Rivian, The UAW, & Politics

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This week, the US Department of Energy announced $1.7 billion in grants to support the conversion of 11 shuttered or at-risk auto manufacturing and assembly facilities across eight states — Michigan, Ohio, Pennsylvania, Georgia, Illinois, Indiana, Maryland, and Virginia. Those factories are primarily owned and operated by GM and Stellantis and are designed to help lower the cost of manufacturing electric vehicles and their supply chain. But they exclude non-union companies like Tesla and Rivian, two companies that arguably are working the hardest to bring electric vehicles to market in America.

The DOE says the grants “will create and retain thousands of good paying union jobs and support the American auto communities that have driven the U.S. economy for generations. They deliver on the President’s commitment to ensure the future of the auto industry is made in America by American union workers, and that the US wins the competition for the 21st century.”

Some quibble that these grants are little different from the support the Chinese government has given its auto industry. Coupled with the new 102.5% tariff on Chinese-made cars, there is concern in some quarters that the government is making it too easy for legacy automakers to slow walk the transition to electric vehicles.

Rivian & DOE Grants

Bloomberg this week focused on how Rivian is affected by this latest grant program. According to sources, Rivian CEO RJ Scaringe tried to get the federal government to cover some of the cost of a new factory it planned to build in Georgia through loans and grants made available by the passage of the Inflation Reduction Act. But a point of contention, the sources said, was the relationship between Rivian and the United Auto Workers. DOE officials suggested that Rivian would have to take a friendlier position toward the union if it expected federal funds.

Rivian’s unwillingness to warm up to labor unions despite pressure from the administration apparently was a major factor in the company’s decision to shift production of its first mass-market electric vehicle to its existing assembly plant in Illinois, rather than a new factory in Georgia. While there were a number of considerations that led to this pivot, Bloomberg says the extent to which the Biden administration has backed organized labor raises questions about how a potential second term for former President Donald Trump would change the landscape for EV makers.

Rivian has applied for financing from Department of Energy loan programs and sources have told Bloomberg the DOE have been happy to oblige, provided Rivian takes a friendlier position toward the United Auto Workers. Bloomberg reporter Edward Ludlow says he was given to understand by those sources that there needed to be some public statement or action by Rivian specifically indicating it was opening the door to its workers becoming unionized

That doesn’t amount to a quid pro quo, Ludlow says, because the Loan Programs Office asks every applicant to lay out how its project benefits the surrounding community, and that includes discussion around labor engagement and the use of a unionized construction or operations workforce. Rivian, like Tesla, has stuck to its preference for maintaining direct relationships with its employees. Rivian is still committed — and contractually obliged — to invest $5 billion in the Georgia facility by 2030. That number is strikingly similar to the amount Volkswagen has committed to invest in the company to help it solve its software issues.

Rivian & Volkswagen Team Up

As my colleague Tina Casey reported a few days ago, Volkswagen and Rivian have agreed to form a joint venture to create next generation software-defined vehicle platforms to be used by both companies in their future electric vehicles. Volkswagen will start off with a $1 billion investment in Rivian, with up to $4 billion in planned additional investments to take place in the future. The joint venture is expected to build on Rivian’s industry-leading software and electrical architecture to create a best-in-class software-defined vehicle technology platform.

In a press release on June 25, 2024, Rivian said the partnership with Volkswagen is expected to accelerate the development of software for Rivian and Volkswagen Group. It will allow both companies to combine their complementary strengths and lower the cost per vehicle by increasing scale and speeding up innovation globally. The Rivian proven zonal hardware design and integrated technology platform are expected to serve as the foundation for future SDV development in the partnership that will be applied to vehicles manufactured by both companies. Rivian plans to contribute its electrical architecture expertise and is expected to license existing intellectual property rights to the joint venture.

Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of this decade. In the short term, the joint venture is expected to enable Volkswagen Group to utilize Rivian’s existing electrical architecture and software platform. The partnership’s ambition is to accelerate Volkswagen Group’s SDV plans and transition to a pure zonal architecture. Each company will continue to separately operate their respective vehicle businesses.

Auto Manufacturing & Politics

Bloomberg’s Ludlow writes that the relationship between Rivian and the Biden administration is particularly interesting in this election year. Like all companies of its size, Rivian employs lobbyists and public policy staff in Washington and around the country. Scaringe often gets face-time with government officials. The focus now, according to Ludlow, is gaming out what might happen after the November election.

No one Ludlow has spoken with thinks the money and policy support from the Inflation Reduction Act is going to vanish overnight if Trump is elected. However, Trump did reportedly tell oil executives during a fundraiser in May to steer $1 billion to his campaign. In return, he has vowed to reverse Biden’s environmental rules and policies, including those pertaining to EVs. While a Trump administration presumably would be less inclined to pressure funding applicants to work with labor unions, the Department of Energy’s Loan Programs Office atrophied during his first term. Trump even went so far as to propose killing it in his federal budget requests.

All this means that Scaringe and Rivian are caught between a rock and a hard place, Ludlow claims. Under a second Biden term, funds might be available to the company, albeit with undesired strings attached. Should Trump retake the White House, it’s not clear that there would be any loans to tap.

The Takeaway

Some of my colleagues here at CleanTechnica are openly wondering about the wisdom of putting so much public money into propping up legacy automakers which have yet to bring truly affordable electric vehicles to American motorists. GM and Stellantis were the primary beneficiaries of the last bailout that came in the wake of the global financial meltdown 13 years ago. One of the principal features of that program was a promise by the companies to build smaller, more efficient cars, but they took the money and then did just the opposite.

Biden has embraced unions in America more strongly than any other president in recent member. Clearly part of that embrace is a hope that union members will support him and the rest of the Democratic ticket come November. The Bloomberg commentary about Rivian shows how tricky negotiating political crosscurrents can be in today’s fractured society. It may actually be easier to build vehicles than to make the right moves politically. For the road ahead, be prepared for a bumpy ride.