From Michigan to Germany, the global car industry wants its Korean battery suppliers to bury the hatchet. At stake are the electric vehicles that will compete with Tesla, thousands of American jobs and even the Trump administration’s rivalry with China.
LG Chem and SK Innovation, the chemical subsidiaries of two of South Korea’s largest conglomerates, are currently slugging it out in the U.S. International Trade Commission in Washington. LGC accuses SKI of stealing trade secrets that won it big electric-vehicle battery contracts, notably with Volkswagen —and then destroying evidence of the theft.
SKI admits it learned information from LGC after hiring some of its staff, but not that the information meets the definition of a trade secret. It also argues that it shouldn’t be held in contempt of court, because almost all relevant documents were deleted before the U.S. litigation started.
The ITC’s investigative team seems inclined to side with LGC. Late in November, they argued that SKI’s destruction of evidence warranted a “default judgment.” If upheld through an appeals process, this would bar SKI from importing batteries and possibly components it may need to supply a new $1.67 billion U.S. factory.
The uncertainty is a problem for car makers as well as for SKI. VW, which is rolling out a range of mass-market electric vehicles to rival Tesla’s Model 3, said last year that the Korean upstart would be its North American battery supplier. The plant SKI has started building in Jackson County, Ga.—its first in the U.S.—is roughly 150 miles from VW’s U.S. base in Chattanooga, Tenn.
Ford is another potential casualty: The auto maker wants to source batteries for the electric version of its best-selling F-150 pickup truck from SKI’s new plant, according to a person familiar with the situation. Ford confirmed that SKI would be a supplier, but not for which vehicles. The batteries for the electric Mustang Mach-E, which Ford launched to much fanfare in November, will come from LGC.
The LGC-SKI case could eventually reach the desk of U.S. Trade Representative Robert Lighthizer, who has the power to dismiss for policy reasons any remedies demanded by the ITC. This notably happened under President Obama, whose trade representative in 2011 overturned a ban on the sale of some iPhones and iPad models following an ITC victory for Samsung over Apple.
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The Trump administration might be tempted to be lenient toward SKI. In March, Commerce Secretary Wilbur Ross and the Republican Governor of Georgia Brian Kemp attended the groundbreaking ceremony of the company’s new plant, which is supposed to create more than 2,000 jobs. And although Mr. Trump isn’t an obvious champion of electric vehicles—he is engaged in a battle with state regulators in California to roll back tightening tailpipe restrictions—many in his administration worry about China’s grip on the battery industry. In October, the Energy Department followed the State and Commerce Departments in warning that a reliance on imported battery materials was a “challenge” for the U.S.
The U.S. isn’t the only one to wish that the battery supply chain—seen by some as the oil pipelines of the future—were closer to home. The European Union last week approved €3.2 billion ($3.6 billion) in state funding for battery research and development projects as part of a muscular new strategy to promote industries seen as “strategic.”
It would be easier for everyone, from politicians in Washington and Georgia to executives at Volkswagen and Ford, if LGC and SKI settled. In a period of frenetic growth for automotive-grade lithium-ion batteries, the car industry needs as many suppliers—and as much certainty over their capacity—as it can get.
Underlining the point, General Motors announced a joint venture with LGC this month to manufacture batteries, including for an electric Chevrolet pickup that will compete with the F-150. The two companies plan to spend $2.3 billion on a new plant near GM’s closed sedan factory in Lordstown, Ohio. VW announced its own battery-production joint venture with Swedish startup Northvolt in June. This year’s battery investments by auto makers have been “all about securing the supply chain” for electric vehicles, says Christopher Robinson, senior analyst at Lux Research.
Once a backwater of the consumer electronics industry, lithium-ion batteries are now attracting interest from all quarters. If the Korean legal tussle doesn’t end, it will force tough choices on auto makers and politicians alike.
Write to Stephen Wilmot at stephen.wilmot@wsj.com
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