• Sat. Oct 29th, 2022

Disagreement threatened Ford and VW’s plans to build electric automobiles in America

Apr 11, 2021

Two of South Korea’s biggest conglomerates have reached a last-minute settlement over a multibillion-dollar intellectual property dispute that had threatened to disrupt Ford and Volkswagen’s plans to build electric vehicles in the US.
The deal struck between the battery-making affiliates of LG and SK comes after the US International Trade Commission in February slapped a 10-year import ban on SK Innovation over allegations from its Korean rival of illegally acquiring sensitive technology.
SK will pay LG Won2tn ($1.8bn) via cash and a running royalty, the companies said in a joint statement on Sunday.
The agreement marks a reprieve for Joe Biden who had until Sunday night to decide whether to make a rare presidential override of an ITC decision to avoid disruptions to the carmakers’ investment plans and protect the jobs of thousands of workers.
Raphael Warnock, the Democratic senator for Georgia who had lobbied the Biden administration and the companies over the dispute, said the resolution would “help keep the local economy moving forward”.
“It has always been clear that the best way to protect workers in Commerce — and the jobs Georgians were promised — is for the companies involved to negotiate a settlement in good faith,” he said.
As part of the deal, the companies also agreed to drop all pending litigation and vowed not to file any lawsuits against each other on this issue for the next 10 years.
The ITC ruling had allowed a grace period to give companies time to switch suppliers. But the industry had argued that the import ban would complicate carmakers’ plans to launch electric vehicles as well as hybrids, and ultimately slow the industry’s transition to environmentally friendly vehicles.
Germany’s VW and US-based Ford each have contracts to purchase batteries from SKI’s new electric vehicle battery plant in Georgia, where the Korean group has invested $2.6bn. The factory has been touted as the biggest single investment in the southern state’s history, expected to provide 2,600 jobs and clean power for 330,000 vehicle a year, including Ford’s fully electric F-150 truck.
The settlement also marks the latest twist in a years-long battle between two fiercely competitive South Korean chaebol that had become an embarrassment for the government in Seoul.
LG’s battery unit — formerly part of LG Chem but has since been spun off into LG Energy Solution — accused SKI of improperly securing lucrative contracts with the auto manufacturers based on stolen technology.
The ITC suit was launched after failed efforts in local courts.
SKI has contested the allegations and lobbied the White House to overturn the ban.
For its part, LG last month announced investments plans of $4.5bn in the US by 2025, creating more than 10,000 jobs, in a bid to allay fears over disruptions for the import ban on SKI.
The ITC has also lambasted Ford for pursuing its deals with SK despite evidence that it had misappropriated trade secrets.
The South Korean commerce ministry welcomed the decision on Sunday.
Senior officials in Seoul, including Chung Sye-kyun, the country’s prime minister, have for months been heaping pressure on the companies to reach an agreement. However, as recently as March the two sides appeared far apart over a potential settlement figure, with LG executives saying the gap was close to $1bn.
Additional reporting by Song Jung-a, Kiran Stacey and Peggy Hollinger