LG and Magna announce billion dollar joint venture in electric car gear (updated)

Aisin

23/12/2020 03:43

(Adds LG Elec's share movement, Magna CEO's quotes)
    By Moira Warburton
    TORONTO/SEOUL, Dec 23 (Reuters) - South Korea-based LG
Electronics Inc  066570.KS  and automotive supplier Magna
International Inc  MG.TO  are launching a joint venture that
will make key components for electric cars, the companies
announced on Wednesday. 
    The joint venture, tentatively called LG Magna e-Powertrain
and valued at $1 billion, will manufacture e-motors, inverters
and onboard chargers, according to LG Electronics. 
    The deal expands a wave of consolidation among suppliers
aiming to capture a growing market for electric vehicle, e-axle
systems, which combine electric motors, power controls and
driving gears in one unit. Earlier this year, gear maker
BorgWarner Inc  BWA.N  acquired rival Delphi, and Japanese
manufacturers Aisin Seiki Corp  7259.T , Denso Corp  6902.T  and
Toyota Motor Corp  7203.T  have created a new e-axle venture
called BluE Nexus.  urn:newsml:reuters.com:*:nL8N2A02YD
    Shares of LG Electronics jumped as much as 24.7% as of 0358
GMT to their highest since 2011, compared to the broader market
KOSPI's  .KS11  1% rise. 
    LG Electronics is an affiliate of South Korea's
fourth-largest conglomerate, with interests ranging from
electronics, including smartphones, to home appliances. LG
Group's major affiliates include LG Display Co Ltd  034220.KS ,
which counts Apple Inc  AAPL.O  as its customer, as well as LG
Chem Ltd  051910.KS , whose wholly owned LG Energy Solution
subsidiary provides EV batteries to Tesla Inc  TSLA.O . 
    LG will own 51% of the new company and Magna will own 49%,
LG said. 
    The transaction is expected to close in July 2021 pending LG
shareholder approval, among other conditions, and will employ
1,000 people at LG locations in the United States, Seoul and
China, according to a press release.
    LG has previously supplied motors, battery packs and other
components to GM’S Bolt EV.
    Magna already makes electronic vehicle gear for companies
including Volkswagen. But gaining more control over production
of the high-value parts of an electric car "has always been part
of the strategy as we move forward," Magna's incoming CEO, Swamy
Kotagiri said in an interview with Reuters on Tuesday ahead of
the announcement.
    "With combined synergies of both companies together I think
we'll be able to address not only our existing customers, but
all the major audiences and preferably the new entrances looking
for electric platforms," he said.
    LG Electronics' vehicle component solutions business has
reported 19 quarters of consecutive losses.
    When asked about the timeline of its Vehicle Component
Solutions business' turnaround during an earnings call in
October, the company said LG Electronics expects to swing to
profit in the third quarter of next year.
    Sales from this business were $150 million in 2019, but
Kotagiri said he expects a compound annual growth rate of around
50% by 2025.   

 (Reporting by Moira Warburton in Toronto, Heekyong Yang & Joyce
Lee in Seoul, and Nori Shirouzu in Beijing; Editing by Dan
Grebler)
 ((Moira.Warburton@thomsonreuters.com; 416-687-7996;
437-771-3124;))