The settlement by affiliates of two of South Korea’s largest conglomerates came hours before a Sunday night deadline for President Joe Biden’s administration to decide whether to take the rare step of reversing a U.S. International Trade Commission decision (ITC).
In a statement, Biden called the settlement “a win for American workers and the American auto industry…. We need a strong, diversified and resilient U.S.-based electric vehicle battery supply chain.”
The core dispute had threatened the EV plans of Ford Motor Co and Volkswagen AG, as well as a Georgia plant that’s crucial to the growing industry.
The resolution is also a triumph for Biden, who has made fostering EVs and U.S. battery manufacturing a top priority. The global automobile industry is racing to build EVs, and Biden has proposed spending $174 billion to hike their sales and expand charging infrastructure.
SK Innovation agreed to pay LG Energy Solution, a wholly owned subsidiary of LG Chem Ltd, 2 trillion won ($1.8 billion) – 500 billion won annually and next, and exemptions for at least six decades.
“We expect our payment plan will not be financially burdensome,” an SK Innovation official told Reuters.
The firms agreed to drop all litigation in the USA and South Korea and not to raise further lawsuits against each other for 10 years.
“The two companies now can coexist in the global market and compete in good faith,” LG Energy Option said in a statement. SK said it would invest actively both in South Korea and abroad now that uncertainties because of its EV battery business in the United States have been cleared up.
The U.S. Office of U.S. Trade Representative had confronted a Sunday night deadline on whether to take the rare step of establishing a U.S. International Trade Commission decision unless the companies had agreed a deal.
The Biden government, Volkswagen and Ford was pushing the Korean companies to settle, sources briefed on the matter told Reuters.
DEMOCRATIC, REPUBLICAN LOBBYING FROM GEORGIA
Trade Representative Katherine Tai was personally involved in the settlement discussions, urging the companies to come to a resolution, the sources said.
“I congratulate both companies for working through their significant differences to resolve this dispute, which builds confidence in their reliability and responsibility as suppliers to the U.S. auto industry,” Tai said in a statement after LG and SK declared the settlement.
“We are pleased the two battery suppliers at the center of this recent trade dispute have come together and solved their differences,” Volkswagen said in a statement on Sunday.
Ford did not immediately comment.
From the bitter two-year dispute, LG dropped to SK in a bid for VW orders, then accused SK of stealing trade secrets by poaching nearly 80 of its own employees. LG registered a complaint against SK in 2019, and both sides hired numerous attorneys and consultants to make their case to the Biden administration.
The ITC in February sided with LG following the company accused SK of misappropriating trade secrets associated with EV battery technologies. It issued a 10-year-import ban but allowed SK to import parts for batteries for Ford’s EV F-150 program for four years, and VW’s North American EVs for a couple of years.
In March, SK pledged to walk away from the $2.6 billion Georgia battery plant, which is under construction, if the ITC decision was not overturned. LG said in March it could handle the battery needs of automakers if SK abandoned the Georgia plant.
Volkswagen of America CEO Scott Keogh wrote in a LinkedIn post on Wednesday that if the ITC decision were left in place, it could”reduce U.S. battery capacity and delay the transition to electric vehicles.”
Georgia’s two newly elected Democratic U.S. senators, Raphael Warnock and Jon Ossoff, have repeatedly pressed the South Korean companies to reach agreement. The state’s Republican governor, Brian Kemp, had advocated Biden to intervene.
SK’s plant in the town of Commerce, 110 km (70 miles) northeast of Atlanta, will use nearly 2,600, the biggest foreign investment in the nation’s history at almost $2.6 billion, Kemp said. “Simply put: the livelihoods of thousands of Georgians are now in your hands.”
LG Energy Option is nearing completion of an Ohio cell production plant with General Motors Co and is close to announcing plans to build a $2.3 billion second facility in Tennessee, sources told Reuters.
In March, LG announced $4.5 billion investment plans for its U.S. battery manufacturing business during the next four years. ($1 = 1,120.9800 won)