Biden calls settlement ‘win for American workers and the American auto industry’
By Baek Byung-yeul
LG Energy Solution (LGES) and SK Innovation (SKI) reached an eleventh-hour settlement over their protracted battery dispute, leaving U.S. President Joe Biden as the main beneficiary through his green economy drive, which aims to create more jobs by nurturing eco-friendly businesses, industry officials said Sunday.
The two Korean EV battery makers said Sunday that they reached a settlement on the dispute over claims that SKI misappropriated LGES’ trade secrets. The settlement came a day before the deadline for Biden’s veto of a U.S. International Trade Commission’s (USITC) decision to ban SKI from importing some batteries into the U.S.
In a joint statement, SKI agreed to pay 2 trillion won ($1.78 billion) to LGES to settle the dispute.
Under the agreement, SKI will pay 1 trillion won up front and another 1 trillion won in royalties. Also, they agreed to withdraw all their pending lawsuits both at home and abroad and will not raise any additional lawsuits over the next decade.
“The two companies agreed on sound competition and friendly cooperation for the development of the EV battery industry in Korea and the U.S.,” LGES CEO Kim Jong-hyun and SKI CEO Kim Jun said in the joint statement. “The two agreed to make joint efforts for the Biden administration’s effort to strengthen the EV battery supply chain and its eco-friendly policy.”
With the settlement, the legal dispute that has continued since 2019 has come to an end. In 2019, LG Chem, the parent company of LGES, filed a pair of lawsuits with the USITC and a U.S. court, claiming that SKI misappropriated and used its EV battery trade secrets by hiring its former employees.
In February, the USITC gave a final ruling in favor of LGES. The commission also issued a 10-year exclusion order prohibiting SKI from importing some batteries into the U.S. But the commission permitted SKI to import components needed to produce EV batteries for Volkswagen and Ford for two years and four years, respectively.
An industry official here said the efforts of the U.S. government appear to have been behind the settlement.
“Since the dispute between the two companies could have delivered a heavy impact on the EV industry and the U.S. economy, the U.S. government appears to have urged them to reach an agreement,” the official said asking for anonymity.
Biden also welcomed the settlement. In a statement released by the White House, the U.S. president said “this settlement agreement is a win for American workers and the American auto industry.”
“A key part of my plan to Build Back Better is to have the electric vehicles and batteries of the future built here in America, all across America, by American workers… Today’s settlement is a positive step in that direction, which will bring some welcome relief to workers in Georgia and new opportunities for workers across the country,” he noted.
LG and SK have competitively invested in building EV battery factories in the U.S. amid expectations of huge growth in eco-friendly vehicle sales. LGES has been operating a battery plant in Michigan with an annual capacity of 5 gigawatt hours, and is currently building a 35-gigawatt-hour plant in Ohio with General Motors. The company added it will shortlist at least two candidate sites for new battery plants in the U.S. within the first half of 2021.
SKI is also constructing a battery plant in Georgia, which could also lead to large-scale job creation. Citing its investment and hiring plans there, SKI has been asking Biden to veto or alter the USITC’s decision.
The Washing Post also echoed that the U.S. government has played a role in the behind-the-scenes work. “The settlement gives the president a boost on the jobs front and among climate activists and those worried about climate change,” it wrote.
“The likelihood of Biden reversing the ITC ruling, pressured LG to reduce its settlement demands, according to a person familiar with the talks, who spoke Saturday on the condition of anonymity to protect business relations. The U.S. trade representative and top South Korean government officials also got involved in the negotiations,” according to the daily.
In addition, the Korean government also made efforts to resolve the case as the dispute has become a headache Seoul, which aims to nurture EV batteries as one of the country’s core export items, following semiconductors.
The country has also been concerned that the legal dispute between LG and SK could end up weakening the competitiveness of the domestic battery industry by limiting exports to the U.S. for one of the players.
The two companies did not reveal how much money they spent on lobbying and legal expenses. But LG and SK spent $532,000 and $650,000, respectively, on lobbying in 2020 alone, according to the Center for Responsive Politics.
Industry officials estimate that the legal costs could be in the hundreds of billions of won or even up to around 1 trillion won.
Last month, Prime Minister Chung Sye-kun urged LGES and SKI to settle their dispute as soon as possible during an interview, saying, “Korea needs to grow the electric car industry and make it a future source of revenue, but we are fighting internally. We shouldn’t pass on these opportunities on to other competitors.”
Stating that he has been requested by the U.S. political community to mediate in the LG-SK dispute, Chung said he felt ashamed. “One company is asking the White House to veto the USITC’s final decision and another one is speaking against its rival’s claim. It is a disgrace to the country as well as a loss to the companies, so we need to resolve the issue as soon as possible,” the prime minister said.