Will SK and LG Heads Find a Breakthrough Through Direct Talks Like in Battery Recalls?

[Asia Economy Reporter Kim Hyewon] On the 5th, the U.S. International Trade Commission (ITC) released a 96-page final opinion explicitly stating SK Innovation's trade secret infringement against LG Energy Solution (formerly LG Chem's battery division), drawing attention to the outcome of this landmark battery lawsuit. In the business community, there is a focus on two possibilities: whether SK Innovation will request a veto from the Joe Biden administration on the ITC's final ruling, and a dramatic settlement through a summit meeting between the heads of SK and LG.

According to industry sources on the day, SK Innovation plans to strongly request President Biden's veto, raising issues with the ITC's decision favoring LG Energy Solution. SK Innovation immediately issued a statement saying, "The ITC's ambiguous decision has effectively blocked legitimate imports, causing serious economic and environmental harm such as the decline in competitiveness of the U.S. electric vehicle battery industry, unfair competition restrictions in the market, and environmental pollution due to carbon emissions caused by delays in electric vehicle battery supply." They added, "Ford and Volkswagen are appealing that the grace period is absolutely insufficient and there are no alternative methods." They also stated, "We plan to actively clarify the problems inherent in the U.S. ITC's decision during the presidential review process and request the exercise of veto power."

Although SK Innovation is pinning its hopes on President Biden's veto, it remains to be seen whether the veto will actually be exercised given that the authoritative domestic administrative agency ITC has detailed 22 items of trade secret infringement. Moreover, the ITC added the opinion that without the information, it would have taken SK Innovation 10 years to develop the battery technology. However, President Biden's veto card could have some influence in leading the two companies to reach an agreement.

Currently, the U.S. administration is reviewing the ITC's final decision issued on the 10th of last month. President Biden must decide whether to exercise veto power within 60 days after the final decision, making around April 10 the deadline. There have been five past cases where U.S. presidents nullified ITC decisions, but none related to trade secret infringement.

If President Biden does not exercise the veto, SK Innovation will have no choice but to pay a large settlement to LG Energy Solution or appeal. In this case, a summit between SK Group Chairman Chey Tae-won and LG Group Chairman Koo Kwang-mo is the last variable. Previously, Hyundai Motor Group Chairman Chung Eui-sun and Chairman Koo reached a generous agreement over the cost-sharing of the recall for the electric vehicle 'Kona,' which the business community views as a precedent. Hyundai Motor and LG Energy Solution also had a power struggle over the recall cost-sharing ratio, but it is reported that the two chairmen made a dramatic compromise after behind-the-scenes contact.

Perhaps because of this, the final cost-sharing ratio between the two companies differed from market expectations. Hyundai Motor and LG Energy Solution agreed to share up to 1.4 trillion won in recall costs at a 3:7 ratio. Samsung Securities commented, "Considering the Ministry of Land, Infrastructure and Transport's investigation results attributing the fire cause to the battery cell and the market's concern over LG Chem's share ratio (70-90%), the actual sharing ratio is significantly lower than expected." The consensus is that such an agreement would have been impossible without Chairman Chung's final approval.

Currently, the gap in settlement amounts considered by LG Energy Solution and SK Innovation is known to be in the trillions of won. Without an agreement between the chairmen, it is difficult to narrow this gap. The regular meetings of the chairmen of the four major conglomerates, facilitating smooth exchanges among the top-tier companies in the business hierarchy, and Chairman Chey’s upcoming inauguration as chairman of the Korea Chamber of Commerce and Industry this month, all raise expectations for a chairman-level agreement to end the long battery lawsuit.