Input 2021.02.15 10:37
In the business world, the lawsuit lost SK(034730)Go actively LG(003550)Observations that it will negotiate with are dominant. The biggest question is how much consensus between the two companies will form the’total amount’ of compensation, which has not been able to close the gap in the negotiation process. If the total amount is close, it is highly likely that both companies will have a tug of war over the method of paying compensation.
On the 15th, SK Innovation responded to the US International Trade Commission’s (ITC) ruling, “A four-year and two-year grace period was allowed for the previously ordered Ford and Volkswagen programs, respectively.” To avoid this, we will actively respond through the remaining lawsuits and procedures.”
There is only one case in which the US president has vetoed ITC rulings over the past decade. In 2013 Samsung Electronics (005930)Won the patent infringement lawsuit filed against Apple, but then US President Barack Obama vetoed it. At the time, President Obama was on the side of Apple, an American company, so it differs from the LG-SK lawsuit. There were a total of five cases in which the President of the United States exercised veto power before, all from the 1970s to 1980s.
If President Biden does not exercise his veto and the ITC ruling takes effect, SK Innovation can appeal to the Federal High Court. Even if an appeal is made, the effect of the ITC ruling, such as the import ban, remains intact, and during the appeal period, SK must bear these losses. In addition, losing the appeal will put SK at a more disadvantageous position in negotiations with LG.
In the end, the best way is for SK to negotiate with LG and reach an early agreement before the ITC ruling takes effect. ITC judgments are of the nature of civil lawsuits, so if the parties agree, the judgments are invalid.
The key to early agreement between the two companies is the’total amount’ of compensation. Until recently, in the market, LG Energy Solutions requested compensation of 2.5 trillion to 3 trillion won, while SK Innovation is 500 to 800 billion won, including some of its stake in SK IE Technology (SKIET), a subsidiary scheduled to be listed within the year. The prospect came out. The two companies have not disclosed the specific amount of compensation, but they are not actively denying the analysis of this market. According to the analysis of the market, the amount of compensation determined by the two companies shows a difference of about 2 to 2.5 trillion won.
LG, who won the ITC, is highly likely to maintain the amount of compensation it previously requested. SK must present the level of compensation LG wants for early agreement.
SK invested 6 trillion won in building three electric vehicle battery plants in Seosan, Chungcheongnam-do and Georgia, the US. If the U.S. fails to import and produce electric vehicle battery parts, the global electric vehicle battery business is virtually impossible and must be withdrawn from the market at all. In the industry, analysts say that it is the best option to pay the level of compensation that LG wants, rather than giving up the business. Investment Bank Credit Suisse said in the report after the final decision of the ITC that there is a possibility of further litigation, “the settlement is expected to be over 5 trillion won”.
Kim Jeong-hwan, a researcher at Korea Investment & Securities, said, “If SK Innovation loses in a civil lawsuit in Delaware in the future, it is possible to apply punitive damages, so the possibility of agreement between the two companies is higher.” “SK Innovation will not give up its secondary battery business in the US I said.
However, some observers say that it is unreasonable for SK to ask for compensation of over 2.99 trillion won, which it invested in the Georgia plant in the United States. Some of the industry reported that SK is considering a plan to pay compensation up to 2 trillion won if SK loses the lawsuit. LG is in a position that “200% punitive damage compensation is possible”, so a fierce battle over the total amount of compensation is expected in the future.
Once the amount of compensation is determined, the method of paying compensation is expected to be another problem. Currently, SK Innovation’s current assets are about 1.8 trillion won. If the compensation exceeds 2 trillion won, mobilizing all current assets is insufficient. In the industry, a method of adding royalties to a portion of cash or paying shares of subsidiaries is discussed.
An industry insider predicted, “When the amount of compensation is determined, SK will set a method of paying compensation at a level that does not harm its financial soundness as much as possible,” said an industry official. “On the other hand, LG will want cash or assets that can be liquidated immediately.”