Ford Battery Deal with Chinese Company Under Investigation by House Committee Chairs

The Lede: On Friday, top House Republicans launched an inquiry to the Ford Motor Company regarding the company’s ties to a battery company in China due to forced labor and job offshoring concerns.

What We Know:

• Two Republican House committee chairs, Mike Gallagher of the House Select Committee on the Chinese Communist Party, and Jason Smith of the Ways and Means Committee, sent a letter to Ford CEO Jim Farley questioning the automaker’s agreement with Contemporary Aperex Technology Co. Limited (CATL) for a $3.5 billion battery plant in Michigan geared toward its electric vehicles.
• The committee chairs raise concerns regarding the structure of the deal as it pertains to employing U.S. and Chinese labor, CATL’s links to forced labor with a lithium mining company based in Xinjiang, reliance on Chinese critical minerals, and the possible flow of U.S. tax credits to CATL.
• The letter requests a copy of the licensing agreement between Ford and CATL as well as all documents and communications exchanged between the companies and with the Biden administration related to the agreement and corresponding tax credits. It also requests answers to a series of questions related to Ford’s labor practices and supply chains in both the U.S. and China.
• Ford has acknowledged the receipt of the letter, is reviewing it, and looks forward to responding.

The Background: This agreement between Ford and CATL was signed in February and lays out plans for Ford to manufacture battery cells using knowledge and services provided by CATL. Ford estimates that 2,500 new U.S. jobs would be added as a result of building the battery plant. Gallagher and Smith said that they had learned that the deal stipulated the employment of several hundred CATL employees from China, who would set up and maintain equipment and remain at the plant until roughly 2038. Automakers have strengthened their plans and production lines in recent years to capitalize on billions of dollars in tax credits and subsidies following the passage of the Inflation Reduction Act, which applies to green energy and electric vehicles. The law prohibits ‘countries of concern,’ including China and Russia, from benefiting from the tax credits and subsidies.

Likely Outcomes:

• A less severe outcome would be the clarification of Ford’s ties with China and the commencement of their plans to build the battery plant, but with significantly scaled-back direct cooperation with CATL in U.S. operations compared to the current structure of the agreement.
• If Ford is unable to respond in a satisfactory manner to this inquiry by lawmakers, there may be follow up measures to actively block the agreement’s implementation and sever the automaker’s collaboration with CATL. This would be a significant exercise in the power of the two committees chaired by Gallagher and Smith in affecting business between U.S. and Chinese firms. Other U.S. companies with ties to China may be subject to such scrutiny by lawmakers in the future, raising the risks of doing business with Chinese firms.

Quotables:

“If Ford is licensing agreement to maximize benefits to itself or CATL at the expense of the U.S. taxpayer, this demonstrates a disregard for corporate responsibility as an American company” – Mike Gallagher, Republican Representative from Wisconsin and chair of the House Select Committee on the Chinese Communist Party, and Jason Smith, Republican Representative from Missouri and chair of the Ways and Means Committee

“We have been woefully behind on scaled battery manufacturing production for years, allowing China to dominate this space…We can’t fail to invest and then finger point when our autos try to catch up.” – Haley Stevens, Democratic Representative from Michigan

Good Reads:

House GOP committee chairs launch probe into Ford-China battery deal (Politico)

Ford's agreement with Chinese company for electric vehicle battery production draws Republican scrutiny (CBS Austin)