Ford is bringing back an EV battery plant in Michigan

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Ford CEO Jim Farley announces at a press conference that Ford Motor Company will partner with the world’s largest battery company, a China-based company called Contemporary Amperex Technology, to establish a to create an electric vehicle battery in Marshall, Michigan, on February 13, 2023 in Romulus, Michigan.

Bill Pugliano | Getty Images News | Getty Images

DETROIT – Ford Motor is scrapping plans for a $3.5 billion battery plant in Michigan as consumers shift to electric vehicles more slowly than expected, labor costs rise and the company moves to cut costs.

Ford executives including CEO Jim Farley and Chairman Bill Ford first announced the facility in February. He quickly became a political target because of his association with Chinese battery maker Contemporary Amperex Technology Co., or CATL. The plant is a wholly owned subsidiary of Ford, but the US automaker is licensing technology from CATL to produce lithium iron phosphate, or LFP, batteries for EVs.

Ford said Tuesday that it is cutting production capacity by about 43% to 20 gigawatt hours a year and reducing expected employment from 2,500 jobs to 1,700 jobs. The company declined to say how much it would invest in the plant. Based on the reduced capacity, it would still be about a $2 billion investment.

The decision adds to a recent pullback from EVs by automakers around the world. Demand for vehicles is lower than expected due to higher costs and challenges with supply chains and battery technologies, among other issues.

The reductions at the Marshall, Michigan plant are part of Ford’s plans announced last month to cut or delay about $12 billion in previously announced EV investments. The company will also halt construction of another electric vehicle battery plant in Kentucky.

Ford Motor Co. CEO Bill Ford announces that Ford Motor will partner with China-based Amperex Technology to build an all-electric vehicle battery plant in Marshall, Michigan, at a press conference in Romulus, Michigan, February 13, 2023.

Rebecca Cook | Reuters

“We looked at all the factors. These included demand and expected growth for EVs, our business plans, our product cycle plans, affordability and business to ensure we can have a sustainable business made out of this center,” Ford Chief Communications Officer Mark Truby said at a press conference. “After evaluating all that, we are now able to confirm that we are moving forward with the plant, although it is slightly smaller in size and scope than what we initially announced. “

Truby said the plant is still expected to open in 2026, even though the company halted production at the facility for about two months during a strike with the United Auto Workers. The talks ended last week when Ford-UAW workers ratified a contract that included a big wage increase and a path for the plant’s battery workers to be brought in. to the registration agreement, if organized by the union.

The UAW did not immediately respond to a request for comment.

The increase in labor costs was due to Ford’s decision to scale back the plans, according to Truby. Ford CFO John Lawler said last month that the new agreement would add $850 to $900 per vehicle collected in labor costs.

Lawler declined to estimate how much the deal, which runs through April 2028, will cost the company. Deutsche Bank estimated the increase over the terms of the deal to be $6.2 billion.

“We’re still very bullish on EVs and our EV strategy, but clearly, while there is growth, both in the US and around the world, clearly, the growth is not at the level that we and others have been anticipating,” Truby said. “We’re trying to be smart about this and how we move forward.”

The plant has received a political pushback from federal and local officials, including protests by residents in a rural Michigan city. US lawmakers have also sought to review the licensing agreement between Ford and CATL amid heightened tensions between the US and China.

Truby reiterated on Tuesday that the company still believes it is better business for the company and the US to license the technology instead of importing batteries from abroad. The plant is expected to be the first in the US to produce LFP batteries.

The lithium-ion phosphate, or LFP, batteries produced by the plant will replace lithium-ion or nickel cobalt manganese batteries, which Ford currently uses. The new batteries are expected to offer different benefits at a lower cost, and allow Ford to increase EV production and profit margins.

Ford, which is currently sourcing LFP batteries from CATL, continues Tesla in using LFP batteries in some of its vehicles in part to reduce the amount of cobalt needed to make battery cells and high-voltage battery packs.

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