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A close-up of an electric vehicle’s motor and mechanical components. General Motors’ cancellation of a long-term magnet supply agreement with VAC has triggered arbitration and added uncertainty to a proposed $1.9 billion acquisition.
GM Cancels Supply Deal With US Rare-Earth Magnet Plant
DETROIT — October 23, 2026
General Motors has cancelled a long-term agreement to buy rare-earth magnets from a new US factory built to supply components for electric vehicles, according to regulatory filings and a person familiar with the matter.
The decision has triggered an arbitration dispute between GM and the US unit of German magnet maker Vacuumschmelze, known as VAC. The dispute highlights the difficulties Western companies face as they try to expand domestic production of rare-earth magnets and reduce dependence on China, which accounts for about 90% of global permanent magnet production.
VAC signed a long-term supply agreement with GM in 2023 to provide permanent magnets for the automaker’s electric vehicles. The company opened its $500 million US factory in South Carolina late last year, with annual production capacity of just under 2,000 metric tons.
About 90% of the factory’s planned output was expected to go to GM, while the remaining production was intended for the US government, VAC Chief Executive Erik Eschen told Reuters in September 2025. The original agreement was designed to support GM for at least 10 years and cover a range of electric vehicle models.
Energy Fuels, a uranium producer that agreed in June to acquire VAC for $1.9 billion, disclosed in a filing with the US Securities and Exchange Commission that a customer terminated its supply agreement on July 1. VAC began arbitration proceedings several days later, according to the filing.
Although Energy Fuels did not identify the customer, GM separately disclosed that a supplier of a component used in electric vehicle traction motors had initiated arbitration against the automaker after it terminated a strategic sourcing agreement. A person familiar with the matter confirmed that GM was the customer involved in the VAC dispute.
VAC’s US unit is seeking damages, arguing that the contract was wrongfully terminated. GM and Energy Fuels declined to comment on the arbitration, citing its confidential nature.
Energy Fuels said it remained confident in VAC’s commercial prospects and its ability to manufacture rare-earth permanent magnets to customers’ specifications. However, the company also told Reuters that the final purchase price for VAC could be adjusted depending on the outcome of the arbitration.
The dispute first emerged in April 2026, according to regulatory documents. Energy Fuels said it knew about the issue while negotiating the acquisition.
The cancellation comes as GM reduces some of its electric vehicle investments. The automaker has faced a more difficult market following the Trump administration’s withdrawal of federal incentives and tax breaks intended to support the industry. In January, GM recorded a $6 billion charge related to unwinding some EV investments.
Energy Fuels expects the VAC acquisition to expand its position in the production of magnets used in aerospace, defence and renewable energy. VAC also supplies more than 1,000 customers through manufacturing facilities in Germany, Malaysia and other locations.
The outcome of the arbitration could affect the financial terms of the acquisition and the future commercial plans for the South Carolina factory. The regulatory filings do not establish the final outcome of the dispute or whether another buyer will replace GM as the plant’s main customer.
