2018 Power Outage at Kia Motors Hwaseong Plant
Kia Motors Files Damages Lawsuit Against LS and Daehan
Claimed Compensation Amounts to 18.2 Billion KRW... Supreme Court Review Underway
'Patent Infringement' Case Also Likely to Reach Supreme Court
The competition between LS Cable & System and Daehan Cable, vying for the top position in the industry, has recently intensified through legal battles and behind-the-scenes rivalry, drawing attention to the outcome of a damages lawsuit filed by Kia Motors against the two companies six years ago. With the Supreme Court's final judgment pending, there is a possibility that one of the two companies will bear the compensation amounting to 18.2 billion KRW, leading to evaluations that this case has become a true 'Achilles' heel' feared by both companies.
Kia Motors Hwaseong Plant Overview
According to the cable industry and legal circles on the 22nd, LS Cable & System and Daehan Cable are being sued in relation to a power outage incident that occurred at Kia Motors' Hwaseong plant in September 2018, and the case is currently under review by the Supreme Court.
In September 2018, Kia Motors agreed to cooperate in relocating transmission lines to secure the construction site for the Shin-Pyeongtaek combined cycle power plant. LS Cable & System and Empower were assigned the construction work, while Daehan Cable was responsible for supplying materials. However, during the construction, a large-scale power outage occurred at Kia Motors' Hwaseong plant, causing significant damage to Kia Motors. Six vehicle production lines were halted, severely disrupting the production schedule. About a year later, in June 2019, Kia Motors filed a damages lawsuit against LS Cable & System, Empower, and Daehan Cable for the losses incurred. Kia Motors claimed that the three companies were negligent and defective in the process of relocating the underground transmission lines, which caused the power outage.
Both the first and second trials held LS Cable & System solely responsible for the construction and ordered partial compensation to Kia Motors. The amounts to be compensated differed. The first trial ordered compensation of 7.284 billion KRW, which is 40% of the 18.2 billion KRW claimed by Kia Motors, while the second trial reduced the amount to 5.46351 billion KRW. On the other hand, the materials supplied by Daehan Cable, such as cables and stress cones, were found to be free of defects, and thus Daehan Cable was judged to have no liability for compensation.
LS Cable & System appealed against the second trial's ruling. If this ruling is upheld by the Supreme Court, LS Cable & System will bear sole responsibility for the compensation, which has become an urgent issue. The compensation amount of 5.46351 billion KRW from the second trial, or potentially the full 18.2 billion KRW if the case is remanded and fully recognized, could impose a significant burden. Additionally, since this is a lawsuit against a domestic company, Kia Motors, there is analysis that the company's reputation and standing in the industry, which have been built over time, could be damaged, making it a matter not to be taken lightly.
Although the final judgment on this case will have considerable impact, the conflict between LS Cable & System and Daehan Cable is unlikely to end here. There are two other major ongoing disputes between them. A 'patent infringement' lawsuit is also heading to the Supreme Court. This lawsuit was filed by LS Cable & System in 2019, claiming that Daehan Cable's busduct joint kit product infringed on its patented technology. A busduct is a power distribution facility that delivers electrical energy within buildings. The joint kit is a component that connects busducts, and LS Cable & System's patent applies to some parts of this joint kit. The first trial accepted some of LS Cable & System's claims and ordered Daehan Cable to pay 490 million KRW in damages. On the 13th, the second trial also ruled that Daehan Cable must pay 1.5 billion KRW to LS Cable & System. After the ruling, LS Cable & System appeared to accept the result, while Daehan Cable stated, "We will carefully review the judgment and decide whether to appeal," showing intent to appeal. LS Cable & System and Daehan Cable have also been under police investigation since June last year over allegations of technology leakage during the architectural design process of the undersea cable factory in Dangjin, Chungnam. The police have booked A Architectural Office, which participated consecutively in the construction of both companies' factories, on charges including violation of the Unfair Competition Prevention Act and are investigating whether Daehan Cable was involved as well.
Amid fierce battles in investigative agencies and courts, it was recently confirmed on the 12th that Hoban Group, the parent company of Daehan Cable, purchased a portion of LS Group's shares, the parent company of LS Cable & System. The acquired stake is reported to be less than 5%. The industry interprets this as an attempt to exert influence and create a favorable situation by securing shares of LS, with whom they are in conflict. An industry insider said, "With interpretations divided within the industry regarding the truth of technology leakage and patent infringement, the court's judgment is likely to become the ultimate barometer that will decide everything."
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