In the US, voices of’early agreement’ are growing… Should LG-SK compensation gap be narrowed?

Input 2021.02.14 11:00

LG Energy Solution (formerly LG Chem (051910)Battery Business Division) SK innovation (096770)As LG won the dispute over the infringement of trade secrets for electric vehicle batteries, SK became busy. This is because the future of the Georgia plant 1 and 2, which is currently being built in the US, became uncertain and an agreement with LG became urgent. Some views expect President Joe Biden to exercise his veto for jobs in the United States, but this is unlikely. In the negotiations between LG and SK, which will be in full swing after the Lunar New Year holiday, it is expected that the key will be how much the gap between the two sides can close the settlement amount gap.

According to industry sources on the 14th, as the US International Trade Commission (ITC) acknowledged SK Innovation’s infringement of trade secrets and imposed a severe punishment of ’10 years of import ban’, SK’s footsteps fell. Immediately, a blow to the first and second factories in Georgia, USA, was inevitable. SK invested 2.6 billion dollars (about 3 trillion won) to build this factory. SK predicts that the plant will be able to produce 430,000 electric vehicle batteries per year.

Although ITC gave Volkswagen and Ford a grace period of two and four years, respectively, which are scheduled to receive batteries from SK Innovation’s first and second plants in Georgia, considering the period remaining until full-scale mass production, the battery is actually only one to two years. Can deliver. Since then, it is practically impossible to operate the factory in a situation where the import ban is attached.

Both Ford and Volkswagen have demanded an agreement from SK. Jim Parley Ford, CEO of Ford, wrote on his Twitter on the 12th that “the two suppliers (LG, SK) must voluntarily agree, ultimately in the best interests of US manufacturers and workers.”

On the same day, Volkswagen also asked the US government to “make it possible to use the electric vehicle batteries produced by SK Innovation for at least four years.” “They became unintended victims of the dispute between SK Innovation and LG Energy Solutions,” he said. “Ultimately, we hope that SK Innovation and LG Energy Solutions will resolve this dispute outside the court of law.”

For SK, if President Biden exercised his veto, the problem could be easily solved. The ITC’s decision must be approved by the President of the United States, and the President may veto it for policy reasons. This is why SK said it expects President Biden to exercise his veto right after the ITC results come out.

Georgia Governor Brian Kemp also helped SK. On the 12th, he made a statement to the effect that “the ITC decision could hurt SK Innovation’s electric vehicle battery plant construction in Georgia, and that President Biden should reverse the decision.”

However, in reality, it is the opinion of the industry that the possibility of exercising the veto power to be President Biden is small. This is because there is no precedent for the President of the United States to exercise veto power over infringement of trade secrets other than patent infringement, and President Biden has emphasized the protection of intellectual property rights.

SK, too, is unable to hold on to veto rights as the ITC final decision is finalized after the 60-day review period. This is why SK is likely to negotiate an early agreement with LG right away.

The key is the compensation gap. LG has requested an amount close to 3 trillion won, while SK has offered less than 1 trillion won. There is a difference in time of more than 2 trillion won. In particular, there is a prospect that the size of the demand for compensation will increase as LG wins a complete victory in the ITC final decision.

If the two sides fail to reach an early agreement, the dispute is expected to prolong. SK may appeal to the Federal Appeals Court in disagreement with the ITC’s trial decision, and LG is open to a lawsuit against SK in Europe.