GM's Battery Supplier LG Electronics to Pay $1.2 Billion to Help Cover the Costs of the Chevy Bolt EV Battery Recall
On Tuesday, General Motors announced it reached an agreement with its battery supplier LG Electronics to cover the costs and expenses associated with the recall of Chevrolet Bolt EVs and Bolt EUVs due to manufacturing defects in battery modules.
South Korean battery firms LG Chem and LG Electronics Inc will pay a combined $1.2 billion to help cover the costs of the recall.
The massive recall of the Chevy Bolt EV due to the risk of battery fires could have cost the automaker up to $2 billion. The recall involves roughly 69,000 Bolt EVs.
GM said in August that it expected LG Electronics to cover the costs to replace the battery packs in the Bolt EVs. The final recall costs will depend on the number of battery modules that are replaced.
"LG is a valued and respected supplier to GM, and we are pleased to reach this agreement," said Shilpan Amin, GM vice president, Global Purchasing and Supply Chain. "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."
As a result of the agreement, GM will recognize an estimated recovery in its third-quarter earnings that will offset $1.9 billion of $2.0 billion in charges associated with the recalls.
The massive recall involves 9,335 2019 model year Bolt EVs and 63,683 2020–2022 model year Chevrolet Bolt EVs and EUVs, including 52,403 that were sold in the U.S.
All Chevy Bolt EVs were recalled due to the risk of battery fires.
The original Bolt EV recall was the result of a Oct 2020 investigation by the National Highway Traffic Safety Administration (NHTSA) which was opened after three battery fires were reported by Bolt EV owners. A month later, GM announced its was voluntarily recalling 2017 through 2019 model year Bolts.
For the first recall, GM dealers installed diagnostic software and limited the battery's state of charge to 90%. GM said the risk of fire is increased when the battery is charged to full, or very close to full capacity. The software update was intended to help reduce the risk of fire.
However, there were several reports of battery fires in Bolt EVs that already had the software update, which prompted GM to voluntarily recall all of them.
In August, GM announced it was expanding its Chevrolet Bolt EV battery recall to cover all of the remaining 2019 models not included in the first recall last year, as well as all 2020-2022 model year vehicles, including the new Bolt EUV.
The automaker has confirmed nine Bolt EV fires and blamed it on defective battery modules supplied by LG.
After disassembling battery packs as part of the automaker's own investigation into the issue, GM said it discovered manufacturing defects in certain battery cells produced at LG's manufacturing facilities beyond the Ochang, Korea, plant. GM said the batteries may have a torn anode tab and folded separator, which increases the risk of fire.
The battery pack is the most expensive component in an electric vehicle. According to energy storage research firm Cairn ERA, General Motors pays an average of $169 per kWh for its battery cells while the industry average runs at about $186 per kWh, according to a recent report from CNBC. The Bolt is equipped with a 66 kWh battery pack.
The battery in the Bolt EVs is warrantied by GM for 8 years or 100,000 miles, so Bolt EV owners will not have to pay anything for the battery replacements.
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