WASHINGTON -- Two big South Korean electric vehicle battery makers said Sunday that they have settled a long-running trade dispute that will allow one company to move ahead with plans to manufacture batteries in Georgia. President Joe Biden called it "a win for American workers and the American auto industry."
The agreement between LG Energy Solution and SK Innovation ended the need for Biden to intervene in a case closely watched for its implications on Biden's clean-energy agenda, which includes a sharp increase in the number of electric vehicles as part of his plan to address climate change. Biden had until Sunday night to make a decision, after a ruling in February by a trade commission.
The companies said in a statement that SK will provide LG Energy with a total of $1.8 billion and an undisclosed royalty. They agreed to withdraw all pending trade disputes in the United States and South Korea and not assert new claims for 10 years.
"We have decided to settle and to compete in an amicable way, all for the future of the U.S. and South Korean electric vehicle battery industries," said Jun Kim, CEO and president of SK, and Jong Hyun Kim, CEO and president of LG Energy.
The companies pledged to work together to strengthen the electric vehicle battery supply chain in the U.S. and support the Biden administration's efforts to advance clean energy policies, including electric vehicles.
The U.S. International Trade Commission had decided in February that SK stole 22 trade secrets from LG Energy and that SK should be barred from importing, making or selling batteries in the United States for 10 years.
The decision could have left Ford Motor Co.and Volkswagen AG scrambling for batteries as they both roll out additional electric vehicle models, a priority for the companies and for the Biden administration. SK has contracts to make lithium ion batteries for an electric Ford F-150 pickup and an electric Volkswagen SUV.
The commission said SK could supply batteries to Ford for four years and to Volkswagen for two years. During that period, the two companies were supposed to line up new suppliers. The decision had jeopardized a $2.6 billion battery factory that SK is building in Commerce, Ga., but the settlement allows SK to finish construction and operate the plant.
SK is expected to eventually create at least 2,600 full-time jobs for the plant, about 45 minutes northeast of Atlanta along Interstate 85. By 2024, the company's facilities will produce batteries for more than 300,000 electric vehicles annually.
Georgia handed over a huge package of economic incentives to SK to win the project. The state provided grants, free land and other incentives that totaled about $300 million so long as the projects lived up to economic development promises.
Democratic Sen. Jon Ossoff of Georgia, who at Biden's request had jump-started negotiations between two companies, said the settlement "has saved the battery plant in Commerce, Georgia, ensuring thousands of jobs, billions in future investment, and that Georgia will be a leader in electric vehicle battery production for years to come."
U.S. Sen. Raphael Warnock, D-Ga., said in a statement that the deal would protect high-paying jobs.
U.S. Trade Representative Katherine Tai said the deal "builds confidence" in the reliability and responsibility of the two companies as suppliers to the U.S. auto industry. The agreement puts the U.S. "in a stronger position to drive innovation and ... clean energy technology while also respecting the rights of technology innovators at the heart of trade and manufacturing policy," Tai said.
Ford, in a statement, said the deal "allows us to focus on delivering a range of Ford world-class battery electric vehicles for our retail and fleet customers, while also supporting American workers, the economy and our shared goal of protecting the planet."
BIDEN EMBRACES DEAL
Biden said in a statement that building electric vehicles and the batteries needed for them is an important part of his $2.3 trillion infrastructure plan.
"We need a strong, diversified and resilient U.S.-based electric vehicle battery supply chain, so we can supply the growing global demand for these vehicles and components -- creating good-paying jobs here at home, and laying the groundwork for the jobs of tomorrow. Today's settlement is a positive step in that direction," Biden said.
The settlement allows Biden to sidestep a conflict with the International Trade Commission. Biden had been expected to issue a decision within the coming days. The president has the authority to overturn commission rulings within 60 days, a power generally delegated to the U.S. trade representative.
But a president has done so only once. In August 2013, President Barack Obama reversed a commission ruling that would have imposed a ban on the sale of some older Apple iPhones and iPads, dealing a blow to Samsung Electronics Co. in a long-running patent battle between those two companies.
With the commission's February ruling, the Biden administration feared that finding new suppliers could prove difficult if the automobile industry rushes to expand its offerings of electric vehicles. The administration has cited the need to overhaul American car and truck fleets and make them all-electric
If Biden didn't overturn the ruling, SK was expected to appeal the decision to a federal court. If he overturned the ruling, LG probably would have revived a federal lawsuit in Delaware that addresses the same issues.
But the likelihood of Biden reversing the ruling pressured LG to reduce its settlement demands, according to a person familiar with the talks, who spoke Saturday on condition of anonymity to protect business relations. Tai and top South Korean government officials also got involved in the negotiations.
Sam Abuelsamid, principal analyst for Guidehouse Insights, said a settlement was always the most likely outcome. Demand for electric vehicles is projected to rise dramatically by 2035, and other companies will start making them in the U.S. to meet that demand, he said.
Switching the U.S. fleet of roughly 279 million largely gas-powered cars and trucks to electric vehicles is a focus of Biden's infrastructure plan, with $174 billion allocated for electric vehicle incentives, a half-million charging stations and development of a domestic supply chain. Experts say it's possible the U.S. will run short of electric vehicle batteries if it doesn't set up its own network of parts suppliers.
"We don't have nearly enough battery production capacity to meet the kind of volumes that companies are talking about producing," Abuelsamid said.
However, David Callahan, a partner at Latham & Watkins, last week disputed the idea that the United States is heading toward a shortage of batteries.
He said LG Chem has a plant in Holland, Mich., that has been making batteries for about eight years and a joint venture with General Motors in Lordstown, Ohio. Last month, he said, LG announced $4.5 billion in commitments for two additional battery plants.
Information for this article was contributed by Matthew Daly and Tom Krisher of The Associated Press; by Andy Peters, Tia Mitchell and Greg Bluestein of The Atlanta Journal-Constitution (TNS); and by Steven Mufson of The Washington Post.
