Ford, White House hail deal to avoid EV battery import ban

Jordyn Grzelewski
The Detroit News

In a victory for Ford Motor Co.'s bid to ramp up production of electric vehicles, the automaker's battery supplier reached a settlement over the weekend in a trade-dispute case with a rival company.

South Korean companies SK Innovation Co. — a battery supplier for Volkswagen AG as well as Ford — and LG Chem confirmed Sunday that they had reached a deal. Under the agreement, the companies agreed to drop all litigation related to the case and to hold off on pursuing any other disputes in the U.S. and South Korea for 10 years. SK also agreed to pay LG $1.8 billion.

An all-electric Ford F-150 prototype during a capability test.

"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," Jun Kim, CEO of SK, and Jong Hyun Kim, CEO of LG Energy Solution, said in a statement. "In particular, we will work together to strengthen an EV battery domestic supply chain and support the U.S. Biden administration's effort to advance green energy policies and environmental sustainability."

News of the eleventh-hour deal drew an outpouring of positive reactions from automakers and government leaders who had been eager to stave off the 10-year import ban on SK's products that would have gone into effect if no action had been taken. The deal is good news for Ford, because it means SK will be able to import parts for Ford's forthcoming battery-electric F-150.

"We are pleased that SK Innovation and LG Energy Solution have settled their differences," Ford said in a statement Sunday. "This 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."

SK Innovation is allowed to bring in components needed for Ford’s EV F-150 pickup for four years.

The settlement also was hailed by President Joe Biden, who had until Sunday to decide whether to overturn the ruling against SK had a deal between the two companies not been reached. The case put the Biden administration in the middle of competing objectives – cracking down on unfair trade practices, or expanding EV production to help achieve his economic and environmental goals.

In a statement, Biden called the deal "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, so we can supply the growing global demand for these vehicles and components," he said. "[Sunday's] settlement is a positive step in that direction, which will bring some welcome relief to workers in Georgia and new opportunity for workers across the country."

U.S. Trade Representative Katherine Tai, who was involved in the negotiations between the suppliers, in a statement congratulated SK and LG "for working through their significant differences to resolve this dispute."

The deal is "enormous for both Ford and for Volkswagen," said Sam Abuelsamid, principal research analyst at Guidehouse Insights. Ford, he noted, plans to release battery-electric versions of two of its signature vehicles next year — the Transit commercial van and its profit-rich F-150. Volkswagen plans to use SK's batteries for its MEB EV lineup in North America.

The case

The U.S. International Trade Commission earlier this year sided with LG Chem in a dispute over intellectual property that LG alleged SK stole. SK denied the allegations.

The ITC said that SK employees had gone to "extraordinary" lengths to destroy documents related to the case. The agency also ruled that SK would be barred from importing batteries to the U.S. for 10 years, though it said SK could continue to supply Ford for four years and Volkswagen for two years so the companies would have time to find new suppliers.

The decision prompted an outcry from elected officials and others concerned about the future of battery factories — and thousands of jobs tied to them — SK had committed to building in Georgia. The ruling effectively would have forced SK to close a battery plant that is nearing completion, which according to an estimate from Benchmark Mineral Intelligence would take 15% of EV batteries off the market this year and reduce U.S. EV manufacturing capacity by more than 50,000 vehicles per year.

"The F-150 is going into a very competitive marketplace," said Abuelsamid. "They did not want one more problem like this to hold them up ... so I'm sure that they were very anxious to get the deal done so they can move forward."

There was likely strong interest from both sides to reach an agreement, he said.

"There's more than enough demand for (battery) cells from all of the factories that have been announced, and there was certainly pressure from a number of automakers on both sides to settle this thing."

Indeed, Ford CEO Jim Farley weighed in on the case in February, saying on Twitter that "a voluntary settlement between these two suppliers is ultimately in the best interest of U.S. manufacturers and workers."

The dispute prompted a flurry of attempts to get the administration to pick a side. Former Acting Attorney General Sally Yates, for example, argued in support of SK, saying the ITC ruling would hurt the Biden administration's climate change goals and put the U.S. at a disadvantage against China in the transition to EVs.

Fragile supply chain

The closely-watched case has underscored the fragility of the supply chain for EV components in the U.S. Everyone from White House officials to automotive industry executives have emphasized the need for the U.S. to expand its manufacturing capacity and reduce its reliance on foreign suppliers, an issue that has been highlighted by an ongoing global shortage of semiconductor chips that has significantly impacted auto production since the start of the year.

Ford executives have hinted that the company is looking into producing its own EV battery cells at some point in the future. And Farley has been vocal about the need to expand domestic production of batteries.

“We need to bring battery production to the U.S.,” he said, speaking at a conference in February. “We can’t go through what we’re doing with chips right now in Taiwan. It’s just too important."

Jonathan Jennings, Ford's global commodity purchasing vice president, told a Senate committee last month that the electric F-150 is "a critical project for us." He said if SK was barred from supplying the companies, Ford would have to import batteries from foreign suppliers rather than the parts being made in Georgia.

Ford recently launched its first fully battery-electric vehicle, the Mustang Mach-E.

The uncertainty over Ford's battery supply came as the Dearborn automaker makes major moves to accelerate its development of EVs. Ford recently launched its first fully battery-electric vehicle, the Mustang Mach-E, and announced earlier this year that it would increase its spending on EVs to more than $22 billion through 2025.

Meanwhile, LG Energy Solution — the EV battery spinoff of LG Chem — has said it plans to invest $4.5 billion to expand its U.S. battery production at its plant in Holland and build two new plants in the next four years. The company's major clients include General Motors Co. and Tesla Inc.

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski

Staff Writer Riley Beggin contributed.