It marks the most significant direct government support for an auto company since the bailouts during the Great Recession and is the largest single loan the Department of Energy has ever made. It comes as the Biden administration and automakers aim to rapidly ramp up electric vehicle production in an attempt to compete with China, which currently dominates the global EV market.
The loan to BlueOval SK would support the venture's three new facilities, one in Tennessee and two in Kentucky, that will build electric vehicle batteries. Ford has estimated that the projects will create 11,000 jobs and DOE says it will create more than 120 gigawatt hours of U.S. battery production annually.
The loan would support President Joe Biden's "agenda to onshore and re-shore domestic manufacturing of technologies that are critical to reaching the clean energy and transportation future," the Energy Department said in a blog post about the funding, adding that expanding domestic EV battery production is critical to meeting the administration's goal of 50% new car sales being electric by 2030.
DOE's announcement is a "conditional commitment," which typically means there are additional requirements companies must meet before a loan is finalized.
The agency said it could not disclose when BlueOval SK would have to repay the loan or specifically why it decided to offer this amount, citing confidential business information, but said loan decisions take into account the borrower's request, business model, "and other due diligence items."
DOE can offer loans with a repayment timeline of up to 25 years. The interest rate on the loan is equal to the United States Treasury yield curve with zero credit spread — a more affordable rate than the joint venture could have gotten from private investors.
Ford Treasurer Dave Webb said in a statement Thursday that the company welcomes the agency's support for the BlueOval SK project.
"It's going to help make great EVs available to more customers while powering thousands of good paying jobs and American manufacturing," he said in a statement. "Major technology transitions have always been accelerated by collaboration between the public and private sectors. The DOE's foresight here will help do the same for the transition to zero-emissions transportation."
The announcement also comes ahead of pivotal contract negotiations between the United Auto Workers and the Detroit Three automakers. The unionization of joint ventures and battery plants like BlueOval SK — especially in the U.S. South, a historically tough-to-organize region — is one of the UAW's top priorities.
"Employees at BlueOval SK's battery plants in Tennessee and Kentucky will be able to choose whether they organize, a right that Ford fully respects and supports," Ford spokesperson Melissa Miller said.
The Department of Energy's Loan Programs Office funds large-scale infrastructure projects that will have a high impact on the United States' energy portfolio, according to the agency.
The loan announced Thursday is by far the largest investment the agency has ever made through the program. In comparison, it gave Ultium Cells LLC — a battery joint venture between General Motors Co. and LG Energy Solutions — $2.5 billion in November last year.
It previously gave Ford $5.9 billion in 2009 to finance projects to increase fuel efficiency in gas-powered cars. It also gave Nissan $1.45 billion and Tesla Inc. $465 million in 2010. All three of those loans have been fully repaid.
Ford announced the investments in Kentucky and Tennessee in September 2021. Construction is underway at both campuses.
The 3,600-acre campus in West Tennessee, BlueOval City, will be Ford's largest manufacturing complex. It will encompass a battery plant jointly operated by Ford and SK, an assembly plant that will build next-generation electric F-Series trucks, a supplier park, and an upfit center. The assembly plant is slated to have the capacity to produce some 500,000 vehicles a year. Executives have said the project is on track for a 2025 opening.
Executives have touted manufacturing efficiencies the new assembly plant will deliver, in part because Ford is developing the truck alongside the plant's construction. The factory will have a 30% smaller footprint than traditional plants, but a higher production capacity.
BlueOval City and BlueOval SK Battery Park, the campus that will be home to twin battery plants, are key pieces of Ford's $50 billion electrification plan, under which it plans to hit a production rate of 2 million EVs annually by the end of 2026. The company also is targeting 10% companywide earnings margins by that time, and 8% earnings margins in an EV business that is slated to lose billions of dollars this year.
The Dearborn automaker also is planning to build another, $3.5 billion battery plant in Marshall, Michigan. That operation is slated to create 2,500 jobs and involves licensing battery technology from Chinese battery maker Contemporary Amperex Technology Co. Ltd., or CATL, an arrangement that has drawn scrutiny from Republicans in Washington.
© 2023 www.detroitnews.com. Distributed by Tribune Content Agency, LLC.
