Countdown to Veto Deadline
SK Innovation Goes All Out with 'Public Opinion Campaign'
Georgia Governor Also Issues Statement
Presidential Veto Unlikely in Reality
Import Ban Appeal Also Underway
[Asia Economy Reporter Choi Dae-yeol] Presidential veto, withdrawal from the US business, or last-minute agreement.
The deadline for US President Joe Biden's veto decision, which will determine the fate of SK Innovation's electric vehicle battery business in the United States, is approaching. President Biden can exercise his veto right by April 11 (local time), within 60 days of the US International Trade Commission's (ITC) final decision on February 10 to ban imports into the US for 10 years.
According to the industry on the 9th, SK Innovation and the state of Georgia, where the US battery plant is located, are making a last-ditch effort to persuade the Biden administration. Brian Kemp, governor of Georgia, where SK's US battery plant is located, said in a statement on the 8th (local time), "The president is about to decide whether to approve or cancel a $2.6 billion investment in Georgia," urging him to exercise the veto.
This is the third time Governor Kemp has urged the president to exercise the veto. He has emphasized that the import ban on SK must be resolved as it could disrupt more than 2,600 local jobs and the expansion of electric vehicle adoption in the US.
Kim Jun, SK Innovation's CEO, who visited the US at the end of last month, is also reportedly meeting with local political and government officials to convey the legitimacy of the presidential veto. In response, LG Energy Solution is also reportedly communicating explanations and positions regarding the ITC decision through former officials connected to the current US administration.
Groundbreaking ceremony of SK Innovation's Georgia plant held in March 2019. Kim Jun, President of SK Innovation (third from left), Brian Kemp, Governor of Georgia (fifth from left), Choi Jae-won, Senior Vice Chairman of SK, and others are posing for a commemorative photo. Currently, Plant 1 has been completed and is in operation, while Plant 2 is under construction. However, a presidential veto is realistically difficult. Former President Barack Obama exercised a veto on the import ban of Apple products that infringed Samsung patents, but that was an extremely exceptional case.
SK is considering relocating its local plant if President Biden does not exercise the veto. The facilities of Plant 1, completed earlier this year, would be redirected to Europe and additional plant investments withdrawn. SK believes that it is more advantageous to absorb sunk investment costs or pay penalties to existing customers than to pay the settlement amount demanded by LG. However, they must endure intangible losses such as being labeled a company that infringed trade secrets in the rapidly growing electric vehicle battery market and the impression of having broken a large-scale contract.
SK is also expected to pursue a series of legal procedures, including appeals, against the import ban. At the end of last month, SK requested the ITC to stay the enforcement of the import restriction measures until the federal circuit court appeal process is completed. SK has decided to appeal if there is no presidential veto and is asking for the import restriction to be delayed accordingly.
Of course, a dramatic last-minute agreement between the two companies remains a possibility. However, a variable at the negotiation table is the patent lawsuit SK filed against LG. SK's negotiating power had significantly weakened after losing the trade secret infringement lawsuit, but if SK wins the patent lawsuit, there is a possibility that the negotiation dynamics could change.
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