The Biden administration avoided one of the more challenging early tests of its climate agenda Saturday, when two South Korean battery giants feuding over trade secrets reached a settlement to keep a massive Georgia factory complex open, according to sources familiar with the negotiations.
The White House faced a Sunday deadline to decide whether to veto a U.S. International Trade Commission decision from February that barred SK Innovation from importing the materials needed to build electric vehicle batteries at a $2.6 billion pair of plants in Commerce, Georgia.
The case illustrates the new administration’s dueling priorities as it seeks to jumpstart efforts to eliminate the U.S. economy’s planet-heating pollution while going head-to-head with China over intellectual property protections.
As late as Friday night, the company looked far from a deal with Seoul-based rival LG Energy Solutions, which convinced the federal trade court that SK Innovation destroyed evidence of stolen trade secrets. In February, the ITC imposed a 10-year import ban on SK Innovation, jeopardizing the supply of batteries for Ford’s electric F-150 pickup and Volkswagen’s Crossover series and threatening the 2,600 jobs the company planned to fill in Georgia over the next few years.
The ruling also risked delaying President Joe Biden’s plans to electrify the nation’s 276 million some-odd automobiles, the top U.S. source of climate pollution.
The $1.8 billion cash deal will also end other ongoing lawsuits between the two companies in the U.S. and South Korea, including one in a federal court in Delaware that had been on pause until the ITC saga reached its completion.
“We have decided to settle and to compete in an amicable way, all for the future of the U.S. and South Korean electric vehicle battery industries,” SK Innovation CEO Jun Kim and LG Energy Solution CEO Jong Hyun Kim said in a joint statement Sunday morning. “In particular, we will work together to strengthen an EV battery domestic supply chain and support the U.S. Biden Administration’s effort to advance green energy policies and environmental responsibility.”
SK Innovation’s plant will comprise upward of 35% of the U.S. production capacity of electric vehicle batteries by the end of Biden’s first term, when the country is expected to have roughly 11 big powerpack-making factories online.
That would likely force automakers to rely more on batteries made in China, which, by contrast, is building some 100 battery plants.
The settlement, the details of which were starting to be disclosed Sunday morning, will likely help reverse the ruling and allow SK Innovation to keep its plant open.
The agreement is a political win. Leaders across the partisan spectrum pressed for an outcome that would allow the plant to remain open. Georgia Gov. Brian Kemp (R) pleaded with Biden to veto the decision if a settlement wasn’t reached. In recent weeks, Sen. Jon Ossoff (D-Ga.) held at least one meeting seeking to broker a deal.
But ultimately the looming deadline and high stakes of a decision that should define the future of a U.S. set for near exponential growth in the next decade led to an eleventh-hour agreement.
Losing the factory without a deal or veto would have sent a chill through the U.S. battery market as it looks to start attracting more players, said Caspar Rawles, an analyst at Benchmark Mineral Intelligence, a London-based research firm that specializes in lithium-ion batteries and electric vehicle supply chains.
“The message that you’re sending to those companies by essentially shutting down a plant in the U.S. due to legal reasons does not send a good message,” he said before the deal was announced. “It’s not the most inviting investment environment for someone looking to spend several billion dollars, and then there’s a risk something happens and there’s a legal intervention and they lose it all.”
A presidential veto would have been a rare move. The last time the power was used was in 2013, when President Barack Obama blocked an ITC ruling that would have prevented Apple from importing some iPads. Ronald Reagan set the record, vetoing four ITC decisions, including one that coincidentally dealt with batteries.