Why Michigan Lost to Indiana for Stellantis Battery PlantMay 25, 2022
May 25, 2022
Jeep maker Stellantis NV’s selection of Kokomo, Indiana, for a $2.5 billion battery plant with South Korean battery manufacturer Samsung SDI that will create 1,400 jobs shows Michigan needs to double down on efforts to attract investment needed to continue its leadership in the new age of automotive manufacturing, according to industry observers.
The transatlantic automaker on Tuesday said it will begin production later this year on the plant offering an initial annual production capacity of 23 gigawatt hours when it launches in 2025 to supply North American vehicle assembly. The aim, however, is to grow the Indiana plant to 33 gigawatt hours, which would increase the investment up to $3.1 billion.
With Stellantis’ long-term strategy calling for two battery plants in North America through 2030, Michigan could be at a loss for such a critical investment in an electrified mobility future for the next decade, potentially jeopardizing its manufacturing leadership. Meanwhile, other states claiming major investments from its hometown automakers, foreign makes and EV startups are championing themselves as the future.
“The state of Indiana has always had a rich automotive heritage,” Indiana Gov. Eric Holcomb said during a news conference in Kokomo, “but with today’s news, we all just became a lot richer.”
The Indiana Economic Development Corp. has committed to more than $186.5 million in support for the project, including in tax credits, training grants, infrastructure improvements, other site readiness efforts and repayable financing support for construction. Additional incentives came from the city, Howard County, utility Duke Energy Corp., which declined to share specifics, and others.
Kokomo beat out Monroe County’s Dundee, where Stellantis has a 1.3-million-square-foot engine plant, The Detroit News previously reported. A roughly 400-acre site in Marshall also was considered. Locations in Wayne County were presented, but properties near Belleville and Trenton were deemed too small.
With a nearly 90-year history in Kokomo, Stellantis already has five components’ plants in the area and resumed production last year at a formerly idled transmission plant to make engines. A $229 million investment in its operations there was announced in October. The new plant will be kitty corner from Kokomo Engine Plant at 2644 N. 50 E, a parcel owned by the Greater Kokomo Economic Development Alliance. Other parcels needed are under option.
Duke Energy will meet with the joint venture to work out the infrastructure needed for the new plant, said Angeline Protogere, spokesperson for the utility in Indiana. It has planned 800 acres of solar panels to power the facility, Mark Stewart, chief operating officer of Stellantis in North America, said in Kokomo.
Industrial energy prices in Indiana were slightly less than Michigan in March at 7.83 and 7.88 cents per kilowatt hour, respectively, according to the U.S. Energy Information Administration.
Stellantis’ familiarity with the company was a factor since Samsung SDI is new to doing business in the United States, Stellantis CEO Carlos Tavares said on Tuesday during a virtual roundtable. He didn’t provide specifics on why other sites missed out.
Kokomo is “a place that is quite well-positioned to have a weighted average outbound logistic cost that is competitive,” he said. Stellantis has four assembly plants in Metro Detroit and one each in Toledo and northern Illinois.
“If you pile up the outbound logistics, the fact that we feel at home, and it was indeed a good (incentive) package that I will keep confidential as a matter of respect to my partners, it was the right thing to do.”
It’s a tough loss for Gov. Gretchen Whitmer’s administration, which has emphasized economic development during a critical election year and comes ahead of next week’s Mackinac Policy Conference. During her tenure, 21,600 auto jobs have been added and billions of dollars in investments announced, including the first assembly plant in Detroit in nearly three decades, according to her office.
Michigan Economic Development Corporation CEO Quentin Messer Jr. in a statement said Tuesday’s news showed the urgency required in expanding the state’s site preparedness efforts.
“Like other states or provinces, Michigan is competing aggressively to earn future investments by Stellantis,” he said in a statement. “While no single state can, or will, win every EV and mobility investment, Michigan’s pipeline remains strong and we remain laser-focused on working closely with our partners across state government, the legislature, our utilities and our regional partners to continue make the strong case for Michigan. Work remains and we are more than up to the task.”
He pointed to General Motors Co. saying in January that it will construct a battery plant in Delta Township outside of Lansing with LG Energy Solution, which in March said it was quintupling production at its existing battery plant in Holland. Those came after the Detroit automaker announced two other plants in Ohio and Tennessee and Ford Motor Co. said it was investing $11.4 billion for an EV assembly plant and three battery plants with partner SK Innovation Co. Ltd. in Tennessee and Kentucky.
Battery manufacturers, other automakers and EV startups have chosen states like Arizona, Georgia and South Carolina for still more battery plants.
“The Stellantis announcement shows that there’s many states that are going to compete,” Josh Hundt, the MEDC’s chief business development officer, told The Detroit News. “We need to make sure we continue to have the toolkit, the talent and land available for projects of this type to happen here in the state.”
Embarrassed by Ford’s Southern commitment, Whitmer and GOP lawmakers in December passed a new incentive program to solidify the GM project. The Strategic Outreach and Attraction Reserve, or SOAR, was a $1 billion incentive fund to help speed closure of a multibillion-dollar investment deal with GM and invest in site readiness.
Efforts like that along with the appointment of a new chief talent solutions and engagement officer are fresh signs of Michigan’s significant commitment to doing what it needs to do to attract investments — even leading up to a contentious election for state offices this fall.
“Michigan has to be able to compete with Georgia or Indiana or any other state or region,” said Glenn Stevens, executive director of MICHauto, the mobility arm of the Detroit Regional Chamber. “To do that, everyone has to be on the same page with everybody committed to better jobs.
“I think that there has clearly been a step, that the business climate and incentives are in place. That can’t be short-term. It has to be a long-term commitment.”
The Democratic governor has a pending request before the Republican-controlled Legislature for $500 million for cash grants to help seal economic development deals and pay for infrastructure improvements to make sites shovel-ready.
“Working together with the Legislature, we must keep making forward progress to put Michigan in the best position to compete for every project,” Whitmer spokesman Bobby Leddy said in a statement. “As the industry evolves at a rapid rate, Governor Whitmer will continue to put her foot on the gas to get deals done that create jobs and put Michiganders first.”
Shane Karr, Stellantis’ external affairs head in North America, described the Kokomo site and Indiana’s economic development team as “ready-to-go.”
Those greenfield sites outfitted with utility infrastructure and ready for construction are the most desirable for automakers facing bottlenecks for EV production, because there are not enough batteries, said Bernard Swiecki, director of automotive communities’ partnership and research at the Center for Automotive Research in Ann Arbor.
“It lets you begin production faster,” Swiecki said. “There’s a huge priority for that in the early days of this. As time goes on, maybe you won’t have as much of a time crunch. That point does free up brownfield sites, places where Michigan has a better shot.”
The new Indiana battery factory will use Samsung’s PriMX lithium-ion battery technology for vehicles assembled in North America.
UAW Vice President Cindy Estrada said in a statement the union will look to add the plant to its ranks and negotiate an agreement with Stellantis that brings the new plant under the UAW’s master agreement with traditional wages and benefits.
UAW President Ray Curry added in a statement: “UAW applauds the decision to invest in domestic production, and our union looks forward to being a part of its success. As President Biden recently said during his visit to South Korea, the most highly skilled and dedicated and engaged workers in the world are American union members. We look forward to having UAW members be a part of the success of this new joint venture.”
The plant is smaller than the gigafactory Stellantis announced in March for Windsor, Ontario, with LG Energy Solution. That $4.1 billion plant’s annual capacity is expected to be more than 45 gigawatt hours and launch in the first quarter of 2024, supplying 2,500 new jobs.
Stellantis is investing $35.5 billion into electrification and software by 2025. It says it will have around 400 gigawatt hours of annual capacity by 2030 across five gigafactories, including three in Europe and the two in North America. By then, it expects more than half of its U.S. sales will be all-electric with 25 available models.
“Sometimes people think that we’re behind,” Stellantis’ Stewart said. “We are not.”