🔋Is Ford’s Pause on CATL Plant Really About China?

Not really, if you look at the details

Ford’s pause of its $3.5 billion battery plant last week has been portrayed in many circles as a victory against Chinese technology. Many members of Congress, from Marco Rubio to Mike Gallagher, who have staked their political career on being permanently anti-China, were quick to claim credit for this “victory”. That's certainly the impression you’d get, if you read coverage from POLITICO – a classic inside-the-DC-beltway rag, or TechCrunch – the equivalent of POLITICO for Silicon Valley. Both Washington DC and Silicon Valley have a strong fixation on China and converged on a narrative regarding the assumed danger of Chinese technology – a DC-SV consensus that would be hard to imagine even two years ago.

We live in a world where you can always find media reports that will confirm your pre-existing beliefs, no matter how wrong those beliefs are. I initially thought this pause was a “China issue” too! To avoid falling into yet another echo chamber, I read a wider variety of outlets covering this news and re-read reports from when Ford first announced its partnership with CATL to build this plant back in February.

What I’ve concluded is that this pause has almost nothing to do with CATL being a Chinese technology company, and entirely to do with the shifting leverage between Ford and the United Auto Workers (UAW) in the ongoing labor strike, as well as the economic reality of global electric vehicle competition. 

Devil in the Details

This conclusion is not hard to draw if we look at the details (as opposed to the headlines) of this Ford-CATL marriage from the beginning to now.

When this partnership was announced, Ford was emphatic about it being a job-creating, Michigan-based EV battery plant wholly-owned by Ford; CATL’s role is only a technology licensor and service provider. Ford also took pains to communicate that CATL will not receive any of the EV subsidies that would be on the table from the Inflation Reduction Act. Minimizing both the perception and reality of CATL’s degree of involvement was done to pre-emptively reduce any legitimate concerns and political blowback of Chinese technology influence on an American national champion like Ford, an awkward relationship I explored in a previous post. These assurances predictably could not deter the most staunch anti-China critics from criticizing the deal. But most officials who recognize the importance of balancing the reliance on Chinese technology with America’s need to accelerate its progress in making more electric vehicles were satisfied with the assurances. 

More interestingly, the UAW supported this plant too! Why? Because the master agreement between Ford and UAW for this plant allows the union to organize future workers using a “card check” process – an easier way to form a union versus a secret voting ballot process akin to an election.

So this wholly-owned Ford battery plant that licenses CATL technology also happens to be quite union-friendly. This setup stands in stark contrast to Ford’s two other major battery plants in Kentucky and Tennessee, which are joint-ventures (not American wholly-owned) with the South Korean company, SK On. Both plants are supported by a massive $9.2 billion federal government loan, when the total investment amount is $11.4 billion (so about 80% of these JVs is funded by the American taxpayers, not the companies). Both plants are also not under any master agreement with UAW that would allow it to organize the workers there in the future. The UAW blasted the Ford-SK On joint ventures when the loan was announced in June.  

Despite CATL’s Chinese identity, hundreds of millions of additional state-level incentives were earmarked to support this project, including:

• A $210 million in direct tax incentives

• A $775 million property tax abatement over 15 years

• A $330 million earmark directed to build more roads and freeways to support transportation near the site

• A $120 million in incentives from Michigan’s newly-created job-creation program called SOAR fund (Strategic Outreach and Attraction Reserve, great acronym) 

The local economic development agency in Marshall, Michigan, where the plant will be located, began working right away on what used to be farmland, to give Ford a “pad-ready site” for further construction. Meanwhile, the most vocal congressional critics of the Ford-CATL partnership, the Select Committee on the CCP, repeatedly and publicly criticized Ford and asked to investigate this deal, including a copy of Ford's licensing agreement with CATL in both English and Chinese. Ford gave them the cold shoulder (and middle finger) and continued building the battery plant.  

Farmland near Marshall, Michigan, being prepared for the Ford-CATL battery plant

Fast forward to last Monday, September 25, Ford announced the pause. What changed? 

The UAW vs Detroit Big Three strike was entering its second week. UAW president, Shawn Fain, called the pause “a shameful, barely-veiled threat.” This anger was predictable, because the UAW actually wanted this plant to be built; Ford took away something the UAW wanted. President Biden was about to join the UAW picket line the very next day on Tuesday, September 26 – an unprecedented act of support from a sitting president. During Biden’s visit, he verbally supported the 40% raise the UAW has been asking for, which is far apart from the 20 or so percent the automakers have been offering. Three days later, on Friday, September 29, the UAW retaliated against Ford by expanding its strike to a Ford assembly plant in Chicago. How do we know this is a retaliation against the pause of the Ford-CATL battery plant? Well, Ford CEO, Jim Farley, responded by criticizing the union for holding up the negotiation “over battery plants that will not come online for another two to three years.” The deadline to complete the CATL plant happens to be March 31, 2027.

What did not change? 

CATL is still Chinese. And Ford is still ignoring the letters and requests from the Select Committee on the CCP, even though its chair is patting himself on the back and claiming victory. 

Mutually Uncomfortable Reliance

In the process of untangling this issue, I found the coverage from The Detroit News to be the most informative and balanced. Local news really shines when a story is vulnerable to being co-opted by a larger, more eye-catching, but less relevant narrative, like the US-China tech competition in this case. 

 The Detroit News’s reporting mentioned CATL as a China-based company, but did not make that identity the point of the story (because it is not). In fact, it broke the news of Ford’s pause announcement. All the other media articles, like the ones from POLITICO, TechCrunch, and the Washington Post, are derivatives, with their own editorial spin applied to co-opt the news into a “China story” to attract more eyeballs.

It is a gross understatement to say this type of “derivative reporting” is uninformative and unhelpful. It is hard enough to make sense of dynamic current events like the UAW strike, now heading into its third week. It is even harder to untangle the reality of the uncomfortable reliance that US EV makers have on Chinese technologies, like CATL’s, and explore the legitimate concerns this reliance may have. It is also worth exploring why the CATL-powered plant is one Ford feels comfortable paying to own wholly, while its geopolitically-safer JVs with SK On needed to be subsidized with such a huge federal loan. (My educated guess is CATL’s technology is more proven and ready to hit production, while SK On’s is less certain.) Every media article is an opportunity to explore these questions more; most of these opportunities have been wasted. Only reporting from The Detroit News mentioned that Ford’s EV competitors, Tesla and Honda, already import their batteries from CATL. 

It is even harder, amidst the noise, to lose sight of the fact that this uncomfortable reliance is actually mutual between the US and China. When the Ford-CATL marriage was first announced, guess who else was uncomfortable with the partnership? Xi Jinping himself! For fear that his country’s world-leading crown jewel will transfer critical advanced technology to the lagging Americans. (The Chinese government began scrutinizing the deal shortly after.)

Xi and the Select Committee on the CCP both agree that Ford should not use CATL’s technology? (What a headline that would’ve made!)

No one knows how long this UAW strike will last, but it will end eventually. When a new labor deal gets signed, Ford will take a hard look at the economics of building its own battery plants with CATL (and SK On). I’m cautiously optimistic that Ford will resume its construction of this CATL-powered battery plant, because its electric vehicle future, and by extension a large part of America’s climate future, depends on it. 

But if Ford does end up scrapping the project for good, it will be because the dollars and cents don’t make sense anymore versus its many EV competitors both domestic (Tesla, Rivian) and foreign (BYD, NIO, Li Auto), not because some anti-China members of Congress wrote letters and tweeted about them. 

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