LG pays GM as much as $ 1.9 billion for Bolt EV battery fires

A 2019 Chevrolet Bolt EV caught fire at a house in Cherokee County, Georgia, on Sept. 13, 2021, according to local fire departments.

Cherokee County Fire Department

LG Electronics has agreed to reimburse General Motors up to $ 1.9 billion for the recall and repair of Chevrolet Bolt electric vehicles due to fire risks from faulty batteries from the South Korean supplier.

Issues with the Bolt – the company’s flagship mainstream electric vehicle – have led the automaker to recall every electric car since production began in 2016. Repairing the vehicles, including completely replacing some batteries, is expected to cost $ 2 billion, GM said Tuesday. That’s an increase from an earlier estimate of $ 1.8 billion.

The deal between the companies is a huge win for the automaker, which fell short of Wall Street’s expectations in the second quarter as funds were set aside for expected recall costs.

As a result of the agreement, GM will recognize an estimated recovery in the third quarter that will offset $ 1.9 billion of the $ 2.0 billion in costs related to the recalls. The automaker previously said it was seeking a refund from LG.

The total cost of the recall depends on the number of vehicles repaired. Earlier in the day, LG companies said the recall will cost about $ 1.2 billion, according to Reuters.

LG did not immediately respond to a comment.

The production problems occurred at LG Battery Solution’s plants in South Korea and Michigan. The “rare manufacturing defects” on the Bolt electric vehicles are a torn anode strip and a folded separator, which GM says increases the risk of fire when they are in the same battery cell.

“LG is a valued and respected supplier to GM and we are excited to enter into this agreement,” said Shilpan Amin, GM’s vice president of global purchasing and supply chain, in a statement. “Our development and manufacturing teams continue to work together to accelerate the production of new battery modules and we expect to start repairing customer vehicles this month.”

According to GM, the defective batteries caused at least 13 vehicles to catch fire.

The deal comes because the companies are building two battery factories in the United States through a joint venture called Ultium Cells LLC. The Ohio and Tennessee plants will produce GM’s next-generation batteries called Ultium.

The supply and production of battery cells is critical for automakers moving to electric vehicles.

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