S.Korea’s LG Chem Dives On GM Electric Car Recall

The LG Chem logo is seen in its office building on October 16, 2020 in Seoul, South Korea. Reuters/Kim Hong-ji/file photo//file photo

  • GM extends Bolt EV recall over fire risk
  • Shares of battery supplier parent LG Chem are down nearly 10%
  • Recall May Delay LG Chem Battery Unit IPO – Analyst

SEOUL, Aug 23 (Reuters) – Shares of LG Chem Ltd (051910.KS) fell nearly 10% on Monday after General Motors Co. (GM.N) said it would recall 73,000 additional Chevrolet Bolt cars that South Korean uses the firm’s battery, a few months after a similar recall by Hyundai Motor Co (005380.KS).

GM on Friday expanded its recall of Bolt electric vehicles (EVs) due to a fire risk from what’s called a battery manufacturing defect, saying the recall would cost $1 billion and it is seeking reimbursement from LG. Will do read more

The US automaker said the recall covers vehicles starting with model year 2019 and will indefinitely halt sales of the Bolt. LG Chem said it is working to ensure smooth recall.

LG Chem, which is preparing an initial public offering (IPO) for battery unit LG Energy Solutions (LGES), lost $5 billion in market value with its stock posting its biggest intraday percentage loss since March 2020. Damage done.

“The market expected LGES to launch its IPO in September, but with GM’s extended recall, the LGES IPO is likely to be delayed by a month or two, as the recall costs the company before finalizing the IPO paperwork.” needs to reflect,” Samsung said. Securities analyst Cho Hyun-ryul.

GM initially recalled 69,000 Bolt cars in July. Its extended recall comes nearly a week after a fire broke out in a Volkswagen AG (VOWG_p.DE) ID.3 EV carrying LGES batteries. read more

Six months ago, Hyundai recalled 82,000 EVs on LGES battery fire risk at an estimated cost of about 1 trillion won ($851.90 million). read more

The recalls from GM and Hyundai include pouch-type batteries instead of cylindrical batteries supplied to LGES customers, including Tesla Inc. (TSLA.O).

In February, South Korea’s Ministry of Transport said a joint investigation with LGES and Hyundai found defects in battery cells at the LGES factory in China. The investigation continues.

Neither LGES nor Hyundai have disclosed how they plan to split the cost of the recall, though analysts expect LGES to assume 60%.

Battery is a big component of LG Group’s earnings. LG Chem posted 40% of operating profit in April-June from batteries – including EV batteries. Earlier this month, LG Electronics Inc. (066570.ks) cut its second-quarter operating profit by more than a fifth to reflect GM recall costs. read more

Shares of LG Electronics, which assembles LGES cells into battery modules, fell as much as 5.8% on Monday. This compared with the local benchmark (.KS11), which was up 1.5% around noon.

($1 = 1,172.5900 won)

Reporting by Hekyong Yang and Jihoon Lee; Editing by Kenneth Maxwell and Christopher Cushing

Our Standards: Thomson Reuters Trust Principles.

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