LG Electronics’ new production line soon to ship GM parts

SEOUL — LG Electronics has completed a new production line dedicated to electric-vehicle components for General Motors and will soon begin shipping the parts, a turning point that will likely make the South Korean company’s fledgling automotive operation profitable.

SEOUL — LG Electronics has completed a new production line dedicated to electric-vehicle components for General Motors and will soon begin shipping the parts, a turning point that will likely make the South Korean company’s fledgling automotive operation profitable.

The new production line is in Incheon, the South Korean city that serves as the hub for LG Electronics’ automotive business. The company is pouring about 400 billion won ($356 million) into the operations this year, which includes the new line and research and development costs. LG Electronics has spent between 300 billion won and 400 billion won annually on the business in recent years.

The company is supplying more than 10 key components for the U.S. automaker’s Chevrolet Bolt, an electric vehicle set to debut later this year. They include batteries, inverters and other parts of the powertrain, as well as liquid crystal display gauge panels and data display systems.

Automakers usually procure parts from a wide range of suppliers to spread the risk. But GM has chosen to source heavily from LG in order to build an electric vehicle that can travel unprecedented distances on a single charge for less than $40,000 — a project described as a disruptive innovation. The two companies jointly developed the components, with GM lending its proprietary expertise in motor design, battery controls and other areas.

This is, in effect, the first time LG Electronics is supplying several parts in a bundle for a client. The company runs plants in China, Vietnam and the South Korean city of Pyeongtaek, while Incheon is a key supply center.

The automotive operation generated 640 billion won in sales during the April-June quarter, up more than 40% from a year earlier. Though the business is gradually growing, it still made a 17 billion-won loss in the period.

Unifying the group

LG group companies used to strike automotive-related deals individually. For example, LG Chem would supply car batteries to GM. In 2013, LG Electronics established a vehicle components segment. That segment linked in-group operations such as car navigation systems, interior displays and camera modules, while managing R&D and sales.

Meanwhile, LG Electronics secured 100,000 sq. meters in Incheon for the initial phase of the automotive operation and dispatched 800 researchers and other staff to the new campus. They produced prototypes and conducted environmental durability tests, among other endeavors.

Among all the vehicle parts, LG Electronics’ batteries hold the most promise. The core component determines the overall capabilities of electric and other vehicles and commands a high unit price. LG Electronics has lithium battery factories in the U.S. and South Korea, and the company opened another one last year in Nanjing, China. The Nanjing plant will enable swift supply to Chinese factories operated by major car manufacturers. Though the capital spending has kept the operation in the red, orders are increasing.

The Nanjing plant has not yet received approval from Chinese authorities. China’s government appears close to introducing new rules under which only electric vehicles and plug-in hybrid vehicles with batteries from government-approved factories will qualify for subsidies. Companies have been obtaining that endorsement from the government, but they are mostly Chinese. LG Electronics plans to increase lobbying in order to maintain its competitiveness.

Source: LG Electronics’ new production line soon to ship GM parts- Nikkei Asian Review

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