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Chevy Bolt EV Recall Will Cost LG $1.9 Billion, 95% of the Total Cost

GM said it would pursue compensation from LGES (LG Energy Solution) due to the Chevy Bolt EV battery pack recall it had to perform: it was going to spend $1.8 billion repairing 110,324 Bolt EV and EUV units with 2017 to 2022 model years included. After Reuters said it would pay the equivalent to $1.2 billion, or 67% of the total, GM fixed that: it will be $1.9 billion of the now $2 billion in expenses, or 95% of the revised value.
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Surprisingly, the costs will be divided among many LG companies. LG Chem, the sole controller of LGES, will pay 620 billion won ($518.39 million at the current exchange rate). LG Electronics – which assembles battery modules and packs with the cells produced by LGES – will cover another 480 billion won ($401,33 million). Those were the numbers Reuters presented before updating its article with GM's official press release. It did not disclose how the Korean companies will pay the other $280 million, but it probably has to do with the amount it had already committed to bearing the recall expenses in Q2 2021.

Closing the discussions around what the companies would have to pay was necessary for LGES to work on its IPO (initial public offering). Prospective stockholders might not be very comfortable buying these shares if they did not have any idea of the financial impact the recall would have on the battery supplier.

Although things are settled with GM, the preparation for the recall raised some concerns. The American carmaker said it would help LGES implement “GM quality metrics” to avoid similar cell issues in the future. If the supplier does that from now on, it will be a relief. However, LGES also sells its batteries for multiple other EVs and manufacturers.

The Korean company supplies cells to Hyundai, Volkswagen, Ford, and, more recently, to Lucid. The models getting the units are the Kona Electric, Mustang Mach-E, and Lucid Air, plus Volkswagen's ID family. The Kona Electric is also subject to a massive recall due to LGES battery defects.

Volkswagen recently had a fire with an ID.3 in Groningen, in the Netherlands. Only the German manufacturer is investigating, while the Dutch government did not seem to bother with it. We’re waiting to learn what the cause was, but such investigations take a long time to complete. Hopefully, Volkswagen will be transparent about its findings and will keep us posted on that.

More than keeping a good relationship with its direct customers, LGES now has to work hard on recovering its reputation in a broader sense. EV buyers may currently have no idea who manufactures the cells in their cars, but they may start asking about that. When they do this, they will certainly prefer those that never had to admit production issues and recall these cells.

Editor's note: After Reuters wrote about the expenses LG would bear, GM published a press release correcting Reuters numbers. Our article has been updated to include GM's press release and the new numbers. Reuters has also updated its text.

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