- Ford scales back plans to build a $3.5 billion battery plant in Michigan as consumers shift more slowly than expected to electric vehicles, labor costs rise and the company strives to reduce costs.
- Ford announced the facility in February. It quickly became a political target because of a licensing deal with Chinese battery maker Contemporary Amperex Technology Co., or CATL.
- The company announced Tuesday that it would reduce its production capacity by about 43% to 20 gigawatt hours per year and reduce planned employment from 2,500 to 1,700 jobs.
Ford CEO Jim Farley announces at a press conference that Ford Motor Company will partner with the world’s largest battery maker, a China-based company called Contemporary Amperex Technology, to create a battery factory for electric vehicles in Marshall, Michigan, on February 13. 2023 in Romulus, Michigan.
Bill Pugliano | Getty Images News | Getty Images
DETROIT – Ford Motor scales back plans to build a $3.5 billion battery plant in Michigan as consumers shift more slowly than expected to electric vehicles, labor costs rise are increasing and the company is trying to reduce its costs.
Ford executives, including CEO Jim Farley and Chairman Bill Ford, initially announced the facility in February. It quickly became a political target because of its ties to Chinese battery maker Contemporary Amperex Technology Co., or CATL. The plant is a wholly-owned subsidiary of Ford, but the U.S. automaker obtains a technology license from CATL to produce new lithium iron phosphate, or LFP, batteries for electric vehicles.
Ford announced Tuesday that it would reduce production capacity by about 43% to 20 gigawatt hours per year and reduce planned employment from 2,500 to 1,700 jobs. The company declined to disclose how much less it would invest in the factory. Given the reduced capacity, this would still represent an investment of around $2 billion.
The move comes on top of the recent move away from electric vehicles by automakers around the world. Demand for these vehicles is lower than expected due to, among other things, higher costs and challenges with supply chains and battery technologies.
The cuts at the Marshall, Michigan, plant are part of Ford’s plans announced last month to reduce or delay previously announced investments in electric vehicles by about $12 billion. The company will also postpone the construction of another electric vehicle battery factory in Kentucky.
“We looked at all factors. These included the demand and expected growth of electric vehicles, our business plans, our product cycle plans, affordability and business to ensure we can make this factory a sustainable business,” the Ford chief said. » said communications manager Mark Truby during a press briefing. “Having evaluated all of this, we are now able to confirm that we are moving forward with the factory, albeit in a slightly smaller size and scope than initially announced.”
Ford Motor Co. Chief Executive Bill Ford announces that Ford Motor will partner with China’s Amperex Technology to build an all-electric vehicle battery plant in Marshall, Mich., during a news conference in Romulus, Michigan, February 13, 2023.
Rebecca Cook | Reuters
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 labor negotiations with the United Auto Workers. The talks ended last week when Ford-UAW workers ratified a deal that included significant wage increases and a chance for the plant’s battery workers to be included in the record deal, according to Reuters. it was organized by the union.
The UAW did not immediately respond to a request for comment.
According to Truby, rising labor costs factored into Ford’s decision to scale back projects. Ford Chief Financial Officer John Lawler said last month that the new deal would add $850 to $900 per assembled vehicle to labor costs.
Lawler declined to estimate how much the deal, which runs through April 2028, would cost the company. Deutsche Bank estimated the increase at $6.2 billion over the life of the deal.
“We are still very optimistic about electric vehicles and our electric vehicle strategy, but it is clear that while there is growth, both in the United States and globally, the growth is not is clearly not at the pace that we and others expected,” Truby said. . “We’re trying to be smart about it and how we move forward.”
The plant has faced political retaliation from federal and local authorities, including protests from residents of the rural Michigan town. US lawmakers have also sought to review the licensing agreement between Ford and CATL amid heightened tensions between the US and China.
Truby reiterated Tuesday that the company still believes it is more beneficial for it and the United States to license the technology rather than import batteries from abroad. The factory is expected to be the first in the United States to produce LFP batteries.
The lithium iron phosphate, or LFP, batteries that the plant produces will be deployed in place of the more expensive lithium-ion or nickel-cobalt-manganese batteries that Ford currently uses. The new batteries are expected to offer different benefits at lower costs, allowing Ford to increase electric vehicle production and profit margins.
Ford, which currently sources LFP batteries from CATL, follows Tesla in using LFP batteries in some of its vehicles, in part to reduce the amount of cobalt needed to make high-speed battery cells and battery packs. tension.
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