Ford Pauses Work On Michigan Battery Factory

Something weird is going on in Michigan. In a statement on September 25, Ford said, “We are pausing work and limiting spending on construction on the Marshall project until we’re confident about our ability to competitively operate the plant.” The company has declined to give any specific reason for the decision, but added there are several things to consider. “We haven’t made any final decision about the planned investment there.”

This is the factory that involves a unique arrangement with CATL, the world’s largest battery manufacturer. There is a lot of animosity in the US against Chinese companies, which is why there are no cars from Chinese brands like Nio and Xpeng on American highways.

From Virginia To Michigan

Originally, the factory was slated to be built in Virginia, before governor Glenn Youngkin decided to play the “godless communists” card to protect his constituents from Chinese companies that want to buy up all the available real estate in America and turn the US into a vassal state dominated by the Chinese Communist Party.

Then the decision was made to build the factory in Michigan. To stifle any “yellow peril” concerns, the two companies came up with a novel business relationship unlike any between an automaker and a battery manufacturer anywhere in the world. Ford would own and operate the factory, but license the technology from CATL.

Ford & CATL Deal Two Years In The Making

That deal took two years of shuttle diplomacy by executive from both companies to get done. According to Autoblog, the companies began discussing the idea of building a battery factory in North America together in 2021. At the time, the idea that doing so would be controversial was the furthest thing on anyone’s mind.

Then Nancy Pelosi decided to visit Taiwan and everything changed. The deal that had been moving forward was suddenly put on indefinite hold. China was infuriated by her visit and made its displeasure known by stepping up naval and air operations in and around the Taiwan Strait.

In addition, the trade war between the US and China that began under the prior administration continued to sputter along, fueled by reports of slave labor conditions in some parts of China with large populations of Uyghur dissidents. Then earlier this year, a Chinese spy balloon made a long and widely condemned journey across America, further exacerbating tensions between the two countries.

Ford is primarily interested in the LFP technology that CATL has developed. Its iron batteries have set new standards for energy density, fast charging, and cold weather operation — three factors of great interest to Ford as it pursues its objective of transitioning to building electric cars and trucks. The $3.5 billion dollar factory was supposed to employ 2500 workers and begin production in 2026. Now it seems the deal is on shaky ground.

Where Does Ford Go From Here?

The absence of specific information is always an open invitation to speculation, and there has been plenty of that. Some have suggested that political opposition to the deal is what killed it. The arrangement was specifically designed to make the batteries produced by the factory eligible for the federal electric car tax credits provided by the Inflation Reduction Act.

Even though the agreement would not put any federal dollars directly into the pocket of a Chinese company, facts often take a back seat to xenophobia and demagoguery that is so popular in America today.

But that might not be it at all. As everyone knows, the United Auto Workers are on strike against all three major US automakers at the moment.The union is unhappy that the companies have been making record profits in the past several years. Executive compensation has exploded while hourly wages have declined. Adjusted for inflation, UAW members earn 30% less than they did in 2003.

The UAW is annoyed that the car companies — particularly Ford — have used the transition to electric cars as an excuse to invest in new factories in red states with laws that discourage union membership. Ford is building major new facilities in Tennessee and Kentucky — facilities that will be non-union when they are completed.

That has Shawn Fain, the head of the UAW today, plenty fired up. When told about the suspension of work on the Michigan factory, he called the decision by Ford, “a shameful, barely-veiled threat by Ford to cut jobs. Closing 65 plants over the last 20 years wasn’t enough for the Big Three, now they want to threaten us with closing plants that aren’t even open yet. We are simply asking for a just transition to electric vehicles and Ford is instead doubling down on their race to the bottom.”

Because the assembly of electric vehicles takes significantly less labor than building gasoline-powered vehicles, the union is concerned that the automakers’ plans to eventually shift to all-electric lineups will eventually mean more job losses and smaller paychecks. Job security, in fact, has become a major issue in the negotiations.

Just When Things Were Looking Good For Ford

Photo provided courtesy of Ford

The decision by Ford to suspend the plan to build a battery factory in Michigan at this time certainly seems to be directly connected to the current strike. That’s a bit odd, because there have been reports in the press that Ford has made more concessions to the union and the striking workers than have General Motors or Stellantis. This could be Ford’s way of sending a message to Shawn Fain and the UAW that the company has been pushed as far as it is willing to go and no further concessions will be forthcoming.

The strike has brought President Biden to Michigan to stand in solidarity with the striking workers. This is the first time a US president has walked a picket line in US history. Biden knows that union members helped him get elected and that he has to be a strong supporter of the UAW if he hopes to get re-elected in 2024.

Michigan Governor Gretchen Whitmer is doing her best to put a brave face on the situation. Reuters reports she said after the announcement of the so-called pause, “Ford has been clear that this is a pause, and we will continue to push for successful negotiations between the Big 3 and UAW so that Michiganders can get back to work doing what they do best.”

Creating A Just Transition

The UAW strike is a portend of things to come, as battery-powered vehicles and the addition of renewable energy resources combine to reduce the demand for fossil fuels. Entire industries may disappear over the next decade, which is bound to cause fear and consternation among those who work in those industries. The UAW is looking out for its members, but it is also putting social justice higher on the agenda for all workers.

No one knows at this point what the fate of the Michigan battery factory will be, but at least for now, CATL is wisely keeping its head down and its mouth shut, at least until the smoke clears. Ford will need those batteries for its electric cars and trucks, so it’s unlikely the Michigan factory is dead in the water. Right now, it appears to be a bargaining chip in the tussle between the union and the car companies. What happens from here is anybody’s guess.