LG and Magna’s joint venture has rocky start
Negotiation over plan delays formation
LG Electronics and Magna International’s joint venture plan is having a rocky start over the pair’s difference over strategy and equity price.
LG Magna e-Powertrain was suppose to from by July 9 after LG Electronics’ approved the split of its auto-component business unit on July 1.
Magna was announced to be acquiring 49% of the split off business unit for US$453 million.
But the process has been delayed for three weeks. The plan is going through however and the joint venture will be formed this week at the earliest.
The delay was mainly caused by Magna International’s later than expected finalization of the equity investment plan, people familiar with the matter said.
By contrast, LG already named the first CEO of LG Magna e-Powertrain in early July as Jung Won-seok, who previous was the head of of green business of LG Electronics’ vehicle solution (VS) business.
People familiar with the matter said Magna had disagreements over the acquisition price of its stakes in the joint venture.
Magna also wants to expand the e-powertrain business in China, while LG wants to go in a different direction, they said.
An analyst at a local security firm, who declined to be named due to the sensitivity of the issue, said analysts found it odd that LG Electronics, after turning in its merger report related to the joint venture to local financial authorities on July 1, made no efforts to communicate with the market.
As LG Electronics doesn’t have a strong footing in the auto-component market, Magna is likely attempting to lead the venture over the South Korean firm, they said.
A spokesperson for LG Electronics investor relations said the company was focused on its second quarter earnings report planned for July 29 and has no plan yet to hold an investors event over LG Magna e-Powertrain for the time being.
The company will however actively communicate with the market on the status and progress of its auto-component business as well as LG Magna e-Powertrain going forward, they added.