By David Shepardson, Hyunjoo Jin and Heekyong Yang
WASHINGTON/SEOUL (Reuters) -South Korean battery makers LG Energy Solution and SK Innovation Co agreed on Sunday to settle disputes over electric-vehicle (EV) battery technology, avoiding a potential setback for U.S. EV ambitions.
The settlement after marathon talks by affiliates of two of South Korea's biggest conglomerates was announced just hours before a Sunday night deadline for President Joe Biden's administration to decide whether to take the rare step of reversing a U.S. International Trade Commission decision (ITC).
In a statement, Biden called the settlement "a win for American workers and the American auto industry.... We need a strong, diversified and resilient U.S.-based electric vehicle battery supply chain".
The core dispute had threatened the EV plans of Ford Motor (NYSE:F) Co and Volkswagen AG (OTC:VWAGY), as well as a Georgia plant that is key to the growing industry.
The resolution is also a win for Biden, who has made boosting EVs and U.S. battery production a top priority. The global auto industry is racing to develop EVs, and Biden has proposed spending $174 billion to hike their sales and expand charging infrastructure.
SK Innovation agreed to pay LG Energy Solution, a wholly owned subsidiary of LG Chem Ltd, 2 trillion won ($1.8 billion) - 500 billion won each this year and next, and royalties for at least six years.
"We expect our payment plan will not be financially burdensome," an SK Innovation official told Reuters.
The companies agreed to drop all litigation in the United States and South Korea and not to raise further lawsuits against each other for 10 years.
"The two companies now can coexist in the global market and compete in good faith," LG Energy Solution said in a statement. SK said it would invest actively both in South Korea and abroad now that uncertainties for its EV battery business in the United States have been cleared up.
The U.S. Office of U.S. Trade Representative had faced a Sunday night deadline on whether to take the rare step of reversing a U.S. International Trade Commission decision unless the companies had agreed a deal.
The Biden administration, Volkswagen (DE:VOWG_p) and Ford had been pushing the Korean companies to settle.
DEMOCRATIC, REPUBLICAN LOBBYING FROM GEORGIA
Trade Representative Katherine Tai was personally involved in the settlement discussions, urging the companies to come to a resolution, the sources said.
"I congratulate both companies for working through their significant differences to resolve this dispute, which builds confidence in their reliability and responsibility as suppliers to the U.S. auto industry," Tai said in a statement after LG and SK announced the settlement.
"We are pleased the two battery suppliers at the center of this recent trade dispute have come together and solved their differences," Volkswagen said in a statement on Sunday.
“We are pleased that SK Innovation and LG Energy Solution have settled their differences," Ford said in a statement.
BITTER DISPUTE
In the bitter two-year dispute, LG lost to SK in a bid for VW orders, then accused SK of stealing trade secrets by poaching nearly 80 of its employees. LG filed a complaint against SK in 2019, and both sides hired numerous lawyers and consultants to make their case to the Biden administration.
The ITC in February sided with LG after the company accused SK of misappropriating trade secrets related to EV battery technology. It issued a 10-year-import ban but allowed SK to import components for batteries for Ford's EV F-150 program for four years, and VW's North American EVs for two years.
In March, SK vowed to walk away from the $2.6 billion Georgia battery plant, which is under construction, if the ITC decision was not overturned. LG said in March it could handle the battery needs of automakers if SK abandoned the Georgia plant.
Volkswagen of America CEO Scott Keogh wrote in a LinkedIn (NYSE:LNKD) post on Wednesday that if the ITC decision were left in place, it could "reduce U.S. battery capacity and delay the transition to electric vehicles."
Georgia's two newly elected Democratic U.S. senators, Raphael Warnock and Jon Ossoff, have repeatedly pressed the South Korean companies to reach agreement. The state's Republican governor, Brian Kemp, had urged Biden to intervene.
SK's plant in the town of Commerce, 110 km (70 miles) northeast of Atlanta, will employ nearly 2,600, the largest foreign investment in the state's history at nearly $2.6 billion, Kemp said. "Simply put: the livelihoods of thousands of Georgians are now in your hands."
LG Energy Solution is nearing completion of an Ohio cell manufacturing plant with General Motors Co (NYSE:GM) and is close to announcing plans to build a $2.3 billion second facility in Tennessee, sources told Reuters.
In March, LG announced $4.5 billion investment plans for its U.S. battery production business over the next four years.
($1 = 1,120.9800 won)