General Motors said it reached an agreement with partner LG Electronics Inc. to recover from the Korean company $1.9 billion of the $2 billion in costs for a recall of batteries in its Chevrolet Bolt electric vehicle.
GM had to recall all 143,000 Bolt and Bolt EUV models because of a manufacturing defect involving the battery that led to an increased fire risk.
As a result of the agreement, GM said its estimated reimbursement in the third quarter will offset $1.9 billion of the $2 billion in charges associated with the recalls, based on accruals under U.S. accounting standards. GM said in a news release that LG agreed to cover recall costs and expenses. The final recall cost will depend on the number of battery modules replaced.
GM will recoup nearly all of the costs of the recall, showing that CEO Mary Barra got the company’s battery partner to assume nearly full responsibility. With the settlement, both GM and LG can begin moving past the costly and embarrassing episode that had the automaker telling Bolt owners to limit how much to charge the car’s battery and advising them to park outdoors and 50 feet from other vehicles.
The two companies will continue to partner to make GM’s new EV batteries through a joint venture called Ultium LLC. The jointly owned company is building a battery plant in Lordstown, Ohio, and will set up another in Spring Hill, Tenn.
“LG is a valued and respected supplier to GM, and we are pleased to reach this agreement,” Shilpan Amin, GM vice president, global purchasing and supply chain, said in the statement. “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.”
