By Ben Foldy
A federal trade commission ruled against battery maker SK
Innovation Co. in a case that could disrupt Ford Motor Co. and
Volkswagen AG's plans to build electric vehicles in the U.S.
The U.S. International Trade Commission, an independent
government agency, affirmed Wednesday a judge's earlier ruling in
favor of rival LG Chem, which in 2019 accused SKI of stealing trade
secrets related to lithium-ion battery production. SK Innovation
has denied the allegations.
The commission's ruling threatens two new battery plants SKI is
building in Georgia to supply Ford and VW with batteries for models
set to go into production in the next two years. The Korean company
has said it is investing $2.6 billion on the project.
The ruling also complicates efforts by the Biden administration
to supercharge domestic battery and electric vehicle construction.
Wednesday's ruling starts the clock on a 60-day review period for
the White House. Changes to the commission's rulings are rare but
not without precedent.
If the White House declines to intervene, then SKI can appeal
the matter in federal court. Construction on the site will proceed,
a company spokesman said.
In the ruling, the commission prohibited SKI from importing its
batteries for 10 years. However, the ruling allowed the company to
import equipment necessary to make batteries for Ford and VW for
four and two years, respectively, to allow the auto makers time to
find another domestic battery supplier.
SKI said it has serious concerns about the commercial and
operational implications of the decision for the future of its
facility and will begin discussions with Ford and VW. The company
also looks forward to engaging the Biden administration on the
issue, it said.
LG Chem said it was grateful to the International Trade
Commission for its decision.
Both Ford and VW told the commission last year that without the
new factories, they'll have to delay their electric-vehicle plans
because the batteries are uniquely built for the new models and
there isn't enough U.S. capacity otherwise to fulfill the
companies' needs.
The SKI complex is expected to supply batteries for a new
plug-in version of Ford's bestselling F-150 pickup truck.
Volkswagen planned to use the SKI-built batteries for a new
crossover, called the ID.4, which will go on sale in the U.S. and
be among the first to use VW's latest battery-electric
technology.
A Ford spokeswoman said the decision supports the company's
plans to bring the F-150 to market in 2022, but she declined to
comment further. VW said it was analyzing the ruling and remained
committed to starting U.S. electric vehicle production in 2022.
The legal clash between two of the world's largest battery
makers highlights the difficulties auto makers face in securing a
steady supply of batteries necessary to meet their growth targets
in electric vehicles. With tightening auto-emissions regulations
and some parts of the world moving to phase out gasoline-powered
cars altogether, the global auto industry is under pressure to sell
more battery-powered vehicles in the coming years or risk having to
pay steep fines.
Auto makers are pouring billions into electrifying their
lineups. However, their plans depend in part on expanding battery
production, which executives and analysts say may fall short of the
numbers needed to power the growing numbers of electric vehicles
they expect to be sold.
Some car companies are getting increasingly involved with making
the batteries themselves to lock in supplies, while others are
leaning more on traditional battery makers like SKI and LG Chem to
supply their models.
China dominates the current battery-supply chain, and building a
domestic capacity has become a core policy goal for U.S. and
European governments and investors.
Jennifer Granholm, President Biden's nominee to run the Energy
Department, highlighted during a Congressional hearing on her
nomination last month her intention to build a domestic-battery
industry. "We can buy electric car batteries from Asia, or we can
make them in America," Ms. Granholm said.
The commission was required by statute to consider how its
decision would affect U.S. consumers.
After the earlier judge's ruling in 2019, lawyers for Ford,
Volkswagen and some of their suppliers filed briefs appealing for
the commission to avoid sanctions that would prevent SKI from
fulfilling its agreements to supply the auto makers with
batteries.
VW described the potential for a "catastrophic supply
disruption" that would harm its employees, suppliers and dealers,
slow consumer uptake of electric cars and hinder the growing U.S.
battery industry.
Ford said an adverse ruling would "drastically reduce already
limited [electric vehicle] battery supply" while disadvantaging
U.S. auto makers in competing with more mature battery
manufacturing regions in Europe and Asia.
Both models are expected to go into production in 2022: Ford in
Michigan, and Volkswagen in Tennessee.
In 2019 SK Innovation broke ground in Georgia on its new
battery-making complex that includes two plants and would employ
around 2,600 workers by 2024 at full capacity. If it comes online,
the facility is expected to produce enough batteries for more than
300,000 electric vehicles annually, the company has said.
But shortly after construction began, LG Chem filed a complaint
with the commission, alleging SKI had misappropriated trade secrets
through a campaign of poaching LG employees. The complaint asked
the commission to block the import of batteries that use technology
at the heart of the trade-secret dispute and the materials or
equipment necessary to manufacture them. Such a move would
effectively prevent production at the Georgia plants from coming
online.
A year ago, the judge overseeing the case issued a default
judgment in LG's favor after finding SKI in contempt and saying it
destroyed documents that may have been relevant to the case. SKI
admitted in filings that some documents had been destroyed but said
that South Korean law doesn't require the same efforts to preserve
evidence that U.S. courts do.
Presidents have chosen to override the trade commission on
occasion.
In 2013, the Obama administration overruled an ITC decision that
would have banned Apple Inc. from importing certain iPhones and
iPads after finding they infringed on a patent held by Samsung
Electronics Co. The administration cited concerns about potential
harm to consumers and competitive conditions in the U.S. among the
reasons for its decision.
Write to Ben Foldy at Ben.Foldy@wsj.com
(END) Dow Jones Newswires
February 10, 2021 21:55 ET (02:55 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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