Pardoned EcoPro founder tasked with overcoming battery industry slump

EcoPro founder and former Chairman Lee Dong-chae speaks during a groundbreaking ceremony for the company's cathode materials plant in Debrecen, Hungary, in this April 2023 photo. Courtesy of EcoPro

Expectations are rising that EcoPro will boost investments in the battery materials sector following the release of its founder from jail on Thursday, thanks to a special presidential pardon granted on the occasion of Aug. 15 Liberation Day.

Lee Dong-chae, the founder and former chairman of the company, was set free about a year and three months after he was sentenced to two years in prison last year on charges of insider trading in 2020 to 2021, which allowed him to make 1.1 billion won ($809,000) in illicit profits.

Although EcoPro has remained silent on the timing of his return to management, Lee is expected to resume overseeing the company’s operations soon to offset deteriorating earnings and falling stock prices of affiliates.

EcoPro, the group's holding company, reported a significant loss in the second quarter, with an operating loss of 54.6 billion won.

EcoPro BM, which produces cathode materials, saw a 96.6 percent year-on-year decrease in second-quarter operating profit to 3.9 billion won. EcoPro Materials, the group’s precursor production unit, shifted to red, posting a 3.7 billion won operating loss.

The stock prices of these companies also fell sharply during Lee's absence, prompting EcoPro CEO Song Ho-jun to apologize to shareholders at a general meeting in March.

“Following the founder’s pardon, all our employees will make every effort to secure future growth engines for the secondary battery business,” an EcoPro official said Tuesday.

Mayor Lee Kang-deok of Pohang, North Gyeongsang Province, where EcoPro affiliates operate factories, welcomed the pardon with anticipation that Lee's return will stimulate significant investments and job creation in the city.

“We expect EcoPro to play a major role in leading the global secondary battery market,” the mayor said Tuesday.

When the EcoPro founder was in jail, Pohang’s businesspeople and residents submitted petitions to the presidential office, requesting a special pardon for him.

Pohang hopes that he will spearhead EcoPro’s investment of over 2 trillion won in the city over the next five years, as the investment plan has been delayed due to the leadership vacuum at the company.

Cheongju in North Chungcheong Province, home to EcoPro’s headquarters, also expects the founder’s return to add momentum to a 300 billion won project to build an R&D center in the city.

However, it remains to be seen whether EcoPro will resume investments in the near future, considering the company’s recent decision to join the trend of battery firms slowing down expansions to cope with decelerating global demand for electric vehicles (EVs).

“We are considering lowering our production capacity in the medium to long run and slowing down our planned investments,” EcoPro BM Vice President Kim Jang-woo said during a conference call on second-quarter earnings, July 31.