GM locked in arbitration with VAC after ending rare-earth magnet supply deal

General Motors (GM) has scrapped a long-term supply deal with a U.S. factory that manufactures rare-earth magnets and the two sides are in arbitration, Reuters reported, citing a person with knowledge of the matter.

German firm Vacuumschmelze (VAC) inked a long-term deal with GM (GM) in 2023 to supply permanent magnets for ⁠electric vehicles from a new plant in South Carolina.

American rare earths producer Energy Fuels (UUUU), which agreed to acquire VAC in ‌a $1.9B deal this year, last week disclosed that a customer terminated its supply deal with VAC on July 1. It did not mention the customer's name.

Energy Fuels (UUUU) said VAC launched ​arbitration proceedings, seeking payments the customer is obligated to make over the remaining life of the supply deal. "Given the early stage and ongoing nature of the proceedings, the ultimate outcome remains uncertain," it added.

"In July, a supplier of a component for EV traction motors initiated an arbitration against us seeking damages after we terminated a strategic sourcing agreement," GM (GM) disclosed. "At this time, we are unable to estimate any reasonably possible material loss or range of loss for these matters."

A source confirmed to Reuters that GM (GM) was the customer that canceled the supply deal with VAC's U.S. unit e-VAC Magnetics.

Energy Fuels (UUUU) last week amended its acquisition terms for VAC, citing the customer dispute, which it said "represents a substantial component of e-VAC Magnetics' expected future revenues and operating plans."

There ⁠may be "potential adjustments to our purchase price of VAC depending on the outcome of the arbitration," Energy Fuels told Reuters.