Ford will cut its projected investment in a new EV battery plant in Marshall, Michigan by $1 billion while also cutting back on the number of workers it expects to hire, the automaker confirmed Tuesday.
Ford is paring back its investment in its battery plant in Marshall, Michigan by $1 billion and about 800 jobs.
The cutback comes days after members of the United Auto Workers union ratified a contract with Ford that included a 25% raise and other improvements. Ford had signaled during negotiations that it would have to factor in any increase in labor costs when considering plans for its transition to EVs. But the automaker had also raised questions about the pace of growth in the EV market, last month saying it would delay about $12 billion in investments dedicated to its battery-electric vehicle program.
“We’ve been studying this (battery plant), project for the past couple of months,” Mark Truby, director of communications at Ford, told the Detroit Free Press, which was first to report on the cutbacks at the Marshall facility. “I think we’re all aware EV adoption is growing, and we expect that to continue, actually. But it’s not growing at the pace that I think ourselves and the industry had expected.”
Rethinking EV plans
During the last few years, Ford has made an aggressive push into the EV market, launching the Mustang Mach-E SUV and F-150 Lightning pickup, as well as all-electric commercial vans. It is preparing to introduce several other EVs and has begun work on the largest manufacturing complex in its history, the BlueOval City project near Memphis, Tennessee.
But it has begun rethinking a number of projects, among other things delaying one of two EV battery plants going into Kentucky.
Ford is slowing its investment into its EV and battery production and development.
The Marshall plant has had its own set of problems. The automaker originally planned to set up the facility in Virginia but had to shift locations due to opposition from that state’s Governor Glenn Youngkin because it partnered Ford with China’s Contemporary Amperex Technology Co Ltd., or CATL, the world’s largest battery manufacturer.
Michigan then landed the project, offering Ford $1.8 billion in subsidies. That could be put in jeopardy due to Ford’s decision to scale back the Marshall plant.
The Marshall plant
The facility is intended to produce lithium-iron phosphate batteries. They’re less powerful — meaning less range — than the more common lithium-ion batteries currently used in products like the Mach-E and F-150, but are substantially cheaper. And with the typical EV now averaging around $60,000, or about $12,000 more than conventional gas models, according to Kelley Blue Book, that could drive down costs and win over budget-minded buyers.
Ford hoped to produce 35 gigawatt-hours of LFP batteries annually in Marshall. Depending upon where they would be used, that could power anywhere from 300,000 to more than 400,000 EVs. The revised plan trims output 42%, to around 20 gWh. At the low end, that would supply less than 200,000 Ford EVs.
Ford CFO John Lawler recently noted the company lost $37,000 on every EV it sold last year.
Truby told the paper the investment in Marshall would likewise be pared back by a commensurate amount from the original $3.5 billion target. Meanwhile, Ford plans to hire just 1,700 workers. The original target was 2,500.
Putting a positive spin
State officials tried to put a positive spin on the cutbacks. “Today’s announcement means 1,700 new jobs coming to Michigan along with billions of additional investment to the state, which will help grow the economy and put more money back into people’s pockets,” said Stacey LaRouche, a spokeswoman for Michigan Governor Gretchen Whitmer.
During negotiations with the UAW, Ford said it was pausing development in Marshall, leading some observers to question whether the project would go ahead — or, if it did, whether Ford might abandon plans to build batteries at the site and instead use it for other purposes.
EV sales growth slows
Governor Whitmer’s office said the project was still bringing 1,700 new jobs to the state.
EV sales have grown sharply in recent years. They accounted for less than 1% of the U.S. new vehicle market in 2019, climbing to 5% last year. By early 2023 that had jumped again to more than 7%, but the market share has fallen flat since then — even though sales numbers continue to grow and will top 1 million for the first time for all of 2023.
Ford officials have raised a number of concerns about the EV segment, especially in light of a price war triggered by Tesla. During a third-quarter earnings call last month, Ford CFO John Lawler indicated the automaker was losing about $37,000 for each EV it sells this year.
Similar concerns have been raised by competitors including Mercedes-Benz and General Motors. GM recently announced a more than yearlong delay in reopening an EV plant in the Detroit suburbs, explaining it is reexamining its strategy for battery-electric vehicles.
0 Comments