GM EV recall costs to weigh on LG affiliates

The Korea Times

The Korea Times

Business

Sun, December 3, 2023 | 20:28

Tech

GM EV recall costs to weigh on LG affiliates

Posted : 2021-08-09 16:53

Updated : 2021-08-09 17:19

LG Electronics' headquarters in Seoul / Yonhap

By Kim Bo-eun

The costs of General Motors recalling its LG battery-loaded Chevrolet Bolt electric vehicles (EVs) are set to weigh on LG's battery unit as well as its electronics affiliate.

GM said last month that it decided to recall nearly 69,000 of its Bolt EVs produced in 2017 to 2019, after reports of two fires, to address the risk of battery fires in these vehicles.

The carmaker has identified "the simultaneous presence of two rare manufacturing defects in the same battery cell as the root cause" of battery fires in certain Bolt EVs. This news comes after the recall was issued for Bolt EVs in November over fire risks.

GM stated as it unveiled its second-quarter earnings last week that it has reflected the recall costs of $800 million in its financial sheets. These costs constitute a substantial chunk of the total $1.3 billion in warranty expenses incurred by the carmaker in the second quarter.

For the recall this time, GM said that it would replace "defective battery modules." Such replacements are likely to burden LG Electronics with the costs, as the company supplies battery modules to the carmaker. A module is a cluster of cells that is made to safely and efficiently manage countless battery cells loaded into one EV. The cells that LG Electronics packaged into modules come from LG Energy Solution's Ochang plant in Cheongju, North Chungcheong Province. LGES, as the cell manufacturer, will also be contributing to paying the recall costs.

"Discussions are taking place with GM on the ratio of costs each company will cover," an LG official said. The ratio of costs between GM and LG will be decided first. LG's electronics and battery affiliates will then decide on the percentage of costs they will each cover, according to the results of inspections, showing which entity holds greater responsibility. The splitting of costs between the two units is set to alleviate the burden for both companies.

Still, as in the case of GM, which saw its earnings for the previous quarter brought down by the recall costs, LG is also set to see its earnings take a toll. LG's battery affiliate is also paying for 70 percent of Hyundai Motor's 1.4-trillion-won Kona EV recall.

"Uncertainty looms over battery makers, given the fact that EV fires continue to erupt," an industry official said. "They will inevitably continue to see their earnings affected by recall costs. This is definitely a major burden."

bkim@koreatimes.co.kr

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