Ultium Cells, a joint venture between Korea’s LG Energy Solution and US-based General Motors, has recently agreed to raise workers' wages at its Ohio battery plant, leaving Samsung SDI and SK On on high alert for the possible need to increase wages at their joint plants with carmakers there, slated to begin operations in a few years.

The company said on Aug. 24 local time that it has reached a tentative deal with the United Auto Workers, the labor union organized within the Ultium plant, for wage increases averaging 25 percent. UAW represents around 146,000 workers from the US' three largest car manufacturers, General Motors, Ford and Stellantis.

Currently, there are roughly 1,100 workers in Ultium Cells in Ohio, the majority of whom agreed to join the UAW last year.

The wage increases are expected to amount to between $3 and $4 per hour, the UAW said. According to a media report from CNBC, Ultium workers on the production line currently make around $20-$25 an hour, while maintenance employees earn $25-$34.60 an hour.

The interim agreement became effective on Aug. 28 after the majority of the plant's workers voted in favor of the wage increase. Some workers will also be retroactively paid back wages amounting to $3,000-$7,000, based on hours worked since December 2022 when the plant became operational, according to the union.

Car manufacturing industry sources say LG and GM are likely to face additional demands, considering that the UAW is also pushing for a 46 percent wage increase for workers at Ford, GM and Stellantis in their battery manufacturing facilities as well as EV plants.

Declining to comment on the UAW's other wage increase demands, an official from LG Energy Solution said that LG and GM will be effectively covering half of the 25 percent wage increase, since they each hold a 50 percent stake in Ultium Cells.

“The company’s stance is to engage in proper and reasonable negotiations with the union,” the official said.

The battery maker did not rule out the possibility of the Ohio wage agreement prompting similar demands from workers at the other two Ultium Cells plants in Tennessee and Michigan, which will be operational within a year, as well as in a joint plant with Stellantis scheduled to be built in Canada. LG either operates or is involved in the construction of a total of six joint EV battery plants in North America.

LG and GM’s settlement has pushed Samsung SDI and SK On, which are building five joint battery plants with the three US auto giants, into a tight spot. The two companies, however, are keeping a low profile on the matter.

“It’s too early to comment about the direct impact on our joint ventures (with GM and Stellantis) in the US. But we intend to respect the rights of the workers and carry out proper discussions with them,” said an official from Samsung SDI.

“The construction of the joint plants (with Ford) is still underway, so we cannot give any official comment (on labor issues). The company will closely monitor how the situation unfolds,” said an SK On official.

Industry insiders say that the battery plant workers’ demand for higher wages is posing a threat to Korean companies, who have invested in building production bases in North America, following the US’ Inflation Reduction Act.

“Strictly speaking, it’s unreasonable for the UAW to insist on giving the same wage increase to EV battery plant workers as to those in car manufacturing facilities. Battery production requires different manufacturing processes and expertise,” said a source close to the matter on condition of anonymity. “But we’re running out of options due to the talent shortage.”

Another source said, “Korean companies have forayed into the US to benefit from the IRA such as via EV tax credits. But wage increases inevitably burden battery makers’ business activities in the US.”

Experts say LG Energy Solution, Samsung SDI and SK On are highly likely to face cost burdens as LG and GM’s wage deal has set a high precedent for other potential labor negotiations.

“Korean battery makers should have anticipated the situation, knowing that the US EV tax credits are not a blank check,” said Park Cheol-wan, a car engineering professor at Seojeong University. “It’s like the US government is charging the bill through the labor union to give benefits to the workers and take part in bringing back a manufacturing boom there.”

Park said the IRA tax benefits will be not enough to cover battery plant workers’ wage increases. “The Advanced Manufacturing Production Credit by the IRA, which amounts to around 100 billion won ($75.8 million) for a Korean battery maker every quarter, will expire after 2025.” The AMPC is a tax credit for eligible renewable energy components produced in the US.

Kim Pil-su, a car engineering professor at Daelim University, echoed the view and said, “Although there is a question of whether granting equal welfare benefits between battery and auto manufacturing workers is fair, the US government will side with the UAW because of the upcoming presidential election next year. The labor union holds considerable power during the campaign.”