The following Supply Chain Matters industry specific commentary is a sidelight to our previous third update on the ongoing labor strike targeting Ford and two other U.S. automakers.
Earlier this week, Ford Motor Company announced that the automaker was pausing plans to construct a $3.5 billion battery production facility to be located in Michigan. The reason provided by Ford in its decision was to limit any further spending until the company was confident that the facility would operate competitively.
Background
In February, Supply Chain Matters highlighted the announcement of this planned facility including the strategies that led to this investment. The $3.5 billion facility was to be located in Marshall, Michigan, about 100 miles west of Detroit.
Ford struck a deal with China based battery supplier Contemporary Amperex Technology (CATX) in what was termed as a joint technology collaboration. Ford would reportedly own and operate the complete facility while CATL would license its intellectual properties for battery technologies to Ford.
The arrangement was billed as allowing the auto maker to reportedly qualify for $7500 tax credits under the U.S. Inflation Reduction Act, but the exact qualification guidelines have yet to be clarified by the Biden Administration.
CATX’s lower cost lithium ion phosphate (LFP) composed battery cell battery composition was considered by Ford to be a less expensive alternative in powering its two premier EV models, that being the Ford Mustang Mach-E sports model and the Ford F-150 Lightening full size pick-up truck.
The automaker’s decision to partner with the China based battery supplier created a political storm in the U.S. House of Representatives as Republican lawmakers questioned whether the technology collaboration would add to “Chinese domination of the U.S. auto industry.” Some lawmakers and a committee chairperson called for Ford to abandon its decision to cede technology leadership to China.
In conjunction with South Korean based battery technology provider SK-On, Ford is constructing two other battery supply facilities, one in Kentucky and the other in Tennessee, both right-to-work states.
The Optics
The optics of this decision are now playing out both from an industry, political and labor relations lens.
As noted in our last update on the UAW strike, the labor union cited the Ford decision to be a not so subtle threat to ongoing labor contract negotiations by means of the wording related to long-term competitiveness.
Reuters reported this week that Ford’s decision has more to do with Tesla’s current domination of U.S. EV sales, and its ongoing strategy of pressuring industry competitors in reducing prices on popular Tesla models. The notion is that if Tesla continues with this strategy, it will push its U.S. competitors into more lower volume model niches that cannot support high final assembly production economics. Specifically stated in this report: “Ford’s decision to pause work on a $3.5 billion electric vehicle battery plant in Michigan comes as some analysts question whether the U.S. EV market will grow fast enough to support all the new battery and assembly operations launched or under construction.”
From our Supply Chain Matters lens, such statements neglect to reference that Telsa’s model line-up is growing old in the market and EV competitors have the opportunity to introduce newer models appealing to both lower cost and premium focused consumers. A further notion here is that the current perceptions related to either the lack of a robust EV support infrastructure for battery charging and for the supply of lower cost and ample electricity is a point in time discussion for the industry as a whole.
All of that, the Ford decision relative to suspending battery production specifically in Michigan remains a flash point from all three dimensions, not to mention timing.
These are the dynamics of today’s geo-political and activist laden labor relations industry supply chains.
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