If the battery catches fire, LG New Energy wants the supplier to bear the relevant costs.
CTOnews.com, December 20 (Xinhua)-- LG New Energy wants its suppliers to bear the costs when the company is faced with problems such as battery fires, according to TheElec.
As an incentive to suppliers, LG New Energy will offer long-term contracts to companies that agree to the terms. The contracts also include a clause that suppliers' profits cannot exceed the set profit margins, the sources said.
The source said that suppliers are generally dissatisfied with the new contract. Some suppliers are "angry" because they have never seen such a clause in the industry, which requires them to bear part of the cost of recalling batteries. Other suppliers are also unhappy with the long-term contract because it could mean they are limited in winning customers other than LG New Energy.
TheElec confirmed that some suppliers that rely heavily on LG new energy have agreed to these terms, while others with more customers are negotiating the terms.
CTOnews.com learned that LG New Energy and other LG affiliates had had to pay hundreds of millions of dollars for recalls of their customers Hyundai and General Motors because their electric cars caught fire while using LG batteries.
As the exact cause of some of the fires is unclear, suppliers say it is unreasonable for them to bear the cost of the recall and should be borne by the battery company.
Kwon Young-soo, CEO of LG New Energy, had previously held senior management meetings with the CEOs of suppliers, and Kwon asked them to upgrade their equipment while promising to grow together.
However, LG's latest decision on new energy will test its relationship with suppliers. LG New Energy's move may also be aimed at improving its profitability as car customers demand cheaper batteries, which have risen because of global inflation.
