© Reuters. The SK Innovation logo can be seen in front of the headquarters in Seoul
By Heekyong Yang and Joyce Lee
SEOUL (Reuters) – Stocks of SK Innovation and LG Chem in South Korea rose on Monday after battery makers agreed to settle a 2 trillion won ($ 1.8 billion) dispute over EV battery technology developments from customers such as Volkswagen (DE :).
LG Energy Solution, a wholly owned subsidiary of LG Chem, and SK Innovation also agreed on Sunday to end all lawsuits in the US and South Korea and not to sue for 10 years after the core dispute threatened Ford Motor’s EV plans ( NYSE 🙂 Co and Volkswagen AG (OTC :).
The shares of SK Innovation rose as much as 18.5%, while the shares of LG Chem rose as much as 4.1%.
“This agreement removed uncertainties about the growth of the battery business and our pursuit of the US market,” said Kim Jun, CEO of SK Innovation, in a message to Reuters. “It will enable us to expedite construction of the Georgia, US plant, and actively encourage additional investment and collaborations in line with developments in the US and global electric vehicle (EV) industry.”
Ford said in a statement on Sunday that it was pleased that the battery manufacturers had settled their differences and that the deal allowed Ford to focus on delivering electric vehicles to retail and fleet customers.
“The market sees the deal in SK’s favor as the settlement amount was less than expected. Some even said it could cost up to 7 trillion won,” said Cho Hyun-ryul, an analyst at Samsung (KS 🙂 Securities.
“The agreement is positive for both companies’ stock prices as it resolves the litigation problem for the future,” added Cho. “For SK, the value of the battery business was reflected less in the share price than it did in comparison to competitors. However, this deal with LG could serve as a lever.”
SK Innovation shares had fallen 19.7% since February when the US International Trade Commission sided with LG Chem on trade secrets, while LG Chem shares had fallen 15.4%.
However, analysts said the companies’ process-free future depends in part on how they reacted to Volkswagen’s decision last month to switch the majority of its cars to a new unified prismatic battery and move away from the bag-type made by LG and SK – although Volkswagen’s shift doesn’t mean other automakers will follow suit.
“For SK in particular, which is highly dependent on bag batteries, the key is how it will win business in the future. Although there are no public numbers, SK is known to be heavily dependent on Volkswagen in the battery business,” he told Kang Dong-jin, an analyst at Hyundai Motor Securities.
The broader market gained 0.4%.
($ 1 = 1,121,4100 won)
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