Ford decision disheartens economic developers

Right Place CEO: Michigan will need to up its game as automaker invests $11B elsewhere.
Ford plans to build its Blue Oval City campus in Stanton, Tennessee. Courtesy Ford Motor Company

When Ford announced its decision last month to invest $11 billion to expand in Tennessee and Kentucky over its home state, economic developers across the state felt the “sting.”

In West Michigan, The Right Place President and CEO Randy Thelen, like all economic developers and alongside the entire auto industry, was closely following the pending announcement from Ford as to where it would put its investment in electric vehicles and batteries, but he was not prepared for the news that the company would be investing $11.4 billion in a new mega campus in Tennessee and twin battery plants in Kentucky that would create 11,000 jobs and power the future of the company’s EVs.

Randy Thelen. Courtesy The Right Place

“It stings, right?” Thelen said. “I mean, Michigan is the home of the auto industry, and here in West Michigan, we have 400 auto suppliers and employ about 40,000 people, and so, as the auto industry shifts, we’ve got to make sure we keep as much of that work as close as possible because we have companies throughout Michigan and throughout the Midwest serving those facilities.

“There may be opportunities for our supply base to serve Tennessee for a while, but over time, what happens is maybe the first model, you can supply with suppliers from Michigan, maybe the second gen, you can supply from Michigan, but by the time the third one comes around, suddenly the supply chain starts to congregate closer and closer to the auto assembly plant. It stings; it hurts — it should hurt. A longstanding, core industry of our state is starting to spread more and more across the country, and we’ve got to find ways to be more attractive and more competitive.”

Ford’s plan

The two campuses in Tennessee and Kentucky will produce the next generation of electric F-Series trucks and the batteries to power future electric Ford and Lincoln vehicles.

Ford plans to make the largest-ever U.S. investment in electric vehicles at one time by any automotive manufacturer and, together with its partner, SK Innovation, plans to invest $11.4 billion and create nearly 11,000 new jobs at the Tennessee and Kentucky mega-sites.

An all-new $5.6 billion mega campus in Stanton, Tennessee, called Blue Oval City, will create about 6,000 new jobs and reimagine how vehicles and batteries are manufactured. Blue Oval City will become a vertically integrated ecosystem for Ford to assemble an expanded lineup of electric F-Series vehicles and will include a BlueOvalSK battery plant, key suppliers and recycling. Ford’s new Tennessee assembly plant is designed to be carbon neutral with zero waste to landfill once fully operational.

In central Kentucky, Ford plans to build a dedicated battery manufacturing complex with SK Innovation — the $5.8 billion BlueOvalSK Battery Park — creating 5,000 jobs. Twin battery plants on the site are intended to supply Ford’s North American assembly plants with locally assembled batteries for powering next-generation electric Ford and Lincoln vehicles. Investments in the new Tennessee and Kentucky battery plants are planned to be made via BlueOvalSK, a new joint venture to be formed by Ford and SK Innovation, subject to definitive agreements, regulatory approvals and other conditions.

“This is a transformative moment where Ford will lead America’s transition to electric vehicles and usher in a new era of clean, carbon-neutral manufacturing,” said Ford Executive Chair Bill Ford. “With this investment and a spirit of innovation, we can achieve goals once thought mutually exclusive — protect our planet, build great electric vehicles Americans will love and contribute to our nation’s prosperity.”

The news comes amid strong demand for the new Ford F-150 Lightning truck, E-Transit and Mustang Mach-E electric vehicles, and it is on top of Ford’s recent announcement to expand production capacity and add jobs at the Ford Rouge Electric Vehicle Center in Dearborn.

“This is our moment — our biggest investment ever — to help build a better future for America,” said Jim Farley, Ford president and CEO. “We are moving now to deliver breakthrough electric vehicles for the many rather than the few. It’s about creating good jobs that support American families, an ultra-efficient, carbon-neutral manufacturing system, and a growing business that delivers value for communities, dealers and shareholders.”

Part of Ford’s more-than-$30 billion investment in electric vehicles through 2025, the investments in Tennessee and Kentucky support the company’s longer-term goal to create a sustainable American manufacturing ecosystem and to accelerate its progress toward achieving carbon neutrality, backed by science-based targets in line with the Paris Climate Agreement. Overall, Ford expects 40% to 50% of its global vehicle volume to be fully electric by 2030.

The decision

Bill Ford told the Detroit News when the news broke that “of course” Michigan was seriously considered for the project, but the state lacked four essential components to land the investment — shovel-ready sites, sufficiently attractive economic incentives at the state and local levels, competitive utility rates for such a large-scale operation, and a workforce trained in the advanced skillsets required in the jobs of the future.

Thelen called the decision “a setback for Michigan.” 

“The automotive industry is Michigan’s game to lose, and we’ve lost the first inning,” he said. “This announcement brings back memories of pivotal moments from decades past in Michigan’s economic history. I was a college intern when General Motors Corp. decided to close the Willow Run plant in Ypsilanti, which once employed thousands of workers. That decision was a wake-up call to our state, which led to the development of an aggressive and robust set of economic development programs and strategies, which unfortunately have faded over the last decade.

“We can’t lose without learning, and if Michigan doesn’t learn from Ford’s decision, we risk further losses. How we respond today will set the course for the next generation of Michigan’s economic future.”

The response

He said it’s not too late for Michigan to regain its competitive standing for future automotive investments, but the state will have to up its game, providing shovel-ready sites for companies to build EV-related facilities and other large-scale job generating projects; creating or re-creating robust economic incentive tools that measure up to those in competing states specifically designed to lure Michigan companies away; setting competitive economic development utility rates for large-scale projects; and training Michigan’s workforce for these high-tech jobs.

“While (Ford’s) news is focused on electric vehicle investments, the elements noted above are universal needs across all our industries,” Thelen said. “Our homegrown companies have many options when considering their next investments, and other states are competing aggressively.

“The good news is we are still in the game. With a strong supply chain, available infrastructure and skilled workforce at the ready, we can win future automotive investments. While we may have lost this inning, we can still step back up to the plate next inning ready to hit.”

Thelen noted that Michigan would do well to think long term, making investments today that would reap manyfold dividends, in terms of growing the tax base and revenues, tomorrow.

“Ten-plus years ago, Michigan had a set of economic incentives that were compelling. The battery industry started here with several plants around Michigan, including one here in West Michigan,” he said. “We had early adoption of EV investments from the auto companies that solidified, particularly southeast Michigan, for that space. Over time, those facilities started to find themselves in Ohio, in Kentucky, now in Tennessee, now in Georgia and Texas and California, for that matter. So, some of it is, as we saw with the Tennessee announcement, we’ve got to find new ways to be competitive for these projects. Incentives is one big piece of it. And just the way we’ve changed the incentive mix over time, relative to our competitors, particularly in the south, it’s become less and less competitive. … Clearly the Southern states that have been utilizing creative incentives for decades to attract the auto industry and other sectors, they’re not regretting their decisions.”

Thelen said he doesn’t believe Ford’s decision necessarily will set a precent for disinvestment in Michigan’s auto industry, as there’s still “no place on the planet” that has a concentration of automotive expertise — suppliers, talent, training and structure, etc. — as great as Michigan’s.

“We have a lot of strengths,” he said. “We just need to be able to respond (to improve our weaknesses).”

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