Auto & Transportation

Due to the fire risks and safety hazards of vehicle battery packs, LG, as a battery supplier, may face the highest compensation ever.

Recently, GM’s official website announced that it has reached an agreement with battery supplier LG on the cost of the Chevrolet Bolt recall. LG agreed to compensate GM up to US$1.9 billion (approximately RMB 12.25 billion).

Beginning in 2019, Chevrolet Bolt models under GM's brand have caught fire one after another. GM’s official report shows that up to now, Chevrolet Bolt has caused 12 fires, resulting in three injuries.

Image source: Screenshot of GM's official website

According to the aforementioned agreement, LG will reimburse General Motors for the costs and expenses related to the recall of vehicles due to manufacturing defects in the battery modules provided by LG. General Motors will recognize this compensation in its third-quarter earnings, which will offset $1.9 billion of its $2 billion expenditure related to the recall.

In fact, this is not the first time LG has paid automakers. Previously, Hyundai Motor recalled 81,700 KONA electric vehicles due to spontaneous combustion incidents, and paid 1.4 trillion won (approximately RMB 8 billion) in recall costs. Among them, LG compensated 70% of the cost, which is 980 billion won (about 5.6 billion yuan).

GM will continue to cooperate with LG

Before reaching an agreement with LG, Chevrolet Bolt models have undergone multiple recalls.

Due to potential fire hazards, General Motors announced the first recall of approximately 69,000 Chevrolet Bolt electric vehicles in November 2020, but it did not completely solve the problem of spontaneous combustion. In April of this year, General Motors announced a second recall. The original plan was to update the software of the vehicle to detect the battery in order to reduce the risk of fire. However, after two software updates, there were still at least two incidents caused by spontaneous combustion of the battery of the Bolt model. GM decided to replace the battery pack in the recalled Bolt model.

In August of this year, General Motors launched the third recall and expanded the scope of the recall to cover all Bolt models produced since 2017 to replace battery modules. The conversion cost of the recall is approximately US$1.8 billion. Some analysts believe that such a huge cost is also the reason why General Motors seeks compensation from LG.

In addition, General Motors said on September 16 that it will extend the shutdown period of its Orion plant in Michigan until at least October 15. The production or sales of Chevrolet Bolt electric vehicles will not be resumed until the recall measures can solve the fire risk problem.

The results of multiple investigations by General Motors and LG Electronics show that in the batteries manufactured by the LG factory, the same battery has two manufacturing defects at the same time: the battery separator is folded and the battery anode is damaged. These two defects appear in the same battery. Will increase the risk of fire.

It is worth noting that in June of this year, General Motors announced that it will increase its investment in electric vehicles and autonomous driving, increasing its investment from 2020 to 2025 from 27 billion U.S. dollars to 35 billion U.S. dollars. By the end of 2025, General Motors intends to launch 30 pure electric models, achieving global annual sales of electric vehicles exceeding 1 million. In addition, General Motors has also released a timetable for the suspension of fuel vehicles, and plans to only produce electric vehicles in 2035 to achieve zero emissions from new vehicles.

However, soon after the strategy was released, it was faced with a large-scale electric vehicle recall, which put a question mark on the smooth implementation of GM's electric vehicle strategy.

However, General Motors does not intend to stop cooperating with LG. Shilpan Amin, the company’s vice president of global procurement and supply chain, said: “LG is an important supplier to General Motors and we are very happy to reach this agreement. Our engineering and manufacturing teams continue to work together to accelerate the production of new battery modules. We expect Maintenance of customer vehicles will begin this month."