In the quest to attract investment from foreign and domestic corporations, Georgia has become a home for Electric Vehicle-related manufacturing. In 2019, SK Innovation (SKI), an electric vehicle (EV) battery manufacturer and subsidiary of a South Korean global conglomerate, broke ground in the town of Commerce on a $1.67 billion manufacturing plant to produce batteries for Ford and Volkswagen, with a promise of creating 2,000 jobs. Shortly after this initial investment, SKI announced an additional investment of approximately $940 million for expansion of the plant and the creation of an additional 600 jobs for local Georgians.
While seemingly well intentioned, promises of new jobs, economic benefits, and a new manufacturing hub came with a much darker side: Multiple revelations have cast a light upon SKI’s suspect and at times illegal business tactics. Regrettably, Georgia, Ford, and Volkswagen have found themselves entangled with a bad-faith actor. Unless a solution is agreed upon, they will be left holding the bag pertaining to lost business and production capabilities.
The situation is this: Several years ago, LG Chem, now LG Energy Solution, a subsidiary of a rival South Korean global conglomerate, accused SKI of stealing trade secrets from LG’s lithium-ion battery technology and then leveraging them to secure lucrative contracts with Ford and Volkswagen. The United States International Trade Commission (ITC), home of the lawsuit, sided with LG, issuing a preliminary default judgement against SKI citing substantial intellectual property (IP) violations. Investigations into these accusations found that SKI would actively attempt to hire former LG engineers with the promise of employment should they provide trade secrets. Investigations also discovered SKI’s attempt to cover up evidence by destroying more than 34,000 files and emails.
State and local officials in Georgia agreed to approximately $300 million in grants, tax incentives, and free land for SKI to secure the company’s investment. The offer also included supplemental incentives such as a sales tax exemption for equipment and energy, as well as substantial tax credits for research and development that could prove to be lucrative for SKI in the years to come. While SKI was more than happy to accept these incentives, the company has failed to live up to its side of the bargain when it comes to investing in Georgia and providing quality jobs. As of this past September, the SKI plant employed only 60 U.S. workers—well short of what was initially promised.
On February 10, the ITC upheld its default judgement issuing a limited 10-year exclusion order prohibiting imports into the United States of SKI lithium-ion batteries while also restricting domestic production. To try and limit the impact on companies like Ford and Volkswagen, both of which are victims of SKI’s deceitful trade practices, SKI will be permitted to import production components for lithium-ion batteries for Ford Motor’s EV F-150 program for four years and for Volkswagen’s MEB electric vehicle line for two years to allow both companies to find new suppliers. However, to ensure that Georgia does not suffer due to SKI’s deception, it is imperative that state, local, and federal officials along with the taxpayers (whose hard-earned money, in turn, subsidized this now-failed venture) take the necessary steps to hold SKI accountable. This entails calling on SKI to find a financial and legal resolution to this dilemma in order to keep its commitments to Georgia, to its customers, and to its employees.
One thing is clear: SKI has abused the generosity and the business-friendly environment of Georgia. In a time where American workers are often under threat from the illicit practices of foreign competitors, we cannot in any way support a company that is at the very crux of this problem.
Rather than trying to find a workable solution with LG, SKI is instead attempting to circumvent the courts and appeal to the whims of politicians. For the good of the state of Georgia, President Joe Biden must send a clear message of upholding IP protections and ensure that SKI suffers the consequences of doing business improperly and illegally. Doing anything less would come at the expense of quality partners like LG that have acted as a vital source of investment in the United States and as an ally to the American worker.
Kent Kaiser, Ph.D., is executive director of the Trade Alliance to Promote Prosperity. More information is available at www.promote-trade.org