|General Motors Chair and CEO Mary Barra appears at the unveiling of the 2021 Chevrolet Suburban and 2021 Chevrolet Tahoe SUVs at Little Caesars Arena in Detroit, Mich. AFP-Yonhap|
By Kim Yoo-chul
LG Energy Solution (LGES), a global top-tier electric vehicle (EV) battery producer, said Tuesday it has agreed with General Motors to settle all outstanding issues regarding a recent battery recall.
In a statement, LGES said it had logged recall-related costs of 700 billion won in its earnings for each of the second and third quarters.
LG Electronics, which assembles LGES-manufactured battery cells into modules and packs, also said the firm had accounted for about 700 billion won of the recall costs during the cited periods. That means the total recall cost that the LG affiliates had prepared were 1.4 trillion won ($1.2 billion).
Shares of LG Chem, the parent company of LGES, rose by 4.19 percent to 796,000 won. LG Electronics advanced 3.33 percent to end at 124,000 won, according to the data by Korea Exchange (KRX), the country's main bourse operator.
The central point is whether GM will accept the reimbursement cost set by the two LG affiliates, because GM said earlier its expanded recall campaign of the company's 140,000 Bolt EVs due to potential fire risks would cost $1.8 billion.
Regarding LG units' Tuesday announcement, GM's U.S. headquarters will respond by Thursday (KST), according to sources familiar with the issue. Once the investigation is completed, then the final reimbursement cost shouldered by the two LG units could be settled.
Analysts and officials said as the recall resulted in GM stopping production and sales of its Bolt EVs in North America, GM was hoping for LG units to cover the estimated losses during the production halt.
Despite the differing calculations in terms of total recall cost, the LGES statement highlighted that it has reached an agreement with GM to settle the recall issue, as GM started shipping replacement battery modules for recalled Bolt EVs recently to its authorized dealers.
"Progress of manufacturing of battery cells and modules has already been completed. That means GM's battery plants resumed production of its Bolt EVs," said the LGES statement, adding its partnership with GM will remain "very strong." LGES and GM are already operating a battery plant in the U.S. state of Ohio and the two companies are moving forward to build another battery plant in Tennessee.
Earlier, GM said it has decided to replace some faulty battery modules with enhanced modules in both Bolt EVs and electric SUVs, which it claims accounts for $1 billion of associated costs. Last year, GM spent $800 million for the original Bolt recall.
Additionally, LGES said it has restarted necessary procedural steps recently to move forward with its planned initial public offering (IPO) in Korea.
LG Electronics said it was expecting its third-quarter results to reach 18.78 trillion won, a quarterly record. This is also an addition of 22 percent, year-on-year, it said in a filing to the KRX. Operating profit during the July-September period reached 540 billion won.