GM cancels long-term rare earth permanent magnet supply agreement in the US; supplier initiates arbitration

According to Zhitong Finance APP, regulatory filings and sources reveal that General Motors (GM.US) has canceled a long-term supply agreement with a US rare earth permanent magnet manufacturer, and both parties are currently in arbitration. This manufacturer produces permanent magnets for electric vehicles, and General Motors is the largest customer of its factory.

This incident highlights the challenges Western companies face in establishing local rare earth production capacity and reducing dependence on Chinese supplies. China produces about 90% of the world's permanent magnets. It also indicates that the landscape of the US auto industry 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 supply for at least 10 years

German company Vacuumschmelze (VAC) signed a long-term agreement with General Motors in 2023, planning to supply permanent magnets for GM’s electric vehicles from a new factory in South Carolina. At the time, VAC stated that the plant would support General Motors for at least 10 years and supply multiple vehicle models.

Permanent magnets are a key material for components such as electric vehicle traction motors. VAC launched its US magnet factory at the end of last year, investing $500 million, with an annual production capacity slightly below 2,000 tons. In September last year, VAC CEO Erik Eschen stated that 90% of this output was originally planned for General Motors, with the rest supplied to the US government.

Customer terminated the agreement on July 1, VAC initiated arbitration

In June, Energy Fuels (UUUU.US) agreed to acquire VAC for $1.9 billion. In a filing with the US Securities and Exchange Commission (SEC) last week, the company said that a customer of the above factory terminated a supply agreement on July 1, and VAC initiated arbitration proceedings against the customer a few days later. The filing did not specify the name of the customer.

This week, General Motors disclosed in an SEC filing that an electric vehicle traction motor component supplier "initiated arbitration against us and is seeking damages" after the company terminated a strategic procurement agreement, but did not state the reason for the contract cancellation.

Sources confirmed to the media that the customer that canceled the contract with VAC’s US subsidiary e-VAC Magnetics is General Motors.

Both General Motors and Energy Fuels declined to comment. The dispute had not previously been reported, and neither company issued a press release. VAC’s US subsidiary stated that due to the “improper termination” of the agreement, it is seeking compensation through arbitration.

Energy Fuels: No concerns about VAC’s business prospects, but acquisition price may be adjusted

Energy Fuels is a company that produces uranium for the nuclear power industry. The company stated that the acquisition of VAC will make it one of the world’s largest non-Chinese magnet producers, supplying products used in aerospace, defense, and renewable energy. VAC has facilities in Germany, Malaysia, and other locations, and supplies magnets to more than 1,000 customers.

Energy Fuels stated: “We have no concerns about VAC’s business success and its ability to manufacture rare earth permanent magnets to customer specifications.” However, the company also noted that depending on the outcome of the arbitration, “the acquisition price for VAC may be subject to adjustment.” Energy Fuels also said it was aware of this dispute during acquisition negotiations with VAC.

General Motors scales back electric vehicle business

This incident also reflects changes in the US auto industry landscape. Since Donald Trump returned to the White House in 2025 and cut federal support for electric vehicles, General Motors has been scaling back electric vehicle sales. Its EV business remains unprofitable.

In January this year, General Motors set aside $6 billion in provisions to shrink certain EV investments.

According to SEC filings, the dispute first surfaced in April 2026. The result of the arbitration and the specific reason for General Motors’ cancellation of the contract remain unclear.