U.S. Lawmakers Urge Investigation into Companies Involved in Ford's Michigan Battery Plant Project

According to a report by Reuters, the Biden administration has been asked to investigate four companies involved in a planned Michigan battery plant by the chairs of two U.S. House committees. This request, highlighted in a letter seen by Reuters, is part of an ongoing scrutiny into Ford Motor's (F.N) partnership with the Chinese battery maker CATL (300750.SZ). The names of these companies have been kept confidential due to agreements with Ford. The investigation is particularly focused on the roles these companies play in the facility's design, construction, and information technology processes.

In a separate inquiry, U.S. lawmakers have reached out to the Treasury and State Departments to investigate potential sanction evasion activities by one of the involved companies. This company is allegedly providing IT tools for the Michigan battery plant. In response, the Treasury Department has reaffirmed its commitment to combating illicit revenue generation activities internationally. Additionally, Representative Mike Gallagher, chair of the select committee focusing on this matter, and Representative Cathy McMorris Rodgers, chair of the Energy and Commerce Committee, have been at the forefront of this investigation.

The probe into Ford's partnership with CATL has intensified since September when lawmakers demanded documents from Ford regarding this collaboration. The possibility of calling CEO Jim Farley to testify before Congress about the due diligence Ford conducted in this partnership has also been considered. Congressional inquiries have focused on the potential impact of this partnership on U.S. interests, particularly concerns about the flow of U.S. tax subsidies to the FEOC (Foreign Entity of Concern). Congress is also concerned that this technological cooperation would create a foreign technological dependence on U.S. domestic industry that would be difficult to kick.

In response to these inquiries and developments, Ford has emphasized their commitment to complying with government regulations and maintaining high standards for their suppliers, particularly in areas of human rights and ethical business practices. Ford maintains that the battery plant is entirely under its ownership and operation, stating that they follow 'all government regulations across our business' and that their suppliers are required to meet their higher standards, including for protecting human rights, and are obligated to extend those requirements to suppliers with whom they might work.

Also, this is not the first time that the project has been criticised or negative factors have arisen. In anticipation of the impact of the lack of demand, at the end of last year Ford has revised the investment plan for the Michigan plant from the originally envisaged $3.5 billion project to a $2 billion investment.

In SMM's view, the technology transfer model of the new battery cell plant in Michigan, which is 100% owned by Ford, is in itself an indication of the attitude that Chinese companies are willing to take a new model of cooperation with U.S. companies in order to gain access to the US market, as compared to CATL's overseas plants such as the one in Thuringia, Germany. After the implementation rules of the Inflation Reduction Act of 2023 are introduced, it was also widely believed that CATL's technology cooperation, which is still difficult to be counted as FEOC, is acceptable to the U.S. at the policy level. However, it may be time for us to take a more cautious look at the viability of Chinese investment in North America.