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Tough settlement talks await SK Innovation

Calls for reconciliation grow in battle of two South Korean battery makers  

(Yonhap)
(Yonhap)
With a defeat after a two-year legal battle against LG Energy Solution in the United States, the only desirable option for SK Innovation to minimize impact seems to be settling with their domestic archrival, according to industry sources on Sunday.

In a final ruling made by the US International Trade Commission on Wednesday, SK Innovation was slapped with a 10-year ban on importing lithium-ion battery products to the US, with a grace period up to four years, for stealing trade secrets from LG.

The ruling would deal a significant blow not only to SK, a latecomer in the battery market, but also its customers like US-based Ford and Germany’s Volkswagen, which plan to launch electric vehicles powered by SK batteries. 

“The spat between the two South Korean corporate giants could have ripple effects for US automakers gearing up to produce electric vehicles,” a report by the Washington Post said. 

The new US administration led by President Joe Biden is preparing for a $2 trillion climate plan, including measures to jumpstart the American electric vehicle market by boosting sales. The ban on SK batteries could pour cold water on Biden’s EV drive. 

According to industry sources, SK Innovation has an estimated order backlog in the US worth 20 trillion won ($18.11 billion). Considering that battery supply deals last five to six years, if its US production base, under construction in the state of Georgia, shut down after only a year or two, SK Innovation will lose about 80 percent of those orders.

However, SK is choosing to highlight its commitment to protecting the interests of its customers and bringing clean energy and jobs to the US.

The Korean battery maker has invested a combined $2.6 billion to build two plants in Jackson County, Georgia. The first plant is set for completion in early 2022, and the second one for 2023.

While pinning its last hope on the 60-day presidential review period, SK may be striving to settle the case with LG as it has no other choice. 

Georgia’s Governor called on US President Joe Biden to overturn the ruling.

“SK Innovation is a valued member of Georgia’s business community and a continued partner in bringing jobs and greater prosperity to the Peach State,” said Gov. Brian P. Kemp in a statement on Thursday.

“Unfortunately, the International Trade Commission’s recent ruling puts SK’s significant investment in 2,600 clean energy jobs and innovative manufacturing in peril during a pandemic that has created unprecedented challenges and hardship for countless families here in Georgia, and across the country.”

“Litigation in these disputes is always complex, and there are several additional levels of review prior to a final resolution – along with the possibility of a settlement. President Biden and his administration also have the opportunity to support thousands of hardworking Georgians – and their communities – who would benefit from SK Innovation’s continued success in our state. I sincerely hope Georgia’s congressional delegation will join me in advocating for swift presidential action.”

Ford CEO Jim Farley said in a tweet on Friday he hopes to see the two battery suppliers reach a settlement.

“While we’re pleased the ITC ruling makes way for Ford to bring to market our groundbreaking electric F-150, a voluntary settlement between these two suppliers is ultimately in the best interest of US manufacturers and workers,” he said.

Pounding out a settlement seems to be the only measure for both Korean battery providers for the industry’s sake, considering the EV market’s growth.

However, the two sides appear to be distant from each other on the amount of compensation.

While LG demands between 2.5 trillion won and 3 trillion won in damages, SK has proposed 500 billion won to 600 billion won, according to industry sources.

LG has calculated the damages based on the trade secret protection law, the company said.

“There remains a big difference in the compensation amount, because SK still doesn’t admit its fault,” said an industry official.

However, some industry watchers speculate there could be a dramatic settlement between LG and SK at a group level before SK Group Chairman Chey Tae-won’s inauguration as the chief of Korea Chamber of Commerce and Industry next month.

“Many predict that SK will change its stance, but LG also needs to demand less, seeking a compromise,” an industry source said.

If the two fail to iron out their differences, SK might appeal the ITC ruling after the presidential review period.

Meanwhile, LG maintains its hardline stance against SK, threatening to take further legal action in Europe and Korea.

“It’s difficult to say SK Innovation’s theft of LG Energy Solution’s technology and the damages it has inflicted are confined to the US region. LG Energy Solution believes such damages also occurred in Europe, Korea and other countries,” said Han Woong-jae, head of legal affairs at LG Energy Solution, during a conference call hours after the USITC decision.

“Whether LG Energy Solution will file lawsuits in other regions depends entirely on the attitude of SK Innovation.”

By Song Su-hyun (song@heraldcorp.com)
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