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(Bloomberg) – In June 2017, months after General Motors Co. beat Tesla Inc. to market an affordable, long-range electric vehicle, it ran full-page newspaper ads touting how long its Chevrolet Bolt could travel between charges. The slogan: “Start a long-distance relationship, now.” “
Four years later, GM’s long-distance relationship with its battery partner, LG Energy Solution, is being tested like never before. In question: which will receive a note of approximately 1 billion dollars.
Last week, GM recalled the Bolt EVs for the third time in nine months due to the risk of their batteries catching fire. The Detroit-based company will replace modules in more than 73,000 additional vehicles and said it was trying to charge LG for the fix. LG, which is headquartered some 6,600 miles in Seoul, said spending would be split based on the results of a joint investigation into the root cause of the problem.
At stake is what appears to be one of the most promising partnerships in the burgeoning world of electric vehicles. Chief Executive Mary Barra is betting GM’s future will go electric, setting a goal in January to sell only zero-emission vehicles by 2035. LG Energy is pursuing a stock market listing after s’ be separated last year from South Korean LG Chem Ltd. to lose such a big customer.
“Together with our customer and partners, LG is actively working to ensure that recall measures are implemented smoothly,” the South Korean company said in an emailed statement. The root cause investigation is conducted by GM, LG Electronics Inc. and LG Energy Solution.
LG Electronics shares plunged 4.1% Monday in Seoul, while LG Chem shares fell 11%, their biggest drop since March 2020. GM shares fell 2.2% at 9:40 am to New York.
GM first recalled approximately 70,000 Chevy Bolts from the 2017 to 2019 model years in November. A month earlier, the U.S. National Highway Traffic Safety Administration launched an investigation to determine whether the cars were likely to catch on fire when parked. GM has voluntarily recalled the vehicles, citing problems with batteries manufactured in Ochang, South Korea.
The automaker asked Bolt owners to take their cars to dealerships for a software upgrade that limited recharging to 90% of the full battery capacity, as it worked to find a permanent cure. NHTSA has urged Bolt owners to park outside and away from their homes as a precaution, saying they are aware of five fires, including at least one that has set a house on fire.
Second reminder
In July, GM recalled the same group of cars again, after two vehicles that had been repaired caught fire. The company said it would replace the battery modules after identifying the simultaneous presence of two manufacturing defects in the same battery cells.
“The batteries are very hard,” Greg Less, technical director of the University of Michigan Battery Lab, said by phone Sunday. “When something goes wrong in a cell, the cell goes wrong – but not always right away.”
Earlier this month, GM took an $ 800 million charge related to the recall, which contributed to missing quarterly profit estimates and its shares are plunging the most in more than a year. Barra said airframes for Bolts 2020 and later model years were built using improved manufacturing processes, so the recall did not affect newer vehicles.
Two weeks later, GM changed its mind. In a statement released after the close on August 20, the automaker said that under rare circumstances the batteries supplied for new Bolts may have two manufacturing flaws – a torn anode tab and a bent separator – in the same cell, which increases the risk of fire. The additional cost: $ 1 billion.
Working with LG, the best information GM had time to release results earlier this month was that the battery module issues were limited to LG’s Ochang plant, according to manufacturer spokesman Dan Flores. automobile.
“As we continued to analyze battery modules and perform physical battery disassembly, we found rare instances of these issues in battery modules from other production lines,” Flores said in an email. Sunday.
GM recently confirmed that a fire in Chandler, Ariz. Involved a 2019 Bolt that contained cells from an LG plant in Holland, Mich. Flores said a recent battery fire posted to YouTube was also confirmed to involve a 2020 Bolt. GM did not inspect the vehicle and the video did not take into account the company’s decision to expand his recall, he said.
Long relationship
Fires and difficulty finding a solution are straining a 14-year relationship. When GM and LG announced that they would be joining forces on the Bolt in 2015, they pointed out how virtually trouble-free battery cells LG provided for the Chevy Volt plug-in hybrid, launched in 2010.
This first record of success is a small consolation for the tens of thousands of Bolt owners who are eagerly awaiting a resolution. Elise Hurwitz lives in the Oakland Hills, California, in a neighborhood at increased risk of wildfires amid the ongoing drought in the state. The 2017 Chevrolet Bolt parked in its driveway now makes it extremely nervous and uncomfortable.
“I really don’t want to park my Bolt in the Oakland Hills during fire season while waiting for my turn to replace the battery cells,” Hurwitz said. “I would like GM to take custody of the vehicle until it is safe to park it at my house. How do I get rid of my car? I don’t want it with this risk, and I can’t sell it.
Customers can be confident that GM is taking steps to ensure its vehicles are safe, said Doug Parks, executive vice president of product development, purchasing and supply chain for the automaker, in a statement. from last week. “We know that building and maintaining trust is essential. “
GM and LG have little choice but to maintain a close bond. They began to jointly build two battery factories in Ohio and Tennessee, each costing more than $ 2 billion and expected to employ more than 1,000 people. GM will lead the manufacturing quality processes used at these factories and other cell manufacturing plants that have yet to be announced, Flores said.
Next-generation Ultium batteries for a Chevy Silverado electric truck, Cadillac Lyric sport utility vehicle, and GMC Hummer pickup and SUV, among other models, will use a common cell that GM and LG will manufacture as part of a joint venture called Ultium Cells LLC.
Since GM began receiving fire complaints from customers last year, Flores said the automaker and LG had looked at manufacturing data from several facilities and disassembled the battery packs to inspect the cells.
“There are hundreds of people at both companies who have been working extremely long hours for months now digging into the data,” Flores said.
(Updates to GM stock trading in the sixth paragraph.)
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