South Korea’s LG Chem shares dip on GM electric car recall

SEOUL, Aug.23 (Reuters) – Shares of LG Chem Ltd (051910.KS) fell nearly 10% on Monday after General Motors Co (GM.N) announced it would recall 73,000 additional Chevrolet Bolt cars that are using the South Korean company’s batteries, months after a similar recall by Hyundai Motor Co (005380.KS).

GM on Friday extended its Bolt electric vehicle (EV) recall due to fire risk from what it called manufacturing defects in the battery, saying the recall would cost $ 1 billion and that it would ask LG for a refund. Read more

The U.S. automaker said the recall covered vehicles from the 2019 model year and would halt sales of Bolt indefinitely. LG Chem said it was working to ensure a smooth recall.

LG Chem, which is preparing an initial public offering (IPO) for the LG Energy Solution (LGES) battery unit, has lost $ 5 billion in market value and its stock is on track for its more big intraday percentage loss since March 2020.

“The market expected LGES to launch its IPO in September, but with GM’s expanded recall, LGES’s IPO is expected to be delayed by a month or two as the company needs to reflect the cost. of the recall before finalizing the IPO documents, ”Samsung said. Securities analyst Cho Hyun-ryul.

GM initially recalled 69,000 Bolt cars in July. Its expanded recall comes about a week after a fire involving a Volkswagen AG (VOWG_p.DE) ID.3 electric vehicle carrying an LGES battery. Read more

Six months earlier, Hyundai recalled 82,000 electric vehicles over LGES battery fire risk at an estimated cost of about 1,000 billion won ($ 851.90 million). Read more

The GM and Hyundai recalls involve pocket-type batteries rather than cylindrical batteries supplied to LGES customers, including Tesla Inc (TSLA.O).

In February, South Korea’s transport ministry said a joint investigation with LGES and Hyundai revealed defects in battery cells at an LGES factory in China. The investigation is ongoing.

Neither LGES nor Hyundai have disclosed how they plan to split the recall costs, although analysts expect LGES to assume 60%.

Batteries are a massive component of LG group revenues. LG Chem made 40% of operating profit from batteries – including EV batteries – in April-June. Earlier this month, LG Electronics Inc (066570.KS) cut second-quarter operating profit by more than a fifth to reflect GM recall costs. Read more

Shares of LG Electronics, which assembles LGES cells into battery modules, fell 5.8% on Monday. This against the local benchmark (.KS11) which was up 1.5% around noon.

($ 1 = 1,172.5900 won)

Reporting by Heekyong Yang and Jihoon Lee; Editing by Kenneth Maxwell and Christopher Cushing

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