S.Korean battery trio face union risk in US after Ultium Cells’ wage deal

South Korean electric vehicle battery majors’ plan to run more than 10 EV battery manufacturing plants in the US may hit a snag due to the looming union risk in the world’s third-largest EV market after Ultium Cells LLC’s agreement to hike wages by more than 20%.

Ultium and the United Auto Workers (UAW) have tentatively agreed to raise wages by about 25% for workers at the battery manufacturing plant in Warren, Ohio, the US largest auto labor union announced on Thursday (local time).

Ultium is an EV battery-making joint venture set up by South Korea’s largest EV battery maker LG Energy Solution Ltd. and US auto major General Motors Co. in the US.

Although it is not disclosed, the hourly wage for the battery pack plant’s workers is expected to jump to $20.6 from the minimum $16.5 under the deal.

The interim wage increase will also be retrospective so any current employee who has worked at the company since Dec. 22, 2022 can receive payments of $3,000 to $7,000 based on hours worked, Ultium said.

The agreement will become immediately effective as of Aug. 28 if UAW members give it the nod on Aug. 27. 

This was the US largest auto union’s first-ever collective bargaining with an EV battery pack-manufacturing company.

The UAW said it will continue to bargain for more wage increases after touting its deal with Ultium as a “breakthrough agreement.”

MORE WAGE HIKES IN THE US EV BATTERY INDUSTRY

The Ultium’s wage deal has spurred concerns that similar wage hikes will follow in the US EV battery industry as the auto labor union has pledged more bargaining.

The UAW is currently in separate wage negotiations with the big three automakers operating in the US, Ford Motor Co., GM and Stellantis N.V., demanding a 46% hike for workers at not only auto-making factories but also EV battery-making plants.

As the US finished car makers have refused to accept such a drastic hike, the UAW is threatening strikes.

A series of wage hikes at the battery plants would be a big headache for Korean battery makers that have been seeking to build multiple battery pack and materials manufacturing plants on US soil to benefit from tax incentives under the US Inflation Reduction Act.

The IRA requires that 50% of the value of battery components be produced or assembled in North America to quality for a $3,750 subsidy. It also requires that 40% of the value of critical minerals be sourced from the US or a free trade partner for another $3,750 credit.

LG Energy Solution, also the world’s second-largest battery maker, plans to operate four battery plants in total with GM via JV Ultium Cells. It also has its own plant in Holland, Michigan and plans to build another stand-alone battery complex in Queen Creek, Arizona.

Korean No. 2 battery player Samsung SDI Co. plans to operate two battery manufacturing plants in the US via a JV set up with Stellantis.

Separately, it will also build a $3.8 billion battery plant in Michigan with GM.

SK On Co. will build an assembly and battery complex in Tennessee and two battery factories in Kentucky with Ford. They have set up a JV called BlueOval SK LLC to run the battery plants in the US. 

The Ultium-UAW deal could be a prelude to a series of wage hikes at Korean battery makers’ plants in the US, which could offset IRA subsidy benefits. 

Write to Nan-Sae Bin at binthere@hankyung.com

Sookyung Seo edited this article.