General Motors has cancelled its long-term supply agreement with a brand-new rare-earth magnet plant in Sumter County, South Carolina, and the two sides are now locked in arbitration over the fallout. The factory, built by Vacuumschmelze (VAC) through its U.S. unit e-VAC Magnetics, was designed around GM as its anchor customer, with the automaker expected to buy up the vast majority of the plant's output for electric-vehicle motors.
A Deal Built Around GM, Now Unraveling
According to Reuters, GM was described as the biggest customer of a U.S. factory making rare-earth magnets for electric vehicles, and the cancellation has pushed both companies into arbitration. VAC signed its long-term deal with GM back in 2023 to supply permanent magnets for electric vehicles out of the then-new South Carolina plant, according to marketscreener.com. Under that arrangement, 90% of the plant's output was set to go to GM, with the remainder earmarked for the U.S. government, per the same report.
The plant, operated by e-VAC Magnetics, opened with real momentum. South Carolina's commerce department announced the Sumter County facility as a more than half-a-billion-dollar investment expected to create 300 new jobs, according to the South Carolina Department of Commerce. The U.S. Department of Defense also agreed to chip in $94.1 million for equipment, infrastructure and production-line development at the site, the commerce department noted. VAC shipped its first neodymium-iron-boron permanent magnets from the plant on December 12, 2025, according to a company announcement from eVAC Magnetics.
Dispute Traces Back to Spring, Surfaced in Summer Filings
The dispute first arose in April 2026, per marketscreener.com's reporting, and e-VAC's U.S. unit says it is seeking damages in arbitration over what it characterizes as a wrongful termination. Energy Fuels, which had agreed to acquire VAC, disclosed that a customer of the plant terminated its supply agreement on July 1, and that VAC launched arbitration proceedings against that customer within days, the outlet reported.
The timing matters because Energy Fuels was in the process of closing a roughly $1.9 billion deal to acquire all of VAC. The company announced in a June 2026 release that it had reached a definitive agreement to acquire 100% of Vacuumschmelze GmbH & Co. KG, calling it a move that would make Energy Fuels one of the world's largest non-Chinese magnet producers, according to its own investor announcement. That same filing described the Sumter, South Carolina facility as having capacity to produce 2,000 tonnes per annum, a figure marketscreener.com's reporting put at just under 2,000 metric tons a year. Energy Fuels has said the purchase price it pays for VAC could be adjusted depending on how the arbitration ultimately resolves, per the outlet's reporting.
Why GM Pulled Back
GM has been pulling back on EV sales after the Trump administration withdrew industry incentives and tax breaks, the same report notes. The automaker took a $6 billion charge in January 2026 to unwind some of its electric-vehicle investments, according to the outlet's reporting. Those pressures sit alongside GM's broader push to diversify its magnet supply: the automaker entered a separate long-term agreement with MP Materials back in 2021 to develop a domestic source of automotive-grade permanent magnets, becoming the foundational customer for MP's Independence facility in Fort Worth, Texas, according to General Motors.
Both GM and Energy Fuels have declined to comment on the confidential arbitration, the reporting states. VAC supplies magnets to more than 1,000 customers worldwide and operates facilities in Germany, Malaysia and other countries beyond its new South Carolina plant.
A Supply Chain Still Dominated by China
The standoff plays out against a market where China produces about 90% of the world's permanent magnets, a dominance that has pushed Western governments and automakers to fund domestic alternatives. The International Energy Agency has found that China accounts for nearly 60% of global rare-earth mining and more than 90% of magnet manufacturing, according to CNBC. That outlet reports U.S. rare-earth magnet capacity is on track to grow nearly sixfold by 2036, while European production is forecast to grow 3.1 times over the same stretch.
Other federal bets on the sector underscore how much money is flowing into the push to compete with Beijing. Vulcan Elements recently received a $620 million direct federal loan from the Department of Defense to support domestic magnet production, CNBC reported, while Neo Performance Materials has said its Estonian factory is on track to produce 2,000 metric tons of rare-earth magnets this year before scaling toward 5,000 tons and beyond. For VAC and e-VAC Magnetics, though, the immediate question is narrower: what happens to a plant built around a single customer that has now walked away.
