Daijiworld Media Network - New York

New York, Oct 23: General Motors (GM), the largest customer of a US factory producing rare earth magnets for electric vehicles, has cancelled its long-term supply agreement with the manufacturer, triggering arbitration proceedings, according to regulatory filings and a person familiar with the matter.

The dispute highlights the challenges Western companies face in expanding domestic rare earth production and reducing dependence on China, which accounts for about 90 per cent of global permanent magnet production. It also reflects changes in the US automobile industry following President Donald Trump's return to the White House in 2025 and the withdrawal of federal support for electric vehicles.

Germany's Vacuumschmelze (VAC) signed a long-term agreement with GM in 2023 to supply permanent magnets for its electric vehicles from a new plant in South Carolina.

Energy Fuels, which agreed in June to acquire VAC for $1.9 billion, said in filings with the US Securities and Exchange Commission (SEC) last week that a customer terminated its supply agreement on July 1. VAC subsequently initiated arbitration proceedings against the customer.

Although Energy Fuels did not identify the customer, GM disclosed in its own SEC filing that a supplier of a component used in electric vehicle traction motors had initiated arbitration seeking damages after GM terminated a strategic sourcing agreement. A person familiar with the matter confirmed that GM was the customer that cancelled the contract with VAC's US subsidiary, e-VAC Magnetics.

GM and Energy Fuels declined to comment on the confidential arbitration proceedings.

VAC launched its $500-million US magnet plant late last year, with an annual production capacity of just under 2,000 metric tonnes. About 90 per cent of its output was expected to be supplied to GM, while the remainder was intended for the US government, VAC CEO Erik Eschen told Reuters in September 2025.

VAC's US unit is seeking damages through arbitration, alleging wrongful termination of the agreement.

Energy Fuels said it had no concerns about VAC's commercial prospects or its ability to manufacture rare earth permanent magnets to customer specifications. However, the company told Reuters that the purchase price for VAC could be adjusted depending on the outcome of the arbitration.

GM has been scaling back its electric vehicle sales amid mounting financial pressures and the withdrawal of incentives and tax breaks under the Trump administration. In January, the automaker announced a $6-billion charge to unwind some of its EV investments.

When GM and VAC announced their supply agreement in 2023, VAC said the South Carolina plant would support GM for at least 10 years and supply magnets for a wide range of vehicle models.
According to the SEC filings, the dispute first emerged in April 2026. Energy Fuels said it was aware of the disagreement while negotiating the acquisition of VAC.

Energy Fuels, a producer of uranium for the nuclear power industry, said the acquisition would position it among the world's largest non-Chinese producers of magnets used in the aerospace, defence and renewable energy sectors.

VAC supplies magnets to more than 1,000 customers through facilities in Germany, Malaysia and other countries.