Two South Korean industrial giants have reached a last-minute, $1.8 billion global settlement of a trade secrets case that will allow a pair of new plants in Commerce, Ga., to move ahead with plans to supply batteries for Ford and Volkswagen electric vehicles.
“This settlement agreement is a win for American workers and the American auto industry,” Biden said in a statement on Sunday. He said the United States needs “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."
SK Innovation can now complete construction of its $2.6 billion manufacturing facilities, which will employ 1,000 workers by the end of this year. By 2024, the plants will have 2,600 workers and annually churn out lithium ion batteries for more than 300,000 electric vehicles annually, mostly for Ford and VW brands.
Under the terms of the settlement, which was announced Sunday, SK Innovation will pay its rival LG Energy Solutions $1.8 billion, part in cash and part in future royalties. LG Energy will drop litigation before the U.S. International Trade Commission, a U.S. federal court and South Korean courts.
Jong Hyun Kim, chief executive of LG Energy Solution, and Jun Kim, chief executive of SK Innovation, said in a joint statement that they would “compete in an amicable way.” They said they were “dedicated to work together to support the Biden Administration’s climate agenda and to develop a robust U.S. supply chain.”
The two companies agreed not to sue each other for 10 years.
LG Energy Solution had accused SK of stealing trade secrets and destroying documents. In April 2019, it sought to limit SK’s battery output in the United States and said the country had no battery shortage.
The trade commission sided with LG and restricted SK’s ability to operate its plants in the United States. SK would have been barred from importing crucial battery components for 10 years. But the company still could have imported enough to supply batteries to certain VW brands for two years and for certain Ford brands for four years, including Ford’s best-selling F-150 pickup truck. During that period, VW and Ford were supposed to line up new suppliers.
The Biden administration, which had until Sunday to overturn the ITC ruling, 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. The settlement gives the president a boost on the jobs front and among climate activists and those worried about climate change.
The likelihood of Biden reversing the ITC ruling pressured LG to reduce its settlement demands, according to a person familiar with the talks, who spoke Saturday on the condition of anonymity to protect business relations. U.S. Trade Representative Katherine Tai and top South Korean government officials also got involved in the negotiations.
Tai, who has been in office for only two weeks, noted in a statement Sunday that the deal left the United States in “a stronger position to drive innovation and growth of clean energy technology envisioned in the American Jobs Plan while also respecting the rights of technology innovators at the heart of trade and manufacturing policy.”
Scott Keogh, chief executive of the Volkswagen Group of America, also applauded the outcome. “With the intellectual property issues between the two companies now settled, our complete focus now shifts to where it should be: the start of U.S. production of the all-electric ID.4 SUV in 2022, assembled by proud, skilled workers in Tennessee,” Keogh said in a statement.
The SK battery plants, located 70 miles northeast of Atlanta, have drawn support from Georgia Republicans and Democrats, including Gov. Brian Kemp (R), Sens. Raphael G. Warnock (D) and Jon Ossoff (D), and former Atlanta mayor Andrew Young (D). Kemp said in a statement in February that Biden and his administration “have the opportunity to support thousands of hardworking Georgians — and their communities — who would benefit from SK Innovation’s continued success in our state.”
The state of Georgia has provided $300 million in grants, land and other incentives to the South Korean company.
The settlement allows Biden to sidestep a conflict with the ITC. 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 an ITC 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.
SK, South Korea’s third largest conglomerate, had lined up prominent advocates to press its case, including former Obama administration officials. Former deputy attorney general Sally Yates, a Georgia native, said its factory should stay open to avoid disrupting the U.S. economy and efforts to fight climate change. She said the two South Korean firms should argue their positions in U.S. District Court, where LG was suing SK.
“We have a severe shortage of EV batteries in the U.S. with insufficient domestic production, and the SK plant in Georgia is necessary to address this supply chain threat,” she wrote.
LG, however, had contended that the Biden administration should let the ITC process work. David K. Callahan, a partner at Latham & Watkins, last week disputed the idea that the United States is heading toward a shortage of EV 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.
This story has been updated.