It looks like the White House won’t be needing to take any action in response to the International Trade Commission’s decision on how to handle the feud between South Korea’s LG Chem and SK Innovation. The duo has reached a settlement that would allow the former battery manufacturer to complete assembly on its $2.6-billion plant located in Georgia.
LG alleged that SK had stolen intellectual property and the ITC was backing punitive measures that would have forbade the latter company from importing certain lithium-ion batteries into the United States under a 10-year exclusion order. While exemptions were made for the components necessary to manufacturer them in the country, the arrangement was tied to SK’s existing orders and limited to just 4 years. The settlement gives SK additional leeway and prevents Joe Biden from having to consider the possibility of blocking the ITC decision as a way of maintaining American jobs.
Fortunately, LG Chem had stated that it would be open to letting SK Innovation finish its factory even during the early stages of the 22 trade secret claims. The settlement involves a $1.8 billion payment from SK and running royalty payments on all batteries manufactured at the Georgia site. In exchange, LG is dropping a U.S. intellectual property suit, resolving all legal claims in South Korea, resolving the ITC decision, and vowing not to sue SK under similar grounds for the next 10 years.
On the surface, it would seem that SK Innovation is getting a good deal in exchange for a substantial, one-time payment. But those royalty fees haven’t been expanded upon by either company and could stretch out for ages.
While both companies reported that the final decision was reached on Sunday, there were routine talks between the battery firms and government officials (both state and federal) ahead of the deal.
LG Energy Solution CEO Jong Hyun Kim even wrote a letter to Democratic U.S. Sen Raphael Warnock in March stating that his company “is prepared to do whatever we can to help the people and workers of Georgia.”
This came with the caveat that, if SK wasn’t eligible to run the plant, LG could step in and supervise — noting that it already had several U.S. facilities, thanks to its ties with General Motors, and planned on spending $4.6 billion to build more. But SK has contracts with Ford and Volkswagen, leading many to realize just how seriously the trade restrictions would benefit its main rival and the automakers that had allied themselves with LG.
The State of Georgia had also laid out $300 million in free land and other incentives for the SK plant that further complicated the issue. The battery firm spent much of March trying to convince the U.S. government that leaving the ITC decision in place would effectively give LG a regional monopoly. At the same time, LG was arguing with SK over the level of compensation it required to withdraw its legal claims and let the factory finish completion — which is still expected to conclude sometime in 2022. If everything goes according to plan, the site is supposed to have 2,600 workers pumping out lithium-ion batteries for more than 300,000 electric vehicles annually by 2024.