LG Chem will no doubt play a key role in manufacturing faster electric cars for Renault, one of the world’s leaders in the segment, according to recent developments.

But it remains to be seen just how it will work, whether it will be in LG’s advantage and how it will help the firm find new drivers of growth, especially as LG Electronics’ new Vehicle Components unit appears to be struggling to make a name for itself.

Amid the uncertainty, there is now talk of the new unit being merged with LG Chem’s battery division, or the other way around.

“There is a big possibility that the pair will try to join hands in order to boost the auto arm’s competence and create bigger synergy,” said one industry watcher close to the local auto industry. He added the strategists within LG appeared to be reviewing the plans that have yet to be confirmed.

Even before LG and Renault made their big announcement on the sidelines of President Park Geun-hye’s recent European tour, sources had predicted LG would try its hand at electric vehicles.

“LG’s new auto unit had taken on some interesting employees, including a senior employee from Tesla Motors of the U.S., so it seemed obvious what it eventually wanted to do,” said another source close to the issue.

Tesla is still losing money despite selling a record number of cars. On top of that, there are reports of cars catching fire and suspicions that the company violated safety regulations.

The deal between LG and Renault is expected to operate on a “supply to order” or “built to specifications” basis, meaning LG will have little say in the manufacturing and will be limited to being a battery supplier.

LG’s Vehicle Component Unit may join with battery division

Given such conditions, it’s vital for LG to gain reputation as more than a battery supplier.

But LG’s Vehicle Components unit, born in July this year, has been losing staff left and right, mostly due to less-than-satisfactory working conditions.

“It seems pretty obvious what kind of state the firm is in when it decides to receive people from venture firms (like Tesla),” said Shin Jung-gwan, a senior analyst at KB Securities.

The pay package may play a part, as many pointed out that LG’s salaries are said to fall below the industry standard.

Further, the VC unit has yet to show off its prowess amid industry-wide skepticism about LG’s ability in the car market, prompting LG’s top brass to consider plans to bolster the auto arm’s presence.

Its top contenders are world-class companies such as Bosch and Continental of Germany, not to mention that Hyundai Motor has the cheaper option of Hyundai Mobis over LG.

Case in point, LG has little recognition over the telematics job it has done for Hyundai’s Veloster and its role in GM’s OnStar that handles navigation, communication and other related modules. 

 

The top dog at LG Chem’s battery division is Kwon Young-soo, who previously led the panel maker LG Display.

Lee Woo-jong, head of LG VC, was formerly chief of V-ENS, a subsidiary of LG CNS.

Unlike the VC unit, LG Chem’s battery unit is widely recognized for its technological savvy that exceeds Samsung SDI at home, but is slightly behind the Japanese makers. LG Chem is reportedly armed with solid patents and has contracts with major carmakers such as GM and Renault.

LG Chem reportedly bid to supply Tesla Motors, which recently settled instead on Panasonic. Rumors have it that LG was the one who walked away after deciding the conditions weren’t right.

Both LG Chem and Samsung SDI officials are to meet with Tesla’s IR team when it visits Monday for an unprecedented session in Korea.

“We can confirm the two affiliates (LG Chem and LG Electronics) are cooperating, but it’s unrealistic to believe that the two separate units under two separate affiliates may merge,” said Song Choong-sup, a spokesman for LG Chem.

Industry watchers, however, said it could be a possibility since LG is run by an owner family that will decide what’s best for the company and stock value.

By Kim Ji-hyun (jemmie@heraldcorp.com)