LONDON: General Motors (GM), the biggest customer of a US factory making rare earth magnets for electric vehicles (EVs), cancelled its long-term supply deal with the manufacturer, and the two sides are in arbitration, according to regulatory documents and a person with knowledge of the situation.
The move spotlights the challenges Western firms face in building domestic rare-earths output and cutting their reliance on China, which produces about 90% of global permanent magnets.
It also shows how the US auto industry's landscape has changed since Donald Trump returned to the White House in 2025 and cut federal support for EVs.
Germany's Vacuumschmelze, or VAC, signed a long-term deal in 2023 with GM to supply permanent magnets for its EVs from a new plant in South Carolina.
Energy Fuels, which agreed in June to pay US$1.9 billion to acquire VAC, said in US Securities and Exchange Commission documents filed last week that a customer of the plant terminated its supply agreement on July 1, and VAC launched arbitration proceedings against that customer several days later.
It did not name the customer, but GM this week reported in an SEC filing that a supplier of a component for EV traction motors "initiated an arbitration against us seeking damages after we terminated a strategic sourcing agreement," without saying why it cancelled the deal.
The person familiar with the matter confirmed GM was the customer that cancelled the contract with VAC's US unit, e-VAC Magnetics.
GM and Energy Fuels declined to comment on the arbitration because it is confidential.
The dispute has not been previously reported and none of the companies involved have issued press releases about the issue.
VAC launched its US$500-million US magnet plant late last year with a capacity of just under 2,000 metric tonnes a year, and 90% was set to be sold to GM, with the remainder supplying the US government, VAC CEO Erik Eschen told Reuters in September last year.
VAC's US unit said it was seeking damages in arbitration due to wrongful termination.
"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, Energy Fuels told Reuters there may be "potential adjustments to our purchase price of VAC depending on the outcome of the arbitration".
GM rolls back EV sales
GM has been pulling back on sales of EVs, which historically have lost money, following the Trump administration’s withdrawal of incentives and tax breaks meant to benefit the industry.
In January, GM took a US$6 billion charge to unwind some EV investments.
When GM and VAC announced the supply deal three years ago, VAC said the plant would support GM for a minimum of 10 years and supply a wide range of models.
The dispute first arose in April 2026, according to the SEC documents. Energy Fuels said it was aware of the dispute when it was negotiating the VAC acquisition.
Energy Fuels, a producer of uranium for the nuclear power industry, said the takeover would allow it to become one of 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, from facilities in Germany, Malaysia and other countries.