Exclusive - Documents Show General Motors Canceled Agreement with a Newly Established US Rare Earth Magnet Factory

Eric Onstad

Reuters London, October 22 - According to regulatory filings and a source familiar with the matter, General Motors GM.N, the largest customer of a U.S. plant that manufactures rare earth magnets for electric vehicles, has canceled a long-term supply agreement with the manufacturer, and the two parties are now in arbitration proceedings.

This move highlights the challenges faced by Western companies in building domestic rare earth capacity and reducing dependence on China—which currently produces about 90% of the world’s permanent magnets.

It also illustrates the changes in the U.S. automotive landscape since Donald Trump's return to the White House in 2025 and the reduction of federal support for electric vehicles (link).

Germany's Vacuumschmelze (VAC) signed a long-term agreement with General Motors (GM) in 2023 (link), to supply permanent magnets for GM’s electric vehicles from its new factory in South Carolina.

Energy Fuels UUUU.A agreed in June to pay $1.9 billion to acquire VAC (link). In a filing submitted to the U.S. Securities and Exchange Commission (SEC) last week, the company stated that a customer of the factory terminated its supply agreement on July 1 and that VAC initiated arbitration proceedings against the customer days later.

The company did not disclose the client’s name, but General Motors said in a filing to the SEC this week that an electric vehicle traction motor component supplier “initiated arbitration and is seeking compensation after we terminated a strategic sourcing agreement,” without stating the reason for the cancellation.

A source confirmed that General Motors was the customer who terminated the contract with e-VAC Magnetics, the U.S. subsidiary of VAC.

As arbitration is confidential, both General Motors and Energy Fuels declined to comment on the matter.

This dispute has not previously been reported by the media, and none of the parties involved have issued press releases.

VAC CEO Erik Eschen told Reuters last September (link) that VAC had launched a $500 million U.S. magnet factory by the end of last year, with an annual capacity just under 2,000 metric tons, 90% of which was intended for General Motors and the rest for the U.S. government.

“We’re not concerned about VAC’s business success or its ability to produce rare earth permanent magnets to customer specifications,” said Energy Fuels.

However, Energy Fuels told Reuters, “Depending on the outcome of the arbitration, the acquisition price for VAC may be adjusted.”

General Motors reduces electric vehicle sales

After the Trump administration revoked incentives and tax breaks designed to support the industry, General Motors (GM) has been scaling back sales of electric vehicles, as the business has historically operated at a loss.

In January this year, General Motors booked a $6 billion impairment charge (link) to write down some investments in electric vehicles. Three years ago, when General Motors and VAC announced the supply agreement, VAC said the factory would support General Motors for at least 10 years and provide parts for several vehicle models.

According to SEC filings, the dispute first emerged in April 2026. Energy Fuels stated that it was aware of the dispute while negotiating the acquisition of VAC.

As a producer of uranium for the nuclear power industry, Energy Fuels said the acquisition would make it one of the world’s largest non-China magnet manufacturers, with products widely used in aerospace, defense, and renewable energy sectors.

VAC supplies magnets to over 1,000 customers through factories in Germany, Malaysia, and other countries.

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