General Motors has shelved, for now, plans to build a fourth U.S. EV battery plant with partner LG Energy Solutions. News of the decision to slow investment in EV battery production broke the same day that GM announced plans to invest $854 million to retool plants in Flint, Mich., New York state and Ohio to build the sixth generation of the automaker’s small block V8 – the latest iteration of a combustion engine family that goes back to the 1950s. What gives? GM isn’t saying. But the decisions point to these factors:
* GM makes most of its global profits from sales of V8 powered pickup trucks and SUVs in the United States. Keeping that franchise going as fuel economy and emissions standards tighten over the next decade is critical.
* The outlook for electric vehicle sales in the United States over the next decade is uncertain. Many forecasters and analysts predict U.S. EV demand will fall short of capacity over the next several years. The price war Tesla began this month could be a preview of coming attractions as scores of new EV models fight for market and mind share.
* GM and LG already have three U.S. battery factories to launch – and those launches so far are going more slowly than GM anticipated. As GM reviews spending heading into a possible recession, putting off another $2 billion + battery investment until the first three plants are shaken down looks prudent.
* Battery technology is shifting fast. GM’s first three Ultium battery plants are designed to produce nickel-cobalt batteries. But Ford and other manufacturers are turning to less costly lithium-iron chemistries. Solid state batteries are supposed to be just around the corner, and GM is investing in startups exploring other alternative chemistries.
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Meanwhile Ford is slashing several thousand product development jobs in Germany, and Germany’s IG Metall union is promising a fight. Ford CEO Jim Farley has been warning that the shift to EVs would result in job cuts and restructuring across the company. Ford last August outlined plans to cut 3,000 jobs from its North American and Indian staffs. Now, Ford is planning to cut as much as 65% of its German product engineering staff, shifting work to the United States, union leaders said.
The cuts throw more shade on the future of Ford’s EV collaboration with Volkswagen. Ford executives have signaled they believe they have a competitive software and electronics architecture locked in for future EVs – whereas VW is rebooting its software strategy. Ford reports 2022 financial results on Feb. 2.