© Reuters. The SK Innovation logo can be seen in front of the headquarters in Seoul
By Heekyong Yang and Joyce Lee
South Korean auto battery maker SK Innovation Co Ltd's SEOUL (Reuters) shares rose Monday after burying the hatchet with LG Energy Solution, freeing up both companies to expand in the US, where electric cars have become a priority for the Biden administration are.
SK Innovation agreed to pay its rival, a unit of LG Chem Ltd, 2 trillion won ($ 1.8 billion) to drop any litigation in a bitter trade secret dispute. That was far less than expected, given that it was estimated that the billing cost was 7 trillion won.
Shares rose 15% while shares of LG Chem also rose, rising 1%.
The series had threatened a $ 2.6 billion Georgia plant that SK is building to supply Ford Motor (NYSE 🙂 Co and Volkswagen AG (OTC 🙂 and is believed to be key to the growing industry.
SK swore last month it would leave the Georgia plant if a decision by the U.S. International Trade Commission favoring LG Chem was not overturned.
The settlement will "allow us to accelerate construction of the Georgia, US plant, and actively encourage additional investment and collaborations in line with developments in the US and global electric vehicle (EV) industries," said Kim Jun, CEO of SK Innovation, seen in a message to Reuters staff.
The US market is important to both companies as Chinese battery manufacturers such as Contemporary Amperex Technology Co. Ltd. (CATL) not gain a foothold. Korean firms have also found it difficult to gain a foothold in China – the world's largest market for electric vehicles – as Beijing pushed ahead with measures to support domestic manufacturers.
"The US electric vehicle market is recognized as the place where South Korean manufacturers of electric vehicle batteries have the best conditions for sustained growth in the future," said Kang Dong-jin, an analyst at Hyundai Motor Securities.
US President Joe Biden said in a statement that the deal was "a win for American workers and the American auto industry." Both Ford and Volkswagen (DE 🙂 also welcomed the agreement.
Volkswagen is a big customer for both Korean battery manufacturers and analysts. Their longer-term prospects depend in part on how they react to the German automaker's decision last month to move the majority of its cars to a new unitary prismatic battery and the pouch battery they specialize in.
SK's main customers are Volkswagen and Hyundai Motor Co, while LG has a diversified customer base serving both these automakers and General Motors Co (NYSE 🙂 and Tesla (NASDAQ 🙂 Inc, analysts say.
LG has announced that it will invest more than $ 4.5 billion in the US to meet growing demand for electric vehicles and is considering building a second battery joint venture with GM in Tennessee.
"We will play an active role in successfully expanding the range of batteries and electric vehicles through bold and preventative investments," said Kim Jong-Hyun, president of LG Energy Solution, in a message to employees.
($ 1 = 1,124,5100 won)
Disclaimer: Fusion Media would like to remind you that the information contained on this website is not necessarily real-time or accurate. All CFDs (stocks, indices, futures) and forex prices are not provided by exchanges, but by market makers. Therefore, prices may not be accurate and may differ from the actual market price. This means that the prices are indicative and not suitable for trading purposes. Therefore, Fusion Media is not responsible for any trading losses you may incur as a result of using this information.
Fusion Media or any person involved with Fusion Media assumes no liability for any loss or damage caused by reliance on the information contained on this website, such as data, offers, charts and buy / sell signals. Please inform yourself comprehensively about the risks and costs associated with trading in the financial markets. This is one of the riskiest forms of investment possible.