Ford Plays Hardball With Michigan for $500 Million in EV Investment

Ford, which wants to build up a "core competency" in battery technology (but has previously farmed out much of its battery vehicle development to companies such as Magna International and Azure Dynamics) said Tuesday that it plans to take its battery pack development in-house. In that, it is following a path laid down by General Motors, which is building packs for the Volt (but, despite a huge new battery center, not the cells inside them).

Ford is also looking for some changes to Michigan's EV tax policy, if it is to agree to invest $300 to $500 million in the state to build its next-generation hybrid and plug-in hybrid cars there. Specifically, Ford wants assurances that Michigan's $500 tax credit on battery EVs (worth up to $135 million) will also apply to hybrids.

It's not just millions of dollars in investment Ford is offering, but also 1,000 direct regional jobs

The cars, to be built on Ford's global "C" platform (as are both the 2011 Focus-based electric car and the plug-in 2010 Transit van), could be assembled at a number of Ford plants, including those in Kentucky, Germany and China. The current Escape Hybrid is built in Kansas City, Missouri, and its battery packs built by Delphi in Hermosillo, Mexico.

But Ford loves Michigan, whose motto in Latin translates as something like "If you seek a pleasant peninsula, look about you." According to Ford's head of global electrification, Nancy Gioia, "Michigan offers a unique opportunity," said. "Our engineering is here, and this would enable us to strategically consolidate that work with design and development for the next-generation battery pack and hybrid drive transmissions. There is university-based energy expertise here, too, as well as multiple industry resources."

Gioia declined to give a letter grade to Michigan Governor Jennifer Granholm's automotive retention efforts, but she did say that Michigan has been "very proactive in looking at electrification as part of strategic diversification and an opportunity for the future."

With the aid of federal stimulus dollars, Michigan was able to attract four battery suppliers to the state, Gioia pointed out. "We are very pleased with Michigan's vision," she said.

Bringing battery pack development in-house is an essential part of "delivering the overall DNA of the product," Gioia said. She declined to say if Ford would also build packs for the Focus-based electric car. "We're focused on the 2012 vehicles," she said.

CSM Worldwide recently predicted that gas prices would remain relatively flat for the next 10 years, which will do no harm to SUV sales (but could hurt battery vehicle deployment). With that in mind, I asked Gioia if Ford could support a policy that put a floor on gas prices--raising taxes when the price threatened to go below that floor. That's one way of assuring automakers of a relatively stable fuel price to compete against as they deploy EVs.

"Clearly, fuel prices have to be tied to long-term energy strategy and policy," Gioia said. "At the end of the day, we need an energy policy encourages technology as appropriate. And [a price floor] is certainly one way to do that."