Ford’s battery joint venture will receive a $9.2 billion government loan

Ford's battery joint venture will receive a $9.2 billion government loan

The Energy Department said Thursday that Ford Motor and its battery manufacturing partner will receive $9.2 billion in loans to build three battery factories in Kentucky and Tennessee. The loan is the largest financial commitment made by the Biden administration in its effort to build an electric vehicle manufacturing network in the United States.

The loan will go to a joint venture formed by Ford and its partner SK On called BlueOval SK that will supply batteries for electric Ford and Lincoln cars and trucks. The factories, one in Tennessee and two in Kentucky, will employ 7,500 people and are among the largest such plants being built by auto and battery companies nationwide, especially in southern states.

President Biden aims for half of new cars sold in the United States to be electric by the end of the decade, up from about 7 percent in the first three months of this year. By helping to finance battery factories, the administration hopes to ensure that the United States does not become dependent on China for batteries and their components. The administration also hopes the new plants will help offset job losses in traditional auto manufacturing.

One of the factories will be in Stanton, Tenn., north of Memphis, adjacent to a large manufacturing complex that Ford is building to produce electric pickup trucks. The other two factories are in Glendale, Ky., south of Louisville, and will employ more people than Kentucky’s coal industry combined.

Ford is spending $3.5 billion to build a battery factory in Marshall, Michigan, that will use technology known contemporary to Amperex Technology Ltd., a Chinese company or CATL that is the world’s largest battery maker. Ford’s deal with CATL, announced in February, drew political blowback from some Republican lawmakers, who criticized Ford for working with a company that has close ties to the Chinese government.

Senator Joe Manchin III, a conservative Democrat from West Virginia, also criticized the agreement, which would allow Ford vehicles using CATL technology to qualify for federal tax credits.

BlueOval’s loan will come through the Department of Energy’s Loan Programs Office, which has issued more than $35 billion in loans and loan guarantees for more than 30 projects over the past 14 years, according to the department. The office was created to provide loans with flexible financing to experimental and high-impact projects that private lenders would not provide.

“It’s a big step for an automaker to bring the supply chain to the United States, so we have more control over our future,” said Doug Levine, president of the consulting firm Stoic Energy.

The Department of Energy did not disclose the terms of the loan, which it said would be finalized after BlueOval met certain conditions and milestones.

Since Mr. Biden was elected, the program has provided funding to nuclear power plants, solar and wind projects and the domestic manufacture of electric vehicle batteries. The Loan Office was effectively moribund during the Trump administration.

From 2009 to 2011, when Barack Obama was president, the office gave out $16 billion in clean-energy loans, about 90 percent of which went to subsidize power plants. Beneficiaries included financial firms such as Goldman Sachs and facilities such as Exelon and NRG.

The office faced Republican criticism for supporting Solyandra, a start-up that received more than $500 million in loan guarantees in 2009 to develop cutting-edge solar technology but ceased operations in 2011.

Perhaps the biggest success of the loan program was the $465 million loan given to Tesla in 2010 when the electric car company was still struggling to prove itself. The money helped the company produce its Model S sedan at a factory in Fremont, California. Tesla pay off loan earlyin 2013, and has become the world’s most valuable automaker in recent years.

In December, the Department of Energy granted a $2.5 billion loan to a joint venture between General Motors and LG Energy Solutions that will produce electric vehicle batteries at factories in Ohio, Tennessee and Michigan.

In February, the department announced a $2 billion loan to help Redwood Materials expand a manufacturing facility near Reno, Nev., to produce battery materials from new and recycled sources. Redwood is led by JB Straubel, a former Tesla executive.

Borrowing from the Department of Energy is attractive to energy and auto companies because the agency typically offers better terms than private lenders and is more willing to take on high-risk and high-cost projects.

“It’s a loan that if you fail, you don’t have to pay back,” said Michael Weber, professor of mechanical engineering at the University of Texas at Austin. “This is a huge advantage for capital intensive industries.”

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