen’s MEB modular platform because employees poached by LG Chem had disclosed said trade secrets.
The US Trade Commission ruled provisionally in 2020 and recently finally in favour of LG. The ruling was a tough one: SK Innovation was to be banned from importing certain batteries and their components into the US for a period of ten years. SKI would only be allowed to temporarily import components for the US production of batteries for the electric Ford F-150 and Volkswagen’s MEB vehicles for four years in the case of Ford, and two years in the case of Volkswagen, it was said.
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SKI responded by threatening to halt construction of its $2.6 billion battery factory in the state of Georgia and to withdraw from the battery business in the US if President Joe Biden did not reverse the US Trade Commission’s decision by 11 April. 11 April because that is when the 60-day “presidential review period” to overturn the decision expires.
Yesterday, on 11 April, SKI and LG announced that they had reached an out-of-court settlement. A report by CNBC reads along the lines that the Biden administration has been pressuring both corporations to settle out of court before the deadline.
“LG Energy Solution and SK Innovation have decided to settle to compete in an amicable way, all for the future of the U.S. and South Korean electric vehicle battery industries,” Jun Kim, CEO and president of SK Innovation, and Jong Hyun Kim, CEO and president of LG Energy Solution, said in a joint statement. “We are dedicated to work together to support the Biden Administration’s climate agenda and to develop a robust U.S. supply chain.” Adding, “We are grateful to the Korean and U.S. governments and stakeholders involved for their efforts in making this settlement possible.”
SKI adds that with the uncertainties now removed, construction of the Georgia plant will be accelerated. The planned production facility is already the second in the state. The “stable operation” at the first plant is also to be “accelerated”, the group says.
LG Energy Solution emphasises in its statement that the agreement underlines LG Energy Solution’s willingness to protect and maintain a fair and competitive climate within the EV industry. And, “This agreement also reinforces the significance of our intellectual property acquired over the past 30 years.” The agreement, he said, allows the two companies to peacefully co-exist and compete in good faith in the global marketplace.