Ford & CATL Factory Won’t Be Built In Virginia. Take THAT, China!

January 15, 20232 years ago Steve Hanley 0 Comments

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A month ago, we reported that Ford and CATL were exploring the possibility of building a factory in America to manufacture LFP batteries to power future electric cars from the Blue Oval team. Michigan and Virginia were mentioned as possible sites for that factory. Now we know Virginia is off the table because its governor, Glenn Youngkin, a Republican with an eye on the White House, told Ford and CATL to go pound sand. He’s protecting the good people of Virginia from the godless communists who want to come to America, buy up all the available real estate, and turn the US into a vassal state dominated by the Chinese Communist Party.

Following his state of the state annual address to the Virginia General Assembly last week, Youngkin told reporters, “We felt that the right thing to do was to not recruit Ford as a front for China to America.” He made the comment in response to questions about a section of his speech that dealt with the dangers of the Chinese Communist Party, or CCP, which he called “a dictatorial political party that only has one goal — global dominance at the expense of the United States.” Youngkin told legislators he is leading Virginia “out of darkness,” according to the Washington Post.

Youngkin noted during the speech that he banned the Chinese owned tech services WeChat and TikTok from state-owned smartphones and warned that “Virginians also should be wary of Chinese communist intrusion into Virginia’s economy.” He called on the General Assembly to “send me a bill to prohibit dangerous foreign entities tied to the CCP from purchasing Virginia’s farmland.”

Youngkin is apparently channeling Florida’s ultra right wing governor Ron DeSantis, who is positioning himself as the heir apparent to the the legacy of a certain failed former president. The day before Youngkin’s speech, DeSantis made a similar proclamation about preserving Florida farmland from the godless heathens across the sea and called on the Florida legislature to bar China from getting in bed with the state’s government. Republican leaders in Congress have set up a committee to investigate Chinese influence.

Fear Of CATL

The decision to resist a Ford plant seemed at odds with Youngkin’s goal of attracting more major employers to Virginia, which he emphasized repeatedly in the speech to the General Assembly. His administration provided few specific details this week about the Ford project or the farm threat. The Washington Post said Richard Cullen, Youngkin’s chief legal counsel, pontificated in an interview that the proposed battery plant involved “national security risk-type technology and he stopped that. They were looking for land and incentives to build something and I think that was the nucleus” of the evolving concern about farmland, he said.

Last month, conservative news outlet Daily Caller reported that Youngkin was removing Virginia from consideration over concerns that the Chinese company would have control over the primary battery technology. And yet, the announcement last week seemed to take both Republicans and Democrats in the General Assembly by surprise.

Democrats in the legislature said they wanted to get more information about both Ford and the potential for Chinese interests buying agricultural land, but expressed bewilderment about Youngkin’s statements. “I had not heard about the governor actively working against bringing a large E.V. battery manufacturer to the commonwealth,” said David Reid, a Democrat who is a former chairman and current member of the Virginia Manufacturing Development Commission. He said such a facility could be “a generational gamechanger” for parts of rural Virginia looking to reestablish lost manufacturing jobs. “And is there any better example of an all-American brand than Ford?”

Who Wants New Jobs?

Oddly, several of Virginia’s neighboring states that also have Republican governors are embracing the EV revolution with open arms. Georgia in particular is attracting massive investments from automakers like Hyundai and solar panel manufactures like Qcells as it seeks to build a growing economy on the strength of the many incentives for clean energy and clean transportation provided in the Inflation Reduction Act and other federal programs designed to bring manufacturing back to America.

The concerns about China are not entirely unfounded, of course. Its government has heavily subsidized many new technologies, including solar panel and electric car production. As a result, China now controls up to 80% of the supply chain for both. That’s a problem — one that the IRA addresses directly by denying federal EV tax incentives to vehicles whose batteries are manufactured with materials of components sourced from China.

One would think that Ford and CATL are both vitally concerned with being eligible for those tax incentives and are taking steps to insure the electric vehicles built by Ford that use batteries from CATL will be in full compliance. Otherwise, why invest the money to build factories who products will be a significant price disadvantage? Yet Governor Youngkin feels the citizens of Virginia need even more protection from the scourge of Chinese batteries in American vehicles. Oh, the horror!

A Novel Business Arrangement

Ford and CATL are well aware of the roiling political waters. The two companies are weighing a novel ownership structure in which Ford would own 100% of the battery factory including the building and the infrastructure, while CATL would operate the factory and own the technology to build the cells. That arrangement would allow the facility to qualify for production tax credits under the Inflation Reduction Act while requiring no direct financial investment from CATL.

The proposal is just one option that has emerged since the IRA was signed into law in August and is far from being a done deal, people with knowledge of the situation have told Bloomberg. The lack of clarity around specific content requirements in the IRA is also impacting the decision, and sites in Mexico and Canada haven’t been ruled out. The Treasury Department is scheduled to issue guidance finalizing the content requirements by the end of March.

What we are seeing in Virginia is the opening salvo in a multi-act political war in which pretenders to the throne attempt to out-Trump each other in a frantic attempt to appeal to their so-called base. Should Americans be concerned about China dominating several emerging technologies? Absolutely. But we need to bear in mind that ever since Nixon went to Beijing, America has been only too glad to let its manufacturing base transition across the Pacific in search of cheaper wages. Now the chickens have come home to roost. Virginia says it wants no part of those chickens. Workers hoping for jobs in the new economy may see things differently.