The US Department of Energy (DOE) plans to loan $9,2 billion to the joint venture BlueOval SK between Ford Motor and South Korean battery maker SK On for its battery plants in Kentucky and Tennessee. A massive loan that nearly matches the $11,4 billion the companies themselves are investing in the project.

It marks the most significant direct government support for an automotive company since the bailouts during the Great Recession. It is the largest single loan the Department of Energy has ever made.

It comes as the Biden administration and automakers aim to rapidly ramp up electric vehicle production to compete with China, which currently tends to dominate the global EV market.

11 000 jobs

The loan to BlueOval SK would support the venture’s three new facilities, one in Tennessee and two in Kentucky, that will build electric vehicle batteries. Ford has estimated that the projects will create 11 000 jobs, and DOE says it will make more than 120 GWh of US battery production annually.

The loan would support US President Joe Biden’s agenda “to onshore and re-shore domestic manufacturing of technologies that are critical to reaching the clean energy and transportation future,” the Energy Department said in a blog post about the funding.

“Expanding domestic EV battery production is critical to meeting the administration’s goal of 50% of new car sales being electric by 2030,” DOE added. DOE’s announcement is a ‘conditional commitment’, which typically means there are additional requirements companies must meet before a loan is finalized.

DOE can offer loans with a repayment timeline of up to 25 years. The interest rate on a loan is equal to the United States Treasury yield curve with zero credit spread, a more affordable rate than the joint venture could have gotten from private investors.

Ford’s electric plans

On Thursday, Ford Treasurer Dave Webb said that the company welcomes the agency’s support for the BlueOval SK project. “It will help make great EVs available to more customers while powering thousands of good paying jobs and American manufacturing.”

“Major technology transitions have always been accelerated by collaboration between the public and private sectors. The DOE’s foresight here will help do the same for the transition to zero-emissions transportation,” he added.

Ford announced the investments in Kentucky and Tennessee in September 2021. Construction is underway at both campuses. The 3 600-acre campus in West Tennessee, BlueOval City, will be Ford’s largest manufacturing complex.

It will encompass a battery plant jointly operated by Ford and SK. This assembly plant will build next-generation electric F-Series trucks, a supplier park, and an upfitting center. The assembly plant is slated to have the capacity to produce some 500 000 vehicles a year. Executives have said the project is on track for a 2025 opening.

High efficiency

Ford executives have touted the manufacturing efficiencies the new assembly plant will deliver, partly because Ford is developing the truck alongside the plant’s construction. The factory will have a 30% smaller footprint than traditional plants but a higher production capacity.

BlueOval City and BlueOval SK Battery Park, the campus home to twin battery plants, are critical pieces of Ford’s $50 billion electrification plan, under which it plans to hit a production rate of 2 million EVs annually by the end of 2026.

The Dearborn automaker also plans to build another $3,5 billion battery plant in Marshall, Michigan. That operation is slated to create 2 500 jobs and involves licensing battery technology from Chinese battery maker Contemporary Amperex Technology (CATL), an arrangement that has drawn scrutiny from Republicans in Washington.

Unions have plans too

The announcement also comes ahead of crucial contract negotiations between the United Auto Workers and the ‘Detroit Three’ automakers. The unionization of joint ventures and battery plants like BlueOval SK – especially in the US South, a historically tough-to-organize region – is one of the UAW’s top priorities.

“Employees at BlueOval SK’s battery plants in Tennessee and Kentucky will be able to choose whether they organize, a right that Ford fully respects and supports,” Ford spokesperson Melissa Miller said in a reaction.