- Ford is scaling back 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 seeks cost cuts.
- Ford announced the facility in February. Through a license agreement with the Chinese battery manufacturer Contemporary Amperex Technology Co., or CATL for short, it quickly became a political goal.
- The company said Tuesday it would cut production capacity by about 43% to 20 gigawatt hours per year and reduce expected employment from 2,500 to 1,700 jobs.
Ford CEO Jim Farley announces at a press conference that on February 13, Ford Motor Company will partner with the world’s largest battery maker, a China-based company called Contemporary Amperex Technology, to build an electric vehicle battery plant in Marshall, Michigan to build. 2023 in Romulus, Michigan.
Bill Pugliano | Getty Images News | Getty Images
DETROIT (AP) — Ford Motor is scaling back 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 seeks cost cuts.
Ford executives, including CEO Jim Farley and Chairman Bill Ford, first announced the facility in February. It quickly became a political target because of its connection to Chinese battery manufacturer 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 new lithium iron phosphate (LFP) batteries for electric vehicles.
Ford said Tuesday it would cut production capacity by about 43% to 20 gigawatt hours per year and reduce expected employment from 2,500 to 1,700 jobs. The company declined to disclose how much less it would invest in the facility. Based on the reduced capacity, it would still be an investment of about $2 billion.
The decision adds to the recent retreat of electric vehicles by automakers worldwide. Demand for the vehicles is lower than expected, including due to higher costs and challenges with supply chains and battery technologies.
Cuts at the Marshall, Michigan, plant are part of Ford’s plans announced last month to cut or delay about $12 billion in previously announced investments in electric vehicles. The company will also delay construction of another electric vehicle battery plant in Kentucky.
“We looked at all the factors. “That included the demand and expected growth for electric vehicles, our business plans, our product cycle plans, affordability and the business to ensure we can make this plant a sustainable business,” Ford chief communications officer Mark Truby said during a media briefing. “Having assessed all of this, we can now confirm that we are moving forward with the facility, albeit at a slightly smaller size and scale than originally announced.”
Bill Ford, chairman of Ford Motor Co., announces that Ford Motor will partner with Chinese company Amperex Technology to build an all-electric vehicle battery plant in Marshall, Michigan, during a news conference on February 13, 2023 in Romulus, Michigan build.
Rebecca Cook | Portal
Truby said the plant is still expected to open in 2026, although the company halted production at the facility for about two months during collective bargaining negotiations with the United Auto Workers. Talks ended last week when Ford-UAW employees ratified an agreement that included significant wage increases and a possibility to include battery workers at the plant in the record deal if organized by the union.
The UAW did not immediately respond to a request for comment.
Truby said increased labor costs were a factor in Ford’s decision to scale back plans. Ford Chief Financial Officer John Lawler said last month that the new deal would increase labor costs by $850 to $900 per vehicle assembled.
Lawler declined to estimate how much the deal, which runs through April 2028, will cost the company. Deutsche Bank estimated the increase over the life of the agreement at $6.2 billion.
“We are still very optimistic about electric vehicles and our electric vehicle strategy, but while there is growth, both in the U.S. and globally, the growth is obviously not at the pace that we and others had expected,” Truby said . “We’re trying to be smart about this and how we move forward.”
The plant has faced political opposition from federal and local officials, including protests from residents of the rural Michigan town. Amid rising tensions between the U.S. and China, U.S. lawmakers have also sought to review the licensing agreement between Ford and CATL.
Truby reiterated Tuesday that the company still believes it is a better deal for the company and the U.S. to license the technology rather than import batteries from overseas. The factory is expected to be the first in the United States to produce LFP batteries.
Lithium iron phosphate (LFP) batteries that the plant will produce will replace the more expensive lithium-ion or nickel-cobalt-manganese batteries that Ford currently uses. The new batteries are expected to provide various benefits at lower costs and allow Ford to increase electric vehicle production and profit margins.
Ford, which currently sources LFP batteries from CATL, is following Tesla in using LFP batteries in a portion of its vehicles, in part to reduce the amount of cobalt needed to make battery cells and high-voltage battery packs.