Report: General Motors Company (GM.US) Cancels Long-Term U.S. Rare Earth Permanent Magnet Supply Agreement; Supplier Initiates Arbitration

According to regulatory filings and people familiar with the matter, General Motors Company (GM.US) has canceled a long-term supply agreement with a U.S. rare earth permanent magnet manufacturer, and the two sides are currently in arbitration. The manufacturer produces permanent magnets for electric vehicles, and General Motors Company is the largest customer of its plant. The matter highlights the challenges Western companies face in building domestic rare earth capacity and reducing dependence on Chinese supply. China produces about 90% of the world's permanent magnets. It also shows that the landscape of America's Car-Mart, Inc. industry has changed since Donald Trump returned to the White House in 2025 and cut federal support for electric vehicles. Agreement began in 2023, was originally set to supply for at least 10 years Germany's Vacuumschmelze (VAC) signed a long-term agreement with General Motors Company in 2023, planning to supply permanent magnets for General Motors Company electric vehicles from a new plant in South Carolina. VAC said at the time that the plant would support General Motors Company for at least 10 years and supply multiple models. Permanent magnets are a key material for components such as electric vehicle traction motors. VAC launched its U.S. magnet plant at the end of last year, with an investment of $500 million and an annual capacity of slightly less than 2,000 tons. VAC Chief Executive Erik Eschen said last September that 90% of that was originally intended for General Motors Company, with the remainder supplying the U.S. government. Customer terminated agreement on July 1, VAC initiated arbitration Energy Fuels (UUUU.US) agreed in June to acquire VAC for $1.9 billion. The company said in a filing with the U.S. Securities and Exchange Commission (SEC) last week that a customer of the plant terminated the supply agreement on July 1, and VAC initiated arbitration proceedings against that customer several days later. The filing did not name the customer. General Motors Company disclosed in an SEC filing this week that a supplier of electric vehicle traction motor components "initiated arbitration against us and is seeking damages" after the company terminated a strategic sourcing agreement, but did not specify the reason for canceling the agreement. People familiar with the matter confirmed to the media that the customer that canceled the contract with VAC's U.S. subsidiary e-VAC Magnetics was indeed General Motors Company. Both General Motors Company and Energy Fuels declined to comment. The dispute had not been previously reported, and the companies involved did not issue press releases. VAC's U.S. subsidiary said it is seeking damages through arbitration because the agreement was "improperly terminated." Energy Fuels: Not concerned about VAC's commercial prospects, but acquisition price may be adjusted Energy Fuels is a company that produces uranium for the nuclear power industry. The company said acquiring VAC will make it one of the world's largest non-Chinese magnet producers, with products used in aerospace, defense and renewable energy sectors. VAC has facilities in Germany, Malaysia and elsewhere, supplying magnets to more than 1,000 customers. Energy Fuels said: "We have no concerns about VAC's commercial success and its ability to produce rare earth permanent magnets to customer specifications." But the company also said that depending on the arbitration outcome, "there may be an adjustment to our acquisition price for VAC." Energy Fuels also said it was aware of the dispute when negotiating the acquisition of VAC. General Motors Company scales back EV business The matter also reflects changes in the landscape of America's Car-Mart, Inc. industry. Since Trump returned to the White House in 2025 and cut federal support for electric vehicles, General Motors Company has been scaling back EV sales. Its EV business is loss-making. In January this year, General Motors Company recorded a $6 billion charge to scale back some EV investments. According to SEC filings, the dispute first emerged in April 2026. The arbitration outcome and the specific reason for General Motors Company canceling the agreement remain unclear.