GM Seeks $1 Billion Compensation From LG Chem For Chevy Bolt Recall
General Motors Company (NYSE:GM) wants LG Chem Ltd (KRX:051910) to reimburse $1 billion in estimated losses for the costly battery defects in the Chev...
General Motors Company (NYSE:GM) wants LG Chem Ltd (KRX:051910) to reimburse $1 billion in estimated losses for the costly battery defects in the Chevy Bolt. The car manufacturer had announced on Friday a third recall of the popular electric model.
The announcement comes just days after GM had issued a third Bolt recall accounting for 73,000 vehicles, for a total of 142,000 including the previous called-in vehicles. The whole operation represents “every single one that Chevy has sold so far,” as informed by NBC News.
TechCrunch reports that “following the news of the recall … LG Chem shares fell by 11% on Monday, and its stock price lost $6 billion in market value. GM’s shares were down 1.27% at market close.”
The recall is a huge blow for the company within the fiercely competitive EV market, as GM has no cars to sell in the whole of the North American region. This will be an opportunity for companies like Tesla and several other automakers to sit stronger in the business.
“The loss in sales, the safety risks, and the possibility of better tech on the horizon might cause GM to take its business elsewhere,” TechCrunch reports.
The battery issues relate to cell defects manifested in a torn anode tab and folded separator.
LG Chem Issues
LG Chem is the parent organization of LG Energy Solutions, which was also involved in a Volkswagen AG ID.3 catching fire earlier this week.
The German brand and Tesla Inc (NASDAQ:TSLA) are rumored to be moving away from LG Chem’s pouch-type lithium-ion battery cells towards more prismatic-type cells, currently manufactured by CATL –Contemporary Amperex Technology Co Ltd (SHE:300750) and Samsung SDI Co Ltd (KRX:006400).
LG Chem’s batteries have been involved in more battery fire incidents that have triggered costly recalls. “Earlier this year, Hyundai recalled 82,000 EVs due to a similar battery fire risk at an estimated cost of about $851.9 million.”
Hyundai’s recall cost would delay LG Chem’s initial public offering currently planned for September.
According to Reuters, batteries are a big chunk of LG Group earnings. “LG Chem earned 40% of operating profit from batteries –including EV batteries– in April-June. Earlier this month, LG Electronics Inc (066570.KS) cut its second-quarter operating profit by more than a fifth to reflect GM recall costs.”