Strengthening the automotive electronics and parts business, the future growth engine
Early construction of mass production system for electric vehicle motors and inverters
Possibility of supplying motors to’Apple Cars’
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LG Group Chairman Koo Kwang-mo threw a match to strengthen the automotive electronic equipment (electrical equipment) and parts business, which is the future growth engine.
It decided to establish a joint venture for electric vehicle parts with Magna International, Canada, the world’s third largest auto parts maker.
Earlier, Chairman Koo bought ZKW, an Austrian automotive headlamp company, immediately after taking office in 2018. With more and more electric and electronic parts being installed in automobiles, it is planning to foster the electric equipment business as a cash cow in the future.
According to the industry on the 24th, LG Electronics held an extraordinary board meeting on the 23rd to establish’LG Magni Powertrain (tentative name)’, a joint corporation in the field of electric vehicle powertrain (power transmission device) with Magna.
It is a method of creating a new company by dividing part of the green business within LG Electronics’ Electronic Components (VS) division. The new company’s stock value is worth $925 million. LG Electronics will own 51% of the stake, and Magna will take over the remaining 49% for $453 million (approximately KRW 501.6 billion).
The joint venture will be officially launched in July when approval for the split-off and establishment of a joint venture is approved at the general shareholders’ meeting scheduled for March next year. The headquarters will be located in Incheon, and about 1,000 employees related to the division will be moved to a joint venture.
An official at LG Electronics explained, “We decided to split the material to increase the competitiveness of the electric vehicle powertrain (power transmission device) business,” and “the joint venture will make decisions independently and quickly.
The joint venture’s main business is the production of a modularized drive system for motors, inverters, vehicle chargers and motors, inverters and reducers for electric vehicles.
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LG Electronics expects that its electric vehicle motor technology, the business know-how of Magna, the world’s third-largest auto parts maker, and its global customer network will produce synergies. In addition, in the fast-growing electric vehicle market, it plans to increase its growth potential by establishing a mass production system that can enjoy economies of scale. The joint venture will first supply electric vehicle parts to Magna, and in the future, it plans to supply parts to global automakers, which are Magna’s customers.
Founded in 1957, Magna is a manufacturer of various automobile parts such as powertrain, chassis, interior and exterior. Its headquarters are in Ontario, Canada.
LG Electronics has technological prowess and manufacturing competitiveness for motors and inverters, which are key parts of electric vehicle powertrains. In particular, based on the experience of developing motors for home appliances such as washing machines and refrigerators early on, it possesses excellent technology in electric vehicle motors.
Previously, LG Electronics was recognized for its technological prowess by supplying major parts for electric vehicles such as Chevrolet Volt EV and Jaguar I-PACE.
Swami Kotagiri Magna, the next CEO, said, “I look forward to taking advantage of the strengths of both companies to take the lead in the rapidly emerging electric component market.”
Kim Jin-yong, vice president of LG Electronics’ VS Business Division, also said, “In order to lead the global market in the electrified parts business with unlimited possibilities and growth opportunities, we made the best choice while boldly.”
When the joint venture is launched next year, LG Electronics’ auto parts business will be reorganized into a three-part system: the VS business headquarters centered on infotainment, ZKW, which is a lamp business, and a powertrain-oriented joint venture.
With the establishment of a joint venture with Magna, LG Electronics’ electronic electronics business is expected to turn to the black. LG Electronics’ VS Business Division recorded an operating loss of KRW 66.2 billion in sales of KRW 1.65 trillion in the third quarter of this year. Annual operating loss this year is expected to be around 400 billion won. However, in the securities industry, the VS business division is expected to succeed in turning profitable with increasing orders for high-margin electric vehicle parts next year. Chairman Koo’s decision to make bold investments to grow the electric electronics business as a future growth engine will come to fruition.
The establishment of a joint venture between LG Electronics and Magna attracts attention in line with Apple’s entry into the autonomous electric vehicle market. Apple, which aims to launch self-driving electric vehicles in 2024, is discussing cooperation with Magna, the largest auto parts maker in North America. The possibility of supplying electric vehicle motors and parts produced by LG and Magna joint ventures to Apple’s electric vehicles is open.
/ Reporter Lee Jae-yong [email protected]
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