Two of the largest conglomerates in South Korea have reached a last-minute settlement over a multi-million dollar intellectual property dispute that threatens to disrupt Ford and Volkswagen’s plans to build electric vehicles in the US.
The agreement between LG and SK’s batteries comes after the US International Trade Commission in February imposed a ten-year import ban on SK Innovation due to allegations by its Korean rival about the illegal acquisition of sensitive technology.
SK will pay LG Won2tn ($ 1.8 billion) via cash and current royalties, the companies said in a joint statement on Sunday.
The deal is a postponement for Joe Biden, who had to decide until Sunday night whether he would take a rare presidential violation of an ITC decision to avoid interruptions in the carmaker’s investment plans and protect the jobs of thousands of employees.
Georgia Democratic senator Raphael Warnock, who has campaigned for the Biden government and companies over the dispute, said the resolution would help keep the local economy moving forward.
“It has always been clear that the best way to protect employees in the trade – and the jobs that Georgians have been promised – is for the companies involved to negotiate a settlement in good faith,” he said.
As part of the agreement, the companies also agreed to drop all pending lawsuits and promised not to sue each other for the next ten years.
The ITC ruling allowed a grace period to give companies time to switch from provider. But the industry argued that the import ban would complicate the plans of car manufacturers to launch electric vehicles as well as hybrids and ultimately delay the transition of the industry to environmentally friendly vehicles.
German VW and the American Ford each have contracts to purchase batteries at SKI’s new electric vehicle battery plant in Georgia, where the Korean group has invested $ 2.6 billion. The factory is considered the largest single investment in the history of the southern state, which is expected to provide 2,600 jobs and clean power for 330,000 vehicles a year, including Ford’s fully electric F-150 truck.
The settlement is also the latest twist in a years-long battle between two highly competitive South Koreans chaebol it has become an embarrassment to the government in Seoul.
LG’s battery unit – formerly part of LG Chem, but has since been split into LG Energy Solution – accuses SKI of improperly profitable contracts with car manufacturers based on stolen technology.
The ITC case was launched after failed attempts in local courts.
SKI disputed the allegations and called on the White House to lift the ban.
LG announced $ 4.5 billion in US investment plans by 2025 last month, which created more than 10,000 jobs, to allay fears of disruption to the import ban on SKI.
The ITC also paralyzed Ford for pursuing its deals with SK, despite evidence that it had abused trade secrets.
The South Korean Ministry of Commerce welcomed the decision on Sunday.
Senior officials in Seoul, including Chung Sye-kyun, the country’s prime minister, have been pressuring companies for months to reach an agreement. As early as March, however, the two parties appeared far apart over a possible settlement figure, with LG executives saying the gap was nearly $ 1 billion.
Additional reporting by Song Jung-a, Kiran Stacey and Peggy Hollinger