GM Did Not Cancel a Magnet Plant. It Canceled the Contract That Made 90% of It Sellable

The facts are unusually clean because two companies filed them separately and neither named the other. General Motors terminated its long-term magnet supply agreement with eVAC Magnetics, Vacuumschmelze's South Carolina subsidiary, effective July 1, 2026, and disclosed in its third-quarter Form 10-Q that a supplier of a component for EV traction motors has begun arbitration against it seeking damages after GM terminated a strategic sourcing agreement. Energy Fuels' Form 8-K adds the detail GM did not give: the dispute with eVAC began in April 2026, termination was served on July 1, arbitration opened on July 7, and eVAC wants a declaration that the termination was wrongful plus payments owed over the remaining life of the agreement. Energy Fuels has booked a customer-specific expected credit loss allowance and legal expenses against it, and has told Reuters it was aware of the dispute while it was negotiating to buy Vacuumschmelze.

Scale does the explaining. Vacuumschmelze sized Sumter at 2,000 tonnes a year and sold 90% of it to GM under a 2023 agreement struck when GM was planning a decade of Ultium electric vehicles. The magnets-per-motor conversion is disclosed by MP Materials itself: its Fort Worth line, announced in December 2021, was rated at about 1,000 tonnes a year, enough for roughly 500,000 EV motors. Applied to the 1,800 tonnes GM had booked at Sumter, that implies capacity for about 900,000 motors a year. GM sold 25,473 electric vehicles in the United States in the third quarter of 2026, an annualised pace near 102,000 vehicles, and 82,152 over nine months, down 43.2%. The cancelled volume was worth roughly nine years of GM's current US electric vehicle output.

Every layer of public support in this chain stops one step short of the customer. The Defense Department of War guarantees the 10X magnet campus at least $140 million of annual EBITDA, subject to escalation, and is obliged to purchase every magnet the plant produces. The 2025 defense agreements also set a $110 per kilogram floor for NdPr oxide, alongside $2,050 for terbium and $575 for dysprosium, levels two to five times Chinese spot prices. Development Finance Corporation money has gone upstream: $565 million to Serra Verde in Brazil, up to $4.84 million for Harena's Madagascar project, and a Defense Department commitment of $750 million for Serra Verde's mixed rare-earth carbonates, with offtake control attached to the loan. Washington's money guarantees the price of the ore and the margin of the factory, never the customer's order book.

The arithmetic punishes the converter. A magnet maker buys NdPr at the floor — MP Materials expects to realise high-$90s per kilogram plus about $10 of price protection, against a market near $110 — and then has to sell a sintered magnet into a market where China supplies about 90% of global output and the automaker can switch. A floor on the input makes the Western magnet more expensive to make, not more likely to be bought. The Defense Logistics Agency's parallel sole-source magnet-block awards to eVAC and Noveon Magnetics were $12.9 million each: a $25.8 million order book against a plant that just lost 1,800 tonnes a year of committed volume.

Energy Fuels agreed on June 22, 2026 to buy Vacuumschmelze for an implied $1.9 billion of equity — $718 million in cash, 65.853 million newly issued shares and a possible preferred issue — with closing expected in early 2027 subject to regulatory approvals. The price exceeds the buyer's total assets of $1.53 billion and is 2.4 times its book equity of $797 million. On October 13 the parties amended the merger agreement to add a purchase-price adjustment tied to the outcome of the customer dispute and a repayment tied to eVAC's credit agreement. Sumter, the plant at the centre of the dispute, was expected by the buyer to generate $65 million to $75 million of annual run-rate EBITDA at its current 2,000 tonnes a year, with roughly $400 million the prize at 12,000 tonnes. Vacuumschmelze's legacy European business generated $29 million of adjusted EBITDA in 2025.

GM did not switch to Chinese magnets to save money in this case; it switched because the volume was not there. But the option to switch is what made the American plant optional rather than obligatory, and that option is priced in Beijing. The suspension of China's extraterritorial export licensing for rare-earth magnets expires on November 10, 2026. Meanwhile the pause is being converted into managed access: an October 9 pact gives the European Union a green channel for magnet licences, and the Ministry of Commerce formalised managed-access licensing for European buyers on October 13. The West's magnet capacity competes with a supplier whose access rules can be rewritten in an afternoon, and the demand-side failure at Sumter is what gives that lever its weight.

The magnet contract is one of two supply disputes General Motors disclosed for its EV programme: in June 2026 GM filed arbitration against a battery material joint venture partner seeking to terminate a supply agreement, and in July a traction motor component supplier began arbitration against GM. Around the same stretch GM sold its roughly 50% stake in an Indiana battery venture to Samsung SDI and restarted its Ohio cell plant with LG Energy Solution after a seven-month shutdown. GM is unwinding fixed supply commitments across the chain, and its partners are left holding the residual. The Korean node in the magnet chain itself is metallisation, not cells: ASM's Korean metals plant, now inside the perimeter Energy Fuels is buying, is expected to take roughly 70% of its feedstock from Energy Fuels' White Mesa mill and to supply the alloy behind all 2,000 tonnes a year of Sumter's magnet capacity. So a plant in Korea feeds a plant in South Carolina that has just lost its customer in Michigan.

Three dates decide the next two quarters. The eVAC arbitration, where GM says it cannot estimate a reasonably possible loss and eVAC wants payment for the remaining life of a contract signed in 2023. Energy Fuels' third-quarter accounts, which carry the first full mark on the Vacuumschmelze purchase and the customer-specific credit loss allowance already taken. And November 10, when China's licensing pause expires and Western magnet inventories either get replenished on tolerable terms or do not.