South Korea’s LGES reviews $ 1.3 billion Arizona battery investment for being bitten by U.S. inflation


South Korean battery maker LG Energy Solution Ltd. (LGES), a major supplier to US automakers including Seoul — Tesla, plans to invest $ 1.3 billion in its Arizona plant due to “unprecedented” economic conditions Is being re-evaluated.

News that South Korea’s largest battery maker is reviewing plans announced just three months ago dropped LGES shares by 4.6% on Wednesday. This is brought about as more companies consider their business plans, fearing that consumer demand will decline amid rising inflation in the United States, primarily caused by global supply chain disruptions. ..

Tesla has cut 10% of office workers and suspended hiring around the world. Its CEO, Elon Musk, predicted last week that the US recession is likely.

LGES said in a statement that it is currently considering various investment options for “the unprecedented economic and investment situation in the United States.”

No mention was made of the Arizona plant, but an LGES spokeswoman said the company would reassess its investment in an independent plant.

LGES said in a submission to another regulatory agency that it is considering the timing, size and details of its investment in Arizona due to rising costs due to the worsening global economic environment, adding that nothing has been decided. ..

LGES is building three plants with General Motors in Ohio, Tennessee, and Michigan elsewhere in the United States, and plans to expand its existing plant in Michigan.

Analysts believed that investment reviews were carried out at the highest levels in more than 40 years due to rising inflation in the United States, which could increase material, construction, and labor costs.

“At this point, LGES is unlikely to withdraw its investment in Arizona. We need to reassess our earnings forecasts amid rising costs due to inflation,” said Cho Hyun-ryul, an analyst at Samsung Securities. ..

LGES said in March that the Arizona plant would be the first US plant to manufacture cylindrical cells, a type of battery used in Tesla and Lucido vehicles. Construction began in the second quarter of 2022 and mass production was scheduled to begin in 2024.

LGES also has production bases in South Korea, China, Poland, Canada and Indonesia.

By Heekyong Yang

Reuters

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