LG Chem shares fall due to Chevy Volt recall

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SEOUL, Aug. 27 (UPI) — The share price of South Korean electric vehicle battery maker LG Chem plunged this week after the recall of General Motors’ Chevrolet Bolt cars, which use LG batteries.

GM announced last week that it would recall an extra 73,000 Bolt electric vehicles from model years 2019 through 2022 due to fire risks, which it said was caused by battery manufacturing defects.

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The American automaker said the recall would cost around $1 billion and that it would seek reimbursement from LG Chem.

Afterward, LG Chem’s share price plunged more than 10 percent on Monday, reaching the lowest level in five months.

The battery giant remained weak on the Seoul market throughout this week, finishing at $670 Friday, down 12.81 percent from a week prior. LG Chem’s market capitalization went down by more than $6.5 billion.

This is not the first time GM has issued a recall over fire risks from LG batteries. In July, GM recalled about 69,000 Bolt cars from model years 2017 through 2019, which cost around $800 million.

In February, South Korean automaker Hyundai Motor also recalled about 82,000 electric vehicles, at an estimated cost of some $850 million. Hyundai and LG split the expenses.

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The repeated recalls are feared to negatively affect LG Chem’s battery-making affiliate, LG Energy Solution, which plans to go public late this year.

However, observers appear to be optimistic about the prospects of LG Chem.

“LG Chem is experiencing challenges faced by market leaders in the early stage of the business,” HMC Investment & Security analyst Kang Dong-jin told UPI News Korea. “The company is expected to reduce its risks through continued development of technologies.”

Daelim University automotive Professor Kim Pil-soo agreed.

“LG’s previous customers are expected to maintain a good relationship with the company. Its partnership with GM will not be affected by the recall,” he said.

LG Chem has forged a strategic partnership with GM in the latter’s transition to electric cars. LG Energy Solution runs a battery factory in Michigan. Ultium Cells, the joint venture between GM and LG, is building a factory in Ohio and plans to construct another one in Tennessee.

LG Chem is the chemical arm of LG Corp., which manufactures electronic devices such as smartphones and televisions.