In a victory for Ford Motor Co.’s bid to ramp up production of electric vehicles, the automaker’s battery supplier reached a settlement Saturday in a trade-dispute case with a rival company.
The deal between South Korean companies SK Innovation Co. and LG Chem was first reported by Bloomberg, which cited “people familiar with the situation.” A person familiar with the discussions confirmed the news to The Detroit News.
SK is an EV battery supplier for Volkswagen AG as well as Ford.
The deal reached Saturday is “enormous for both Ford and for Volkswagen,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights. Ford, he noted, plans to release battery-electric versions of two of its signature vehicles next year — the Transit commercial van and its profit-rich F-150. Volkswagen plans to use SK’s batteries for its MEB EV lineup in North America.
The U.S. International Trade Commission earlier this year sided with LG Chem in a dispute over intellectual property that LG alleged SK stole. SK denied the allegations.
The ITC said that SK employees had gone to “extraordinary” lengths to destroy documents related to the case. The agency also ruled that SK would be barred from importing batteries to the U.S. for 10 years, though it said SK could continue to supply Ford for four years and Volkswagen for two years so the companies would have time to find new suppliers.
The decision prompted an outcry from elected officials and others concerned about the future of battery factories — and thousands of jobs tied to them — SK had committed to building in Georgia. The ruling effectively would have forced SK to close a battery plant that is nearing completion, which according to an estimate from Benchmark Mineral Intelligence would take 15% of EV batteries off the market this year and reduce U.S. EV manufacturing capacity by more than 50,000 vehicles per year.
Though the full details of the settlement are not yet clear, it means that SK will avoid the 10-year import ban on its products. That’s good news for Ford, because it means SK will be able to import parts for Ford’s forthcoming battery-electric F-150.
“The F-150 is going into a very competitive marketplace,” said Abuelsamid. “They did not want one more problem like this to hold them up … so I’m sure that they were very anxious to get the deal done so they can move forward.”
There was likely strong interest from both sides to reach an agreement, he said.
“There’s more than enough demand for (battery) cells from all of the factories that have been announced, and there was certainly pressure from a number of automakers on both sides to settle this thing.”
Indeed, Ford CEO Jim Farley weighed in on the case in February, saying on Twitter that “a voluntary settlement between these two suppliers is ultimately in the best interest of U.S. manufacturers and workers.”
The settlement comes on the cusp of the deadline for President Joe Biden to overturn the ruling. With the import ban slated to take effect Sunday, he had until then to either intervene or take no action.
The case put the Biden administration in the middle of competing objectives — cracking down on unfair trade practices, or expanding EV production to help achieve his economic and environmental goals.
The dispute prompted a flurry of attempts to get the administration to pick a side. Former Acting Attorney General Sally Yates, for example, argued in support of SK, saying the ITC ruling would hurt the Biden administration’s climate change goals and put the U.S. at a disadvantage against China in the transition to EVs.
The closely-watched case has underscored the fragility of the supply chain for EV components in the U.S. Everyone from White House officials to automotive industry executives have emphasized the need for the U.S. to expand its manufacturing capacity and reduce its reliance on foreign suppliers, an issue that has been highlighted by an ongoing global shortage of semiconductor chips that has significantly impacted auto production since the start of the year.
Ford executives have hinted that the company is looking into producing its own EV battery cells at some point in the future. And Farley has been vocal about the need to expand domestic production of batteries.
“We need to bring battery production to the U.S.,” he said, speaking at a conference in February. “We can’t go through what we’re doing with chips right now in Taiwan. It’s just too important.”
Jonathan Jennings, Ford’s global commodity purchasing vice president, told a Senate committee last month that the electric F-150 is “a critical project for us.” He said if SK was barred from supplying the companies, Ford would have to import batteries from foreign suppliers rather than the parts being made in Georgia.
The uncertainty over Ford’s battery supply came as the Dearborn automaker makes major moves to accelerate its development of EVs. Ford recently launched its first fully battery-electric vehicle, the Mustang Mach-E, and announced earlier this year that it would increase its spending on EVs to more than $22 billion through 2025.
Meanwhile, LG Energy Solution — the EV battery spinoff of LG Chem — has said it plans to invest $4.5 billion to expand its U.S. battery production at its plant in Holland and build two new plants in the next four years. The company’s major clients include General Motors Co. and Tesla Inc.
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