General Motors Company (NYSE: GM) wants LG Chem Ltd (KRX: 051910) to reimburse $ 1 billion in estimated losses for costly Chevy Bolt battery faults. The automaker announced a third recall of the popular electric model on Friday.
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The announcement comes just days after GM issued a third Bolt recall representing 73,000 vehicles, for a total of 142,000, including previous vehicles called up. The whole deal represents “everything Chevy has sold so far,” as NBC News reported.
TechCrunch reports that “following the announcement of the recall… LG Chem shares fell 11% on Monday and its stock price fell $ 6 billion in market value. GM shares were down 1.27% at the close of the market.
The recall is a blow to the company in the highly competitive electric vehicle market, as GM has no cars to sell in the entire North American region. It will be an opportunity for companies like Tesla and several other automakers to sit stronger in the industry.
“Lost sales, security risks and the possibility of better technology on the horizon could cause GM to expand its business elsewhere,” TechCrunch reports.
Battery issues relate to cell faults manifested by a torn anode tab and a bent separator.
LG Chem issues
LG Chem is the parent organization of LG Energy Solutions, which was also involved in the fire at a Volkswagen AG ID.3 earlier this week.
Rumors have it that the German brand and Tesla Inc (NASDAQ: TSLA) are moving away from LG Chem’s pocket-type lithium-ion battery cells towards more prismatic-type cells, currently manufactured by CATL -Contemporary Amperex Technology Co Ltd ( SHE: 300 750) and Samsung SDI Co Ltd (KRX:006400).
LG Chem batteries have been implicated in more battery fire incidents that have triggered costly recalls. “Earlier this year, Hyundai recalled 82,000 electric vehicles due to a similar battery fire risk at an estimated cost of approximately $ 851.9 million.”
Hyundai’s recall charges would delay LG Chem’s initial public offering currently slated for September.
According to Reuters, batteries represent a large part of the LG group’s revenue. “LG Chem achieved 40% of operating profit from batteries – including electric vehicle batteries – in April-June. Earlier this month, LG Electronics Inc (066570.KS) cut second-quarter operating profit by more than a fifth to reflect GM recall costs.