SK President Flies to the US Over Annual Meeting... Making a Multi-Trillion Won Decision

LG-SK Battery Dispute ITC Ruling: Two Weeks Left for Presidential Review
Veto Possible but Realistic Limits... LG Negotiations Slow Over a Month
Local Business Withdrawal, Veto Decision, US Government Mediation Talks Resume
Likely to Stay Locally Until Mid-Next Month to Make Key Decisions

Kim Jun, President of SK Innovation / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Choi Dae-yeol] Kim Jun, CEO of SK Innovation, did not attend the shareholders' meeting held on the 26th. He was on a business trip to the United States. Since his appointment as CEO in 2017, he had never missed a shareholders' meeting and always chaired it until last year, but this year he handed over the gavel to someone else. Originally, Kim was scheduled to chair the meeting this year as well, but a sudden business trip to the U.S. was arranged, prompting him to depart hastily. Although the company has not disclosed specific plans, a senior official said that Kim is scheduled to meet with local authorities and political figures regarding the battery business.

For SK Innovation, which has been aggressively expanding its battery business in the U.S., an important decision must be made following last month's final ruling by the U.S. International Trade Commission (ITC). The ITC imposed a 10-year import ban, allowing only limited imports to produce some of the previously contracted quantities. Even though temporary factory operations are permitted, not being able to operate a manufacturing plant for over five years essentially means shutting down.

SK is operating a battery plant in Georgia, known as the hub of automobile manufacturing in the southeastern U.S. An additional investment in a second plant has also been confirmed. The investment amount for the first and second plants alone reaches $5 billion. With the Biden administration actively promoting electric vehicles, the demand for EV batteries is expected to surge, prompting aggressive investments. SK signed contracts years ago to supply batteries for the electric model of the Ford pickup truck, America's most beloved vehicle, as well as for Volkswagen's locally produced EVs, which along with Tesla, are the two major EV manufacturers at present.

President Joe Biden of the United States

SK Appeals for U.S. President's Veto on ITC Ruling
Citing EV Expansion and Georgia Jobs

Kim is expected to appeal to U.S. President Joe Biden and local political authorities to exercise a veto against the ITC decision. Although the U.S. president has never exercised a veto on trade secret infringement cases before, the unique importance of EV batteries raises hopes for an unprecedented decision.

If SK Innovation, a leading battery company, withdraws from the U.S. market, it could disrupt the local EV supply chain. The U.S. government's stance to curb Chinese companies regardless of industry may also influence the situation. EV batteries are among the sectors President Biden has urged to review domestic supply chains. SK's recruitment of high-ranking officials likely connected to the current administration, as well as Kim Jong-hoon, the head of trade negotiations and chairman of SK's board, personally meeting political figures in the U.S., all reflect this context.

At the LG Chem shareholders' meeting held on the 25th, Vice Chairman Shin Hak-cheol is delivering a greeting. Vice Chairman Shin reiterated that they will respond strictly regarding the negotiations with SK at that time.

SK's insistence on the unlikely presidential veto seems to stem from the significant and difficult-to-bridge differences in negotiations with LG around the time of the ITC ruling last month. Initially, the industry expected the two companies to accelerate their agreement after the ITC decision. There was a sentiment that the prolonged dispute of 3-4 years should end to focus on business going forward.

However, the settlement amounts proposed by both sides were vastly different. Although specific figures were not disclosed, SK reportedly offered several hundred billion won along with shares in its soon-to-be-listed battery materials subsidiary and royalties for a certain period. LG, on the other hand, demanded several trillion won. The ITC ruled that if SK had not infringed trade secrets, the development period would have taken 10 years, while LG openly emphasized that it had spent over 5 trillion won on battery-related R&D over 10 years. Despite negotiations continuing for over a month after the ITC ruling, little progress was made, and the ongoing off-the-record rumors are seen by some as a sign that the talks have effectively collapsed.

SK Hints at Possible Withdrawal from U.S. Business
"Stalled LG-SK Talks Could Gain Momentum with U.S. Mediation"

Although the exact reason for Kim's visit to the U.S. has not been confirmed, considering that the presidential review deadline is about 15 days away on the 11th of next month, it is highly likely that some decision will be made around this business trip. It is expected that a definitive answer regarding the presidential veto will be obtained during the trip. The options are limited. If no veto is exercised, discussions about withdrawing from the local business have openly started within the company. It is a kind of last stand.

In this case, not only would the existing investments be lost, but it would also mean breaching contracts with Ford and Volkswagen. Since foreign batteries used in U.S. EVs incur additional taxes, batteries cannot be supplied from factories in Korea, China, or Europe. Besides penalties for breach of contract, other regional businesses could also be negatively affected.

There is also speculation that the U.S. administration might mediate between the two companies. To prevent SK's withdrawal without exercising a veto, the only way is for the two companies to reach an agreement. Given that negotiations have stalled because one side has been unwilling to concede more or accept less, U.S. government mediation could play a significant role in resolving the talks. The government has sufficient authority to offer incentives to either party. The Georgia legislature's decision to support an agreement between the two companies rather than relying on a presidential veto aligns with this approach. LG Energy Solution, which has a plant in Michigan, has recently pledged additional local investments besides its joint venture with GM.

This content was produced with the assistance of AI translation services.