The Zhitong Finance App learned that according to regulatory documents and information from people familiar with the matter, General Motors (GM.US) has cancelled a long-term supply agreement with an American rare earth permanent magnet manufacturer, and the two sides are currently in arbitration. The manufacturer produces permanent magnets for electric vehicles, and GM is the largest customer at its factory.
This incident highlights the challenges Western companies face in building local rare earth production capacity and reducing their dependence on China's supply. China produces about 90% of the world's permanent magnets. It also shows that the US auto industry landscape has changed since Donald Trump returned to the White House in 2025 and cut federal support for electric vehicles.
The agreement began in 2023 and was originally intended to be supplied for at least 10 years
Germany's Vacuumschmelze (VAC for short) signed a long-term agreement with GM in 2023 to supply permanent magnets for GM electric vehicles from a new plant in South Carolina. VAC said at the time that the plant would support GM for at least 10 years and supply a variety of models.
Permanent magnets are a key material for electric vehicle traction motors and other components. VAC launched its US magnet factory at the end of last year, with an investment of 500 million US dollars and an annual production capacity of just under 2,000 tons. VAC CEO Erik Eschen said in September last year that 90% of it was originally intended to be sold to GM, and the rest was supplied to the US government.
The customer terminated the agreement on July 1, and VAC initiated arbitration
Energy Fuels (UUU.US) agreed to buy VAC for $1.9 billion in June. The company stated in a filing with the US Securities and Exchange Commission (SEC) last week that a customer of the factory in question terminated the supply agreement on July 1, and VAC initiated arbitration proceedings against the customer a few days later. The file did not name the customer.
GM disclosed in SEC documents this week that an electric vehicle traction motor component supplier “initiated arbitration and sought damages against us” after the company terminated a strategic procurement agreement, but did not specify the reason for canceling the agreement.
People familiar with the matter confirmed to the media that the customer that cancelled the contract with VAC's US subsidiary e-VAC Magnetics was GM.
GM and Energy Fuels declined to comment. The dispute has not been previously reported, and the companies involved have not issued a press release. VAC's US subsidiary said it was seeking compensation through arbitration because the agreement was “wrongfully terminated.”
Energy Fuels: Not concerned about VAC's business prospects, but the purchase price may be adjusted
Energy Fuels is a company that produces uranium for the nuclear power industry. The company said that the acquisition of VAC will make it one of the world's largest producers of non-Chinese magnets, with products used in aerospace, defense and renewable energy. VAC has facilities in Germany, Malaysia and other places to supply magnets to more than 1,000 customers.
“We have no concerns about VAC's commercial success and its ability to produce rare earth permanent magnets to customer specifications,” Energy Fuels said. However, the company also stated that “our purchase price of VAC may be adjusted” based on the arbitration results. Energy Fuels also said it was aware of the dispute when it was negotiating the acquisition of VAC.
GM cuts electric vehicle business
This incident also reflects changes in the US auto industry landscape. GM has been cutting back electric vehicle sales since Trump returned to the White House in 2025 and cut federal support for electric vehicles. Its electric vehicle business is in a state of loss.
In January of this year, GM charged 6 billion US dollars to reduce investment in some electric vehicles.
According to SEC documents, the dispute first surfaced in April 2026. The outcome of the arbitration and the specific reasons for GM's cancellation of the agreement are unclear.