MichAuto > Blog > Media Coverage > Howes: Michigan losing race to win more EV factories

Howes: Michigan losing race to win more EV factories

May 9, 2022
The Detroit News
Daniel Howes
May 8, 2022

Leadership in electric vehicle production and battery assembly is up for grabs, and evidence strongly suggests the home of Detroit’s automakers keeps falling behind.

Automakers old and new are placing bets on EV-related production and development hundreds of miles from the Motor City, laying bare the perception and sometimes the reality that this state is getting lapped in the parallel races for electrification and job-creating investment.

Just ask the governors of Kentucky and Tennessee, each touting massive EV and battery projects in their states — from Michigan’s own General Motors Co. and Ford Motor Co. Or Canada’s prime minister, Justin Trudeau, now holding Stellantis NV’s pledge to partner with LG Energy Solution to produce batteries in Windsor and a GM plan to assemble battery-related materials in Quebec, among other things.

Hey, Lansing — these are not encouraging trends if you’re serious about securing Michigan’s leadership in next-generation electric vehicles and battery production. Walbridge Co., the Detroit-based commercial construction firm that builds auto plants and other facilities around the world, identified 70 electric vehicle and battery-related projects across the United States, Chairman John Rakolta Jr. told The Detroit News.

Leadership in electric vehicle production and battery assembly is up for grabs, and evidence strongly suggests the home of Detroit’s automakers keeps falling behind.

Of those, just nine are considering Michigan. And only two — GM’s announced battery plant in Delta Township near Lansing and its conversion of Lake Orion Assembly to electric truck production — are pledged to Michigan. They’re part of what Walbridge estimates to be $200 billion in investments for battery-electric assembly plants, battery production, diode and cathode sub-suppliers, semiconductor chip plants and aluminum production.

More EV- and battery-related investments in Michigan are possible, even likely. Mark Stewart, chief operating officer of Stellantis North America, last week signaled that Michigan “absolutely” is in contention for at least one of as many as three EV battery plants in North America, and that a decision should come within a month or “two months maximum.”

But the concentration of startups and foreign-owned assembly plants in Ontario, Indiana, Ohio and a swath of Southern states — and the growing list of battery operations located nearby — signals that the state credited with assembling more vehicles than any of its peers nonetheless is on track to lose more than it wins.

With the exception of Mazda Motor Corp.’s now-dissolved dalliance with Ford Motor Co. at its Flat Rock Assembly, not a single foreign automaker has located a U.S. plant in Michigan. And that stubborn fact does not strengthen the state’s efforts to land EV- and battery-related investments now mostly accruing to Southern states.

“The market is telling you Michigan is uncompetitive,” Rakolta said. “This is passing us by at breakneck speed. We won two, three out of nine so far. Even if we win all nine, it’s not sufficient to replace what we’re losing. Momentum … is taking place right now.

“This is not a problem that has a silver bullet. This is existential, I believe, to the state of Michigan. There is no cohesion in Michigan. Two, we don’t have ready sites. We all know what’s going on. The question is, do we have the fortitude to change?”

Not so much, if the past is any indication. Ford’s decision last fall to join with a battery partner to invest $11.4 billion — its largest manufacturing investment in the Blue Oval’s 118-year history — in Kentucky and Tennessee shocked and angered Michigan’s complacent leadership, chiefly because the move blew a multibillion-dollar hole in an Auto 2.0 narrative reeking of entitlement.

Battling back

Embarrassed, Michigan responded by creating the “Strategic Outreach and Attraction Reserve,” or SOAR, a $1 billion incentive fund quickly arranged to help speed closure of a multibillion-dollar investment deal with GM, a transaction paired with a competitive industrial utility rate package quarterbacked by DTE Energy Co.

“What we’ve done for General Motors, we can do for anyone,” DTE CEO Jerry Norcia said in an interview earlier this year. “The Ford announcement caused a lot of deep reflection of everyone involved. We really need to build capacity to invest in EV assembly and batteries.”

However positive Ford’s launch of its all-electric F-150 Lightning pickup in Dearborn, or GM’s revival of Detroit-Hamtramck Assembly building the Hummer EV and, soon, its electric full-size pickups, evidence mounts that no single place is likely to own the electrified future.

In another hit to Michigan, Stellantis last week also said it would invest $2.5 billion to renovate plants in Windsor and Brampton, Ontario, in preparation for their transition to building EVs. And the transatlantic automaker pledged to expand its Automotive Research and Development Centre in Windsor to create a battery lab to develop all-electric and hybrid cells, modules and battery packs.

The challenge is intensifying. Startups like Lucid, Rivian, Nikola and heavyweight Tesla are building vehicles in Arizona, Illinois, California and Texas. Foreign-owned legacy rivals Honda Motor Co., Nissan Motor Co., Volkswagen AG, Toyota Motor Corp., Mercedes-Benz, BMW AG, Hyundai Motor Co. and Subaru Motor Co. are planted in Ohio, Tennessee, Kentucky, Indiana, South Carolina, Georgia, Alabama and Mississippi.

And as many of Detroit’s rivals add electric vehicles to their U.S. production plants — near certainties in the launch of new EVs — battery-related operations to supply those plants are likely to follow. BMW, Nissan and Hyundai are scouting sites for U.S. battery operations, too. The upshot is a shift in the critical mass of electrification away from the traditional heart of the American auto industry.

“Half the die is already cast,” said Patrick Anderson, CEO of the East Lansing-based Anderson Economic Group. “Where they’re assembling these vehicles is the No. 1 factor in where they locate these facilities.”

If geography is destiny, the hard realities of the map do not bode well for Michigan’s bid to claim leadership in the industry’s increasingly hard pivot to electrification. Nor does the unmistakable post-pandemic trend toward full-time remote work, likely to be intensified by automakers’ efforts to recruit new kinds of tech talent working around the country.

Among the risks: that remote work and invest-in-battery-production where you assemble could form a perfect storm to diminish the concentration of knowledge-based auto talent in Michigan, among other industry strongholds. What those trends portend for places like Detroit, Warren, Dearborn and Auburn Hills are hard questions that cannot be denied.

Wake-up call

The quickening change is no secret to state officials scrambling to claim a share of the EV gold rush, according to a ranking source familiar with the matter, describing a “historically” high rate of activity in the EV-related investment pipeline. The trouble is most projects announced outside Michigan are perceived — if not actual — losses eroding the state’s claim of leadership.

The more others win, the harder it will be for Michigan to dispel whispers that the home of the first automotive century is losing its grip on the next one. Such a wound is largely self-inflicted, the economic and civic culmination of the state’s collective refusal to reckon with its workaday culture, comparative lack of educational attainment and increasingly toxic, hyper-partisan politics.

Last week, the CEO of Business Leaders for Michigan, Jeff Donofrio, used a Detroit Economic Club meeting to detail a new benchmarking analysis of the state’s competitive position with other states. The bottom line: Michigan’s relative position is much improved from the dark days of auto bankruptcies amid the global financial meltdown, but rival states are improving at faster rates and landing more job-creating investment.

Nearly 170,000 jobs in Michigan are potentially at risk amid the EV transition, BLM estimates. Over the past dozen years, the CEO group says the state moved to 15th from 49th among the 50 states in business competitiveness. Also over the past decade, Georgia and Kentucky have passed Michigan in educational attainment and Tennessee — future home to Ford’s sprawling Blue Oval City — is drawing closer.

“Tennessee’s not messing around, either,” said Glenn Stevens, vice president and executive director of the Detroit Regional Chamber’s MichAuto, explaining that the Volunteer State has been shoring up its workforce development programs and community college system. It also notched an 8,500-person, $1.2 billion campus in downtown Nashville for software giant Oracle Corp.

“The same thing can be said for Kentucky. Indiana is all-in. The competition is really tough,” he added. Ohio landed one of GM’s battery plants near Lordstown, and Intel Corp. is investing $20 billion near Columbus to build two “leading edge” semiconductor chip plants employing thousands and reshaping Ohio’s industrial narrative. Intel’s total investment there is nearly three times GM’s pledged investments in Delta Township and Lake Orion.

And Ontario’s aggressive strategies to build a high tech cluster it calls “The Corridor,” to invest $2 billion in a minerals strategy for EV mining supply chain to develop strategies for electrification and software development, is drawing reinvestment by GM and Stellantis not far from Detroit.

Failed imagination

Michigan is just too slow.

For more than a decade, imperatives to attract and retain talent, to boost educational attainment, to coalesce Republicans and Democrats around a shared vision for the state’s economic future have consistently fallen short. Why? Because things have been too good, economically speaking, and this place doesn’t do big, hard things unless its collective back is against the wall.

Examples: think Ford’s restructuring under former CEO Alan Mulally; think the pitiless workouts of GM and the old Chrysler Group in federally induced bankruptcy; think the bankruptcy of Detroit. Even the recent creation of the SOAR fund to woo GM investments amounted to a panicked reaction to the massive Ford deals in Kentucky and Tennessee.

Second, partisan politics have morphed into demonizing the other side, making “consensus” and the “cohesion” of Rakolta’s telling risible concepts to the governor, lawmakers and those who would take their places. Smart CEOs whose companies are not deeply rooted here would think very long and very hard about investing billions in a state governed more by ideological grandstanding than enlightened economic pragmatism.

That’s why Michigan’s marquee Auto 2.0 investments of the dawning electric century come from GM and not Toyota, Ford and not Volkswagen. It’s why LG Energy Solution is investing to expand its operation in Holland and create 2,000 more jobs — because it knows the state. Others not already heavily invested here have options.

Third, leaders here too often project a failure of imagination, aggravating their disinclination to lead. Southern governors play offense and work with their respective legislatures, and the results speak for themselves; Michigan’s governor plays defense and exhibits scant aptitude for managing Republican leaders — except under duress — and it shows.

Now, this being a statewide election year, there’s always the lurking possibility the state could land a big next-gen project promising thousands of jobs and a tech-driven narrative akin to Ohio’s Intel win. But that assumes hurdling such deficits as suitably large (and development-ready) sites, comparatively high utility rates and Republican reticence to give an election-year win to a Democratic governor seeking a second term.

The next automotive century, mostly powered by electricity, does not belong to Michigan. It’ll go to the places that hustle hardest and demonstrate by what they do that their job is providing the conditions business needs to prosper. And, right now, Michigan is at serious risk of missing that moment.

View the original article.