Ford Motor has decided to halt the construction of a $3.5 billion battery plant located in Marshall, Michigan, where it initially intended to produce cost-effective battery cells using technology from a Chinese battery manufacturer.
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The U.S. automaker announced on Monday that it is suspending construction and curtailing spending on the facility until it can ensure competitive operation. This immediate stoppage does not constitute a final decision regarding their planned investment.
This unconventional decision by Ford comes amidst months of scrutiny from lawmakers concerning its collaboration with the Chinese battery-maker, Contemporary Amperex Technology Co. Ltd. (CATL). It is worth noting that Ford would have owned and operated the plant.
Multiple House committees, led by Republicans, have initiated investigations into this deal and the proposed project, arguing that it might lead to Chinese dominance in the U.S. automotive industry.
Simultaneously, Ford is engaged in negotiations for a new labor agreement with the United Auto Workers union, a move many analysts believe will result in increased labor costs for the company in the United States. The UAW is currently picketing at a Ford truck and SUV plant in Michigan, and President Biden is expected to visit Michigan on Tuesday to meet with striking union workers.
A spokesperson for Ford remarked, “We are evaluating various factors that impact our competitiveness.”
The Detroit News reported the suspension of factory construction earlier on Monday.
CATL is among the world’s largest electric vehicle battery manufacturers, and Ford had initially sought to leverage the company’s expertise to manufacture battery cells at the Michigan plant, with the aim of reducing production costs through innovative chemistry. This facility was expected to generate 2,500 jobs.
At the time of announcing the plant, the Dearborn, Michigan-based automaker had stated that it was crucial for achieving its ambitious EV sales targets, including the production of 2 million battery-powered vehicles globally by 2026. However, Ford has since stepped back from this goal, citing the volatile nature of consumer demand.
Ford’s CEO, Jim Farley, mentioned in a July call with analysts, “We expect the EV market to remain volatile until the winners and losers shake out.”
The cost-effective batteries to be produced at this plant played a central role in Ford’s strategy to reduce the price tags of electric vehicles for consumers. Ford had originally planned to use battery packs employing CATL technology in its Mustang Mach-E electric SUV and F-150 Lightning electric pickup truck.
One of the reasons behind Ford’s decision to reduce prices on its F-150 Lightning truck by up to $10,000 on certain versions in July was the lower material costs associated with these batteries.
In the political arena in Washington, Ford’s proposed investment had become a contentious issue.