Ford scales back EV battery plant in Michigan

Detroit – Ford The company is scaling back plans for a $3.5 billion battery factory in Michigan as consumers shift to electric vehicles more slowly than expected, labor costs rise and the company takes steps to cut costs.

Ford executives, including Chief Executive Jim Farley and Chairman Bill Ford, originally announced the facility in February. The company quickly became a political target due to its ties to Chinese battery maker Contemporary Amperex Technology Co Ltd (CATL). The factory is a wholly owned subsidiary of Ford, but the U.S. automaker is licensing technology from CATL to produce new lithium iron phosphate (LFP) batteries for electric vehicles.

Ford say on tuesday The company said it would cut production capacity by about 43% to 20 gigawatt hours per year and reduce expected employment from 2,500 to 1,700. The company declined to say how much investment in the plant would be reduced. Based on reduced capacity, the investment is still approximately US$2 billion.

The decision adds to global automakers’ recent retreat from electric vehicles. Demand for vehicles has been lower than expected due to issues including rising costs and challenges with supply chain and battery technology.

The production cuts at the Marshall, Mich., plant are part of a plan Ford announced last month to cut or delay about $12 billion in previously announced investments in electric vehicles. The company will also delay plans to build another electric vehicle battery factory in Kentucky.

“We considered all factors. Among them were the demand and expected growth of electric vehicles, our business plan, our product cycle plan, affordability and the business to ensure we could achieve a sustainable business through this plant,” said Ford Chief Communications Officer Mark Truby told a media briefing. “Having assessed all of this, we are now pleased to confirm that we are moving forward with construction of the facility, albeit at a smaller scale and scope than we originally announced.”

Truby said the plant is still expected to open in 2026, although the company has suspended production at the plant for about two months while it engages in collective bargaining with the United Auto Workers union. Negotiations ended last week with Ford-United Auto Workers employees approving a deal that includes significant wage increases and the inclusion of factory battery workers in a record deal if unionized.

The United Auto Workers did not immediately respond to a request for comment.

Truby said rising labor costs were a factor in Ford’s decision to scale back the program. Ford Chief Financial Officer John Lawler said last month that the new agreement would add $850 to $900 to labor costs per vehicle assembled.

Lawler declined to estimate how much the deal, which runs through April 2028, will cost the company. Deutsche Bank estimates that the increase during the transaction will be $6.2 billion.

“We remain very bullish on electric vehicles and our electric vehicle strategy, but clearly, while there’s growth in the U.S. and globally, it’s not growing at the rate that we and others expected,” Truby said. “We’re trying to be smart about this and how we move forward.”

The plant has faced political pushback from federal and local officials, including protests from residents of rural Michigan cities. U.S. lawmakers are also seeking to review the licensing agreement between Ford and CATL amid tensions between China and the United States.

Truby reiterated on Tuesday that the company still believes licensing the technology is more cost-effective for the company and the United States than importing batteries from overseas. The plant is expected to be the first in the United States to produce lithium iron phosphate batteries.

The plant will produce lithium iron phosphate (LFP) batteries, rather than the more expensive lithium-ion or nickel-cobalt-manganese batteries currently used by Ford. The new batteries are expected to offer different benefits at lower costs, allowing Ford to increase production and profit margins of electric vehicles.

Ford is currently purchasing lithium iron phosphate batteries from CATL. Tesla Part of the reason for using lithium iron phosphate batteries in some of its vehicles is to reduce the amount of cobalt needed to make the cells and high-voltage battery packs.