The 9.603 trillion won battery supply contract between LG Energy Solution and U.S. automaker Ford was terminated at Ford's request. When automakers and battery manufacturers sign contracts, they typically include a clause requiring the payment of compensation if the agreed quantity is not purchased. Based on this, the financial investment industry says LG Energy Solution is expected to receive a substantial amount of compensation from Ford.
According to the battery industry and major foreign media on the 23rd, Ford is expected to incur large expenses as it scales back electric vehicle investment and reprioritizes its business around internal combustion engine vehicles.
U.S. online outlet Axios said, "Ford's business transition will generate $20 billion (about 30 trillion won) in expense through 2027," and "cash expenditures over the next two years will reach about $5 billion (about 7.5 trillion won)."
On this, a battery analyst at a domestic securities firm said, "The $5 billion that Ford spends in cash likely includes expenses for terminating long-term supply contracts and restructuring headcount in EV-related organizations." The analyst said, "Considering that 30% of EV manufacturing expense is the battery, it can be interpreted that up to about $1.5 billion (about 2.23 trillion won) has been set aside as compensation for the contract termination with LG Energy Solution."
LG Energy Solution and Ford signed two battery supply contracts in Oct. last year, but on the 17th Ford terminated one of them. The contract Ford sought to cancel called for supplying 75 GWh (gigawatt-hours) of batteries over six years from 2027 to 2032, with the termination amount reaching 9.603 trillion won.
Ford decided to cancel its contract with LG Energy Solution as it reorganized its business amid a continued EV chasm (temporary demand slowdown) and reduced U.S. government support for EVs. On the 15th, Ford said it would halt production of the F-150 Lightning electric pickup truck and focus on hybrids and internal combustion engine vehicles.
There have been previous cases where automakers failed to purchase the contracted volume of batteries and paid compensation. LG Energy Solution, Samsung SDI and SK On, Korea's three battery makers, received 500 billion to 600 billion won in compensation from overseas automakers in the first half of last year. Those automakers reportedly paid compensation because they failed to sell as many EVs as targeted.
An LG Energy Solution official said, "As a rule, battery supply contracts include clauses related to contract termination," and "we will negotiate with Ford on the size of the compensation payment based on the contract drafted at the time."