LG Chem Recovers to 4th Place in Market Cap Amid GM Recall Setback

GM Recall Provision Set... Investor Sentiment Focused on Uncertainty Resolution
Rises Over 8% in 2 Trading Days... 'Holding Up' Even in a Down Market

The LG Twin Towers in Yeouido, Yeongdeungpo-gu, Seoul, where LG Chem headquarters is located.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] LG Chem has quietly reclaimed its position as the 4th largest company by market capitalization. This appears to be driven by relief that the uncertainty surrounding the recall issue of General Motors (GM)'s 'Bolt' electric vehicle (EV), which was the main cause of the stock price decline, has been resolved.

As of 11:14 AM on the 13th, LG Chem's stock price rose 1.38% from the previous day to 807,000 KRW. The upward trend continued for consecutive days, with the closing price rising 8% over the past two trading days. This contrasts with the KOSPI, which fell about 1.5% during the same period. It reached the 800,000 KRW level for the first time since August 26. The market capitalization ranking, which had once fallen to 7th place, also recovered to 4th. LG Chem maintained its upward momentum even as the KOSPI approached a breakdown below the 2,900 level.

It is evaluated that LG Chem's move to set aside provisions related to the GM Bolt EV fire recall helped quell uncertainty. LG Chem announced the day before that it decided to set aside 620 billion KRW in provisions related to the GM Bolt recall for its Q3 earnings this year. Including the 91 billion KRW reflected in Q2, the total provision amounts to 711 billion KRW, marking a resolution for now.

Earlier, last month, GM announced an additional recall of 73,000 Bolt vehicles, which triggered the stock price decline. This was because LG Energy Solution, a subsidiary of LG Chem that manufactures the secondary batteries supplied to the Bolt, had to increase its provisions. As a result, LG Chem's stock price fell more than 11% in a single day on August 23. The downward trend continued, and on September 3, the stock price even dropped to the 600,000 KRW range during intraday trading. This was the first time LG Chem's stock price hit the 600,000 KRW level since November 19 of last year, about 10 months ago.

Yu-jin Jeon, a researcher at Hi Investment & Securities, explained, "The cell and module process improvements related to this fire incident have been completed, and production has begun to normalize. The temporarily halted LG Energy Solution IPO is also being pushed forward again and is expected to be completed early next year." She added, "Since the urgent issues have been resolved, this is an opportunity for a short-term stock price rebound."

However, challenges remain, such as the potential deterioration of profitability due to the upward adjustment of future provision rates for LG Energy Solution and mid- to long-term order competitiveness affected by consecutive fires. There is also analysis that concerns should be given to the possible outflow of passive funds, such as those from the secondary battery-related exchange-traded funds (ETFs), and the supply-demand shifts between LG Chem and LG Energy Solution immediately after the latter's IPO.

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