South Korea's LG Electronics has agreed to pay General Motors up to $1.9 billion as reimbursement for the losses the company incurred related to the recall and repair of its Chevrolet Bolt electric vehicles.
GM had to recall its Chevrolet Bolt vehicles due to the potential fire hazard posed by the batteries that were provided by the South Korean tech giant. Because of reports of some vehicles suddenly catching on fire, GM had to recall all of the Chevrolet Bolts it had sold since production began in 2016. GM said it has received at least 13 reports of Chevrolet Bolts catching on fire.
GM said Tuesday that fixing the recalled vehicles, including replacing some unit's battery packs, will likely cost it more than $2 billion. The latest estimate is slightly higher than the $1.8 billion GM had stated previously.
LG had a much lower estimate of the cost of repairs, pegging it at around $1.2 billion. GM said the actual cost of the recall and repairs will be greatly dependent on the number of vehicles that will be brought in by customers.
The $1.9 billion settlement with LG is a big win for the American automaker as it missed to beat analysts' expectations for its second quarter due to losses related to the recall and expected cost of repairs.
The settlement will allow GM to report an estimated recovery for its upcoming third-quarter earnings, offsetting its expected $2 billion cost associated with the Chevrolet Bolt recall.
GM said the issue of the faulty batteries was traced to LG Battery Solution's manufacturing plants in South Korea and Michigan. The company said the "rare manufacturing defects" had caused some battery cells to catch fire. LG said damage to the battery's anode tab had increased the risk of fire in some units.
GM's vice president of global purchasing and supply chain, Shilpan Amin, said LG continues to be a valued and respects supplier of the company. He added that the company is pleased that it has reached an amicable agreement so that both parties can continue to work together.
"Our engineering and manufacturing teams continue to collaborate to accelerate production of new battery modules and we expect to begin repairing customer vehicles this month," Amin said.