Jim Farley’s decision to invest $7 billion in green-field new battery and electric-vehicle assembly plants in the mid-South is not only a huge new commitment by the Ford Motor Co. CEO to the fast-gaining propulsion technology. It’s also a mammoth declaration by America’s iconic carmaker that the future of the auto business in the United States will remain anchored in flyover country.
Kentucky and Tennessee scrapped to land the $11.4 billion in new industrial production that will be located northeast of Memphis and in Glendale, Kentucky, including commitments by SK Innovation, Ford’s battery supplier. The two states came up with nearly $1 billion in financial incentives for the two companies to plunk the facilities and an estimated 11,000 new direct jobs in their precincts.
“West Tennessee will now lead the nation in the next American industrial revolution, said Governor Bill Lee of Tennessee in a news conference, with actually not too much hyperbole. Andy Beshear, the governor of Kentucky, predicted “these enormous plants will capture the attention of the entire world. Every nation will know where Kentucky is and who we are.”
Losers React
The repercussions were immediate in other states that lost out. Michigan officials, for example, were left explaining how they couldn't land such a watershed new investment by an important homegrown company, and reminding everyone that automakers are continuing to invest other billions across the state. Ohio was the other reported finalist.
“I was shocked, very disappointed to see” that Ford decided to locate the plants out of state, U.S. Rep. Tim Walberg told the Detroit News. Quick analysis by the News concluded that Michigan’s comparatively high industrial-power costs, lack of large-scale tracts suitable for modern developments, and its “difficulty quickly mustering the kinds of financial incentive packages that can help close big deals” all contributed to the state’s failure to land Ford’s plants.
Meanwhile, in Illinois, the announcement goosed Governor J.B. Pritzker’s strategizing behind a plan that would boost the state’s efforts to attract its own share of EV investments. Electric-truck startup Rivian put its first plant in Normal, Illinois, in an old Mitsubishi facility, and now Pritzker wants to convince Samsung to build a massive battery factory next door.
“The governor’s goal is to build an ecosystem, not only to build vehicles but [also] the supply chain,” one senior administration official told Crain’s Chicago Business. “The governor repeatedly has said this is a key area for us.”
The First Boom
Indeed, the froth these days as automakers begin to build out their EV-production infrastructure is reminiscent of what happened 40 years ago across the heartland when global players were all trying to figure out how to build and sell small cars profitably in an American market that was being choked by high gasoline prices.
Nissan built its first U.S. plant, near Smyrna, Tennessee; Toyota built its first U.S. plant, near Georgetown, Kentucky; and General Motors plunked its Saturn complex near Nashville. Meanwhile, Volkswagen – ill-fatedly, as it turned out – had refurbished a plant in Westmoreland, Pennsylvania, and began churning out little cars in 1978.
The mid-South plant locations then made a lot of sense because they were in states unfriendly to unions and yet close enough to the supplier industry’s existing infrastructure, centered in the Upper Midwest, to make sense logistically.
Forty years later, there’s similar logic to Ford’s decision in favor of Tennessee and Kentucky, including relatively inexpensive supplies of the massive amounts of electricity it takes to make batteries for all-electric vehicles.
At the same time, Ford’s new plants now will be in the relative center of a massively expanded auto-industry supply base and assembly-plant network that now occupies essentially all of flyover country -- from a Mercedes-Benz plant in Alabama to a Kia plant in Georgia; from new GM battery plants planned for Ohio to the company's long-existing assembly plant in Missouri; and from the Subaru plant in Lafayette, Indiana, to the Toyota plant about 170 miles to the south in Princeton, Indiana.
The Digital Divide
Include all the existing plants in the mid-South – with a big new one, built by Volkswagen in Chattanooga, opening up about a decade ago. And in Michigan, note the thriving facilities operated or being constructed by the traditional Big Three in Detroit alone: a refurbished Stellantis plant that is turning out the company’s biggest Jeeps ever; GM’s Factory Zero, its ground zero for EV production that is taking over the company’s Detroit-Hamtramck facility; and a huge new tech-center campus being built by Ford in and around the old Michigan Central train station close to downtown.
Actually, that last project – a mixed-use campus where Ford projects thousands of young white-collar workers designing and developing new generations of vehicles while enjoying an urban ambiance – may prove just as important to the heartland as what Ford now plans to do in Kentucky and Tennessee.
For while Ford’s plans for EV production will help keep the ballast of automotive output in flyover country, probably for decades to come, the domestic industry is still battling Silicon Valley for control of the brains of modern vehicles, particularly as evolving technology tilts toward electric power and digital controls that tend to be paired together.
The bulk of engineering and development work on vehicles remains strongly situated in the Midwest, not only through the Detroit Three but also through foreign automakers such as Toyota and Hyundai that have big R&D investments in Michigan. When it comes to designing powertrains, marrying nav screens to dashboards, eliminating noise and vibration, and figuring out how to connect the knee bone to the thigh bone, the domestic auto industry clearly has vanquished initial attempts by the Apples and the Googles to dabble in actually designing and making automotive sheetmetal.
But through the back door of digital tech and autonomous driving, Big Tech keeps clawing to develop and control the critical mass of binary IP that will operate vehicles in the future – no matter where they’re designed and built.
Will flyover country be able to shoulder our way into the pole position in the computerized car of the future as we have clearly won the competition to retain our dominance in vehicle development and manufacturing? That is today’s challenge.