Hyundai and LG agree on recall cost split for Kona fires
Hyundai Motor will be responsible for 30 percent of the recall expense, set at 1.4 trillion won. The cost has been revised up from 1 trillion won originally announced last month.
LG Energy Solution will take on 70 percent of the recall expense.
Hyundai Motor in a regulatory filing uploaded on March 4 said that it will provision some 386.6 billion won in the fourth quarter last year in addition to 38.9 billion won already provisioned, leading to a total of 425.5 billion won of expense related to the latest recall.
It said its operating profit in 2020 will be revised from 2.78 trillion won to 2.39 trillion won after reflecting the expense.
LG Energy Solution will provision 550 billion won in 2020.
LG Chem which wholly owns yet-to-go-public LG Energy Solution in a filing on March 4 said its operating profit has gone from 673.6 billion won to 118.6 billion won after the provisions.
"Hyundai Motor and LG Energy Solution agreed on the fact that we should minimize the confusion caused to the customers," Hyundai Motor said in a statement. "Hyundai Motor will continue to push forward with customer protection and recover credibility on quality."
There have been some 15 cases of Kona Electrics catching fire in and outside of Korea since last year, leading to the carmaker to recall some 77,000 units of the model sold globally. Kona Electric was Hyundai's most-sold electric model.
The cause of the fires was seen as being related to a defect in the battery made by LG Energy Solution after other electric models using the same battery product caught fire as well.
General Motors' Bolt EVs, which are fit with LG battery, were caught catching fire, leading to the Detroit automaker recalling some 70,000 units of them last year.
An electric bus installed with an LG battery caught fire last month in Changwon, South Gyeongsang while running.
Korea's Transport Ministry last month in its interim investigation report said that LG batteries made at its Nanjing factory between Sept. 2017 and July 2019 were found to have defect in cells that could lead to fire.
Hyundai Motor said it will voluntarily recall three models - Kona Electric, Ioniq Electric and Elec City bus - all of which are equipped with the battery in question.
"LG Energy Solution prioritizes customer safety and will actively cooperate on the recall," the battery company said in a statement.
BY JIN EUN-SOO [jin.eunsoo@Joongang.co.kr]