Che Dongxi reported on November 1 that LG Chem recently announced its third-quarter revenue results.Although LG New Energy, the battery division of LG Chem, suffered a lot from the battery recall of General Bolt and its operating profit fell by 20% year-on-year, the overall performance of LG Chem in the third quarter was still impressive.
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LG Chem’s total revenue in the third quarter increased 41% year-on-year to 10.610 billion won (approximately RMB 57.848 billion); however, operating profit was only 727 billion won (approximately RMB 3.971 billion), a year-on-year decrease of 20%. In addition, LG New Energy had only negative profits in the third quarter due to the compensation incident.
Last month, LG said it reached an agreement with GM on the cost of the Bolt recall and decided to pay GM US$1.9 billion. This move had a great negative impact on LG Chem’s performance throughout the third quarter. As the new battery has officially started production, Bolt EV will also officially resume production this month, and LG New Energy will gradually correct the negative impact of previous battery safety issues.
1. Q3 operating profit loss of 2 billion yuan officially announced two super factory projects
According to public information, LG Chem’s total revenue in the third quarter reached 10.610 billion won (approximately RMB 57.848 billion), an increase of 41% year-on-year, and a net profit margin of 6.4%. Operating profit reached 727 billion won (approximately 3.971 billion yuan), a year-on-year decrease of 20%. Compared with the second quarter, LG Chem’s momentum in the third quarter has indeed slowed down; but after experiencing compensation for the cost of GM’s large-scale recall of Bolt, such performance is also justified.
▲LG Chem’s third quarter revenue performance
Although LG New Energy, the battery division of LG Chem, has been affected by the GM recall, its performance is relatively stable. In the third quarter, LG New Energy’s total revenue was 4,027 billion won (approximately 21.874 billion yuan), a year-on-year increase of 28%; it accounted for 38% of LG Chem’s total revenue. However, affected by the cost of compensation for GM’s recall, the operating profit in the third quarter was 373 billion won (approximately RMB 2.037 billion)
▲LG New Energy’s third quarter revenue performance
In addition, LG New Energy recently announced two new super factory projects-one is an Indonesian plant in cooperation with Hyundai Motor Group, and the other is a North American plant in cooperation with Stellatis. It is reported that LG New Energy also has battery factories in South Korea, the United States, Poland and China.
2. Bolt EV resumed production this month, LG New Energy changed its commander due to battery problems
It is reported that in the middle of last month, General Motors announced on its official website that it has reached an agreement with LG Chemical’s parent company LG on the cost of Bolt EV recall. LG agreed to compensate General Motors up to US$1.9 billion (approximately RMB 12.25 billion).
At present, the new battery provided by LG New Energy for Bolt EV has been put into production, and foreign media said that Bolt EV will officially resume production in the near future.
In addition, after agreeing to pay 1.9 billion U.S. dollars (approximately RMB 12.25 billion) to General Motors due to battery problems, LG New Energy will also usher in changes in its management. It is reported that LG New Energy has nominated Kwon Young-soo, vice chairman of LG Group Holdings, as the next CEO.
It is reported that Kwon Young-soo will succeed Kim Jong-hyun, the first CEO of LG New Energy. The latter resigned mainly because of battery problems. KwonYoung-soo, 64, led LG Chem’s battery business unit from 2012 to 2015, and played an important role in promoting LG Chem to become the world’s top battery supplier.
LG New Energy, which was established on December 1 last year, was spun off from LG Chem’s battery business. During his tenure, he has established solid cooperative relationships with many world-renowned car companies such as Audi and Daimler, and has made important contributions to LG’s new energy global leading position in power batteries.
Conclusion: Battery safety issues should not be underestimated
LG New Energy’s battery safety problem not only pits its partner GM, but also tastes bitter fruit.
LG New Energy’s $1.9 billion in compensation for GM’s recall costs does not hurt its fundamentals. What’s more serious is that it is consuming customers’ trust in the reliability of its brand.
After all, battery safety is closely related to personal safety, which is a crucial factor that affects consumer purchases.