LG Chem & SK Innovation battle over US battery supply

The US Trade Commission (ITC) has given a preliminary ruling on the legal dispute between the two South Korean battery manufacturers LG Chem and SK Innovation in the USA. The ITC has ruled in favour of LG Chem, and a final decision is expected by 5 October.

++ Please find updates below. ++

The lawsuit in question had been filed by LG Chem at the beginning of 2019 against SK Innovation in the USA. The dispute dates back to late 2016, however, when SK Innovation poached 77 employees from LG Chem – a “significant number” of engineers, later accused to allegedly have passed on LG Chem’s protected know-how in the development and manufacture of lithium-ion pouch cells to SK Innovation. Later in 2019, SK Innovation turned the tables and launched a counter-suit for patent infringement.

In December, US court files examined by Reuters showed that both companies were trying to prevent each other from importing and selling batteries intended for electric SUVs from Volkswagen and Ford in the USA, among others. LG Chem claimed that SK Innovation won the contract to supply battery cells for Volkswagen’s MEB only because employees hired by LG Chem allegedly disclosed said trade secrets.

The dispute has governments and international automaking giants on tenterhooks. The South Korean government approached both companies pleading for a resolution to the disagreement that threatens to disrupt battery supply to both Volkswagen and Ford in the USA. At the end of last year, Industry Minister Sung Yoon-mo said that they were watching the dispute closely, wanting to support an and that would bring about a “positive outcome for the country overall”. Now it seems, both sides are open to talks.

The sentiment communicated by an LG Chem spokesperson to The Korea Times was: “There will be no change in that LG Chem will be sincere in the remaining litigation process. However, we won’t nail down our decision. We are also open to talking with SK Innovation for a possible settlement.”

It seems that SK Innovation is similarly open to talks, saying that LG Chem is still its “business partner to develop the battery industry’s ecosystem together,” which would indicate an inclination to move beyond the corporate war zone.

According to The Korean Times, an analyst from the Korean battery industry said that “Both LG Chem and SKI want to reach a settlement ending their long legal tussle because neither of them wants to lose their customers, which are EV makers.”

But, if the final decision of the US Trade Commission follows the preliminary one, this could mean that SK Innovation will not be allowed to import the battery components into the US required to supply the US factories for Volkswagen and Ford Motors.

Update 21 July 2020: Volkswagen and Ford have now jointly renewed their appeal to the United States International Trade Commission (ITC) to allow SK Innovation to manufacture batteries at its proposed factory in Georgia.

Volkswagen fears that a “catastrophic supply disruption” would be imminent if the case is not laid to rest. Ford emphasised that LG Chem’s assertion that it can replace SK Innovation as a supplier is not “credible” citing existing EV battery supply shortages and the long development period for EVs. The US carmaker also pointed to possible job losses should no agreement be reached.

As before, LG Chem declined to comment, citing ongoing litigation, reports Reuters. In the preliminary ruling as mentioned above, the ITC had ruled in favour of LG Chem, meaning SK Innovation would not be able to supply cells to VW or Ford in the US should the ruling be upheld.

>> With reporting by Stefan Köller and Nora Manthey.

reuters.com, koreatimes.co.kr, reuters.com (update 21 July)