LG Chem shares of SKorea affected by GM Bolt withdrawal | Auto industry news


General Motors has expanded its recall of Bolt EVs due to a fire risk from battery manufacturing defects that it said would cost $1 billion.

Shares of LG Chem Ltd. fell about 10 percent on Monday after General Motors said it would recall an additional 73,000 Chevrolet Bolt vehicles that use the South Korean company’s batteries, months after a similar recall by Hyundai Motor Co.

General Motors on Friday expanded its recall of Bolt electric vehicles (EVs) due to a fire risk from what it described as battery manufacturing defects, saying the recall would cost $1 billion and that it would seek compensation from LG.

The US automaker said the recall covers car models starting in 2019 and that it will halt Bolt sales indefinitely. LG Chem said it is working to ensure a smooth recall.

LG Chem, which is gearing up for an initial public offering (IPO) for its LG Energy Solution (LGES) battery unit, has lost $5 billion in market value, with its stock on track for its biggest intraday loss in percentage terms since March 2020.

“The market expected the LGES to launch its IPO in September, but with the expansion of GM’s recall, the LGES IPO will likely be delayed by a month or two, as the company needs to reverse the cost of the recall before finalizing the IPO papers,” Samsung said. Securities analyst Cho Hyun Ryol.

GM initially recalled 69,000 Bolt vehicles in July. Its extended recall comes about a week after a fire involving a Volkswagen AG ID.3 EV carrying an LGES battery.

Six months ago, Hyundai recalled 82,000 electric vehicles due to an LGES battery fire risk at an estimated cost of about 1 trillion won ($851.9 million).

General Motors and Hyundai recalls include bag-type batteries, rather than the cylindrical batteries offered to LGES customers including Tesla Inc.

strained relationship

In February, South Korea’s Ministry of Transportation said a joint investigation with LGES and Hyundai had found defects in battery cells at an LGES plant in China. Investigation is underway.

Neither LGES nor Hyundai has disclosed how they plan to split the recall costs, although analysts expect LGES to bear 60%.

Fires and challenges in finding a solution to a strained relationship that lasted years. When General Motors and LG announced they were joining the Bolt in 2015, they touted how trouble-free battery cells LG had introduced to the Chevy Volt hybrid, launched in 2010.

General Motors and LG have no choice but to maintain close relations. They have started building two battery plants together in the US states of Ohio and Tennessee, each costing more than $2 billion and expected to employ more than 1,000 people.

Batteries are an important component of the LG Group’s profits. LG Chem got 40 percent of its operating profit from batteries — including EV batteries — in April and June. Earlier this month, LG Electronics cut its second-quarter operating profit by more than a fifth to reflect General Motors’ recall costs.

Shares of LG Electronics, which assembles LG cells into battery modules, fell 5.8 percent on Monday. This is compared to the local benchmark index, which rose by 1.5 percent at noon.





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