LGES says GM’s Chevy Bolt recall to have little impact on company Twice-issued recall for electric vehicle costs US automotive giant $800 mil
Translated by Ryu Ho-joung 공개 2021-08-09 08:06:11
이 기사는 2021년 08월 09일 08:02 thebell 에 표출된 기사입니다.
The Chevrolet Bolt electric vehicle recall has cost General Motors $800 million, with attention being paid to its impact on LG Energy Solution (LGES) which supplied battery cells for the model.The US automotive giant spent $800 million (about 915 billion Korean won) on the twice-issued recall for 2017 to 2019 Chevrolet Bolt EVs, the company told investors on a call Wednesday. GM said the recall was due to defective batteries manufactured by LGES, formerly LG Chem.
The automaker first issued a recall for the vehicle in November last year after it received reports from owners that the vehicle had caught fire and the US National Highway Traffic and Safety Administration issued consumer alert. The company took follow-up measures in April this year, and issued the second recall last month to replace battery modules.
With faulty batteries cited as the reason for the recall, attention is being paid to whether LGES has to pay part of GM’s recall expenses. LGES, however, expects the recall to have little impact on the company.
“Defects were not related to battery cells but related to battery modules, which were supplied by LG Electronics,” said an official at LGES.
GM’s second recall for the Bolt came after South Korea’s Hyundai Motor earlier this year issued a recall for its EV models with LGES batteries. The move followed the investigation results by the country’s transport ministry, which confirmed fire risks due to defective battery cells produced in LGES’s Nanjing, China facility.
Hyundai Motor’s voluntary recall covered more than 81,000 cars including Kona EVs, and LGES paid about 70% of the total recall expenses.
LG Chem, the parent company of LGES, put aside large reserves to cover potential recall costs in the fourth quarter in 2020 before LGES was launched in December. This caused an 80% decline in LG Chem’s quarterly operating profit.
While the recall for the Bolt is likely to have limited impact on LGES, the possibility of the company paying part of the recall expenses cannot be ruled out, industry watchers said. This could be a negative for LGES as it is preparing for an initial public offering.
“Additional reserves set aside for recall costs could reduce LGES’s net profit, which will have negative impact on the company’s valuation,” said an industry insider. (Reporting by Ki-soo Park)
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