© Reuters. FILE PHOTO: LG Chem's logo can be seen in its office building in Seoul, South Korea on October 16, 2020. REUTERS / Kim Hong-Ji
From Heekyong Yang
SEOUL (Reuters) – General Motors Co announced Tuesday that its battery partner LG Electronics Inc. of South Korea has agreed to reimburse it for the estimated $ 2 billion costs and expenses related to the Bolt electric vehicle recall .
The U.S. automaker didn't say how much LG would pay, but said it will recognize an estimated rebound in third-quarter earnings that will offset $ 1.9 billion in total costs related to the recall.
It follows announcements by GM's battery suppliers LG Chem Ltd and LG Electronics that the two South Korean companies will collectively bear $ 1.2 billion in costs related to the recall.
GM expanded the recall to replace LG battery modules because of the risk of fire to more than 140,000 cars in August.
The agreement with LG is an important step for GM to resolve an embarrassing episode that forced it to ask Bolt owners to park on decks, on the top floor or on an open level, and at least 15 meters from other vehicles removed due to the risk of fire.
According to LG, the final recall costs may still change, depending on the number of battery modules replaced.
"While the recall measures with the complete replacement of battery packs and modules for the early battery models will be (continued), the newer battery modules will be selectively replaced after the diagnostic software has been screened," said the unlisted battery unit LG Energy Solution from LG Chem in a statement.
LG and GM carried out joint analyzes and found two rare defects as the cause of the fires – a cracked anode and a folded separator.
The replacement and repair work is expected to begin this month, and the company is working with LG to accelerate production of new battery modules, GM said.
GM and LG Energy Solution to build two US joint venture battery plants.
LG Chem and LG Electronics announced Tuesday that they booked most of their 1.4 trillion won ($ 1.2 billion) cost in the July-September quarter, although some were booked in the previous quarter.
For the final quarter, LG Chem will pay a charge of 620 billion won, while LG Electronics, which assembles the cells into battery modules and packs, will cost 480 billion won.
LG Chem and LG Electronics shares closed 4.2% and 3.3% respectively on Tuesday, with investors relieved that there was less uncertainty about the cost of the recall. GM shares closed 1.5% after rising more than 2% earlier in the day.
LG Energy Solution added that it plans to resume work on its IPO, which was put on hold in August amid uncertainty over the cost of the recall.
($ 1 = 1,194.0300 won)
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