Highlights
- In 1995, GM sold Magnequench to a Chinese-linked entity, giving China control over 85% of key magnetic materials used in precision-guided munitions.
- China now controls the entire rare earth magnet supply chain, impacting military systems, EV production, and critical technological infrastructure.
- The U.S. industrial strategic advantage has been dismantled through short-term thinking, potentially compromising national defense capabilities.
A gripping exposé by Michael Dunne has reignited outrage over a pivotal moment of U.S. industrial surrender: the 1995 sale of General Motors’ rare earth magnet subsidiary, Magnequench (opens in a new tab), to a Chinese state-linked entity disguised as an American investment group. Despite warnings from Pentagon officials, the deal—brokered for just $56 million—gave China control over 85% of key magnetic materials used in U.S. precision-guided munitions.
Fast forward to 2025: While Americans cheered the B-2 stealth bomber strike over Iran this month, few realized those aircraft, and the missiles they carry, are now reliant on permanent magnets sourced from China. “The U.S. cannot produce a single guided missile without China’s permission,” Dunne warns. The dependency is no longer theoretical—it’s an active national security crisis.
In May, Beijing abruptly halted exports of rare earth magnets. Ford shut down EV production lines. German manufacturers panicked. Magnosphere CEO Frank Eckard captured the moment: “The whole car industry is in full panic… they are willing to pay any price.”
This isn’t about price—it’s about power. China controls the supply chain for mining, refining, and magnet production. Meanwhile, the U.S., once a rare earth titan, has dismantled its strategic advantage through short-term thinking, environmental complacency, and an addiction to offshoring.
The implications go far beyond cars and consumer goods. Rare earth magnets are embedded in F-35 fighter jets, hypersonic missiles, submarine sonar arrays, and classified defense systems. Without them, American deterrence falters.
Rare Earth Exchanges Editorial Note:
Dunne’s piece is factual, well-sourced, and historically accurate. His warnings echo what REEx has long emphasized: without a cradle-to-factory-to-arsenal U.S. rare earth magnet strategy, America remains strategically leashed to its rival.
RARE EARTH EXCHANGES™ BIAS METER
| Claim Clarity | Financial Transparency | Detail Risk Disclosure | Investor Usefulness |
| High | Medium | High | High |
Source: Michael Dunne, The Magnequench Betrayal (Dunne Insights Substack (opens in a new tab))
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