The Korea Herald


SK rejects LG compensation demands, unafraid of giving up Georgia plant

By Kim Byung-wook

Published : March 26, 2021 - 15:01

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Lee Myoung-young, the senior executive vice president of SK Innovation, speaks during the annual shareholders meeting at the company’s Seoul headquarters on Friday. (SK Innovation) Lee Myoung-young, the senior executive vice president of SK Innovation, speaks during the annual shareholders meeting at the company’s Seoul headquarters on Friday. (SK Innovation)

SK Innovation said it cannot accept rival LG Energy Solution’s demands for damage compensation it suffered after its battery technologies were stolen, dragging on an already drawn-out settlement dispute involving the two battery makers.

The corresponding remark came during the company’s annual shareholders meeting on Friday and also in the wake of LGES’ vow on the previous day that it will fight to receive reasonable compensation from SK.

At the 14th shareholders meeting held at its headquarters in Jongno, central Seoul, Executive Vice President Lee Myoung-young stated that the company would rather settle things in court than accept the LG battery maker’s demands.

“We will not accept the competitor’s demands as they will seriously undermine the competitiveness of our battery business and disturb our business in the US,” Lee said, adding that the company will do its best in dealing with the remaining legal proceedings.

Lee presided the occasion on behalf of President and CEO Kim Jun currently in the US making last-ditch efforts to reverse the US International Trade Commission’s earlier ruling that came in favor of the LG affiliate.

“Kim is visiting Georgia and Washington and speaking with local government officials to salvage the Georgia battery plant. Also, Kim is drawing up plans for the worst case scenario, even considering taking out equipment inside the Georgia plant and relocating them to the company’s battery factories in Hungary or China,” a senior SK Innovation official said.

On Feb. 10, the ITC concluded that SK Innovation had stolen battery trade secrets from its archrival LGES. As punishment, SK Innovation was slapped with a 10-year ban on importing, producing and selling lithium-ion batteries in the US. The ban, which has a grace period up to four years, would jeopardize SK Innovation’s plant currently under construction in Georgia, unless the company settles with LGES.

Under a contingency plan, SK Innovation is considering ditching its $2.6 billion Georgia plant and is conducting a study to calculate the related costs, the official added.

Even if SK Innovation were to ditch its Georgia plant, the company would keep all the equipment installed -- which make up the majority of the costs invested in the project, since the corresponding site was leased to them for free by the state.

On Thursday, Shin Hak-cheol, chief executive and vice chairman of LG Chem, vowed to get proper compensation from SK Innovation over the trade secret case.

“We cannot easily let go of this case, for the sake of companies across the world that are developing technologies according to fair market competition and of clients who make purchase upon the belief that the products have been made legitimately,” he said at the company’s shareholders meeting.

He also vowed to take “stern actions” in order to secure reasonable compensation and to protect the rights of shareholders and investors.

According to SK Innovation officials, LGES is demanding at least 3 trillion won ($2.6 billion) in settlement fees and a stake in SK Innovation’s wholly-owned subsidiary SK IE Technology, which manufactures a key component for electric vehicle batteries.

When asked about the potential split-off of the battery business, SK Innovation’s battery business chief Jee Dong-seob said that “nothing has been decided,” though he acknowledged that the idea is under review.

As for the progress on the company’s negotiation with LG and the possibility of obtaining a veto from US President Joe Biden, Jee declined to comment.

Biden has the authority to alter or veto the ITC’s final ruling and salvage the Georgia plant. The deadline for the decision is April 11.

Shortly after SK Innovation‘s shareholders meeting, LGES released a statement urging SK to disclose the trade secret documents it had stolen.

“To end this consuming debate, LGES suggests to cross-check documents and related evidence stated in ITC’s final ruling together with SK Innovation,” the statement said.

Both LGES and SKI are not able to directly confirm the evidence that had been brought to court individually. Attorneys from each sides have been checking the evidence on their behalf to prevent further trade secret leaks.

If LGES and SK Innovation both agree, they can cross-check each other‘s submitted evidence directly. LGES believes that doing so will “clear things up” for SK Innovation executives.

SK Innovation acknowledges that it did misappropriate trade secrets from LGES, but argues that it didn’t end up having to use them because its batteries are “more advanced.” The company further claims that it’s up to LGES to prove exactly which trade secret SK Innovation had allegedly utilized to manufacture its batteries, if it ever did so.

By Kim Byung-wook (