Ford, SK Innovation to form joint venture to build battery cells

Ford Motor Co. on Thursday announced it plans to form a joint-venture with South Korean battery maker SK Innovation to manufacture batteries for electric vehicles, a major step forward on the Blue Oval's path to electrifying its vehicle lineup.

The two companies have signed a memorandum of understanding to form a JV called BlueOvalSK. The venture is slated to produce 60 gigawatt hours annually in traction battery cells and array modules in North America, starting mid-decade, with the potential to expand.

"This MoU is just the start; it's a key part of our plan to vertically integrate key capabilities that will differentiate Ford far into the future," Ford CEO Jim Farley said in a statement. "We will not cede our future to anyone else."

The announcement comes on the heels of Ford's unveiling Wednesday night of its all-electric F-150 Lightning, a major new entrant to the EV market. SK Innovation is the battery supplier for the electric F-150, which is slated to go into production next spring.

It also follows the resolution last month of a trade dispute between SK and rival LG Chem that had put into question SK's operations in the U.S.

"We are delighted to be entering into collaboration with Ford, America's leading and iconic automaker," Kim Jun, SK Innovation's CEO, said in a statement. "Our JV with Ford will play a pivotal role in fleshing out the electric vehicle value chain in the United States, a key objective of the current U.S. administration."

Ford officials cast the partnership as a way to secure its supply of vital components, gain greater expertise in battery chemistry, and reduce the costs of raw materials needed for EV parts. Executives said Thursday that it makes sense to source the parts in-house now that Ford is rolling out a higher-volume portfolio of electric vehicles.

"Given our projections on the demand for those products, there’s sufficient volume there for us to justify having a dedicated plant just to support that volume," said Hau Thai-Tang, Ford's chief product platform and operations officer. "And in fact we think it’s probably going to require two plants to deliver this 60 gigawatt hour, and that’s what led us to think about how to go about doing that.”

The battery cells and arrays that result from the JV will be used in "several" future Ford EVs, according to Ford.

The automaker says it will require at least 240 gigawatt hours of battery cell capacity by 2030, amounting to approximately 10 plants' worth. Of that total, about 140 gigawatt hours will be needed in North America alone, with the rest spread across other regions, including Europe and China.

SK, which is headquartered in Seoul, operates a battery plant in Georgia that supplies both Ford and Volkswagen. 

The establishment of the JV is not yet a done deal, as it's subject to the drafting of definitive agreements and regulatory approvals, the companies said.

And many of the details around what the JV will look like were not released Thursday or are still in the works. Representatives from the companies said, for example, that the ownership structure is still being determined.

And it was unclear from Thursday's announcement whether the JV will result in the construction of new battery plants, or whether it would involve adding capacity to some of SK's existing operations in the U.S. But Ford officials said their target of 60 gigawatt hours of capacity amounts to about two plants.

"This looks like an ownership agreement where Ford is locking in a specific amount of capacity that's tied to volume and by doing a joint venture, it ensures that they are the recipient of that volume," said Mike Ramsey, an automotive analyst at Gartner Inc.

Another issue that is likely to get attention from labor advocates, and potentially the White House, is whether the operations will employ union workers.

Just this week, Ford was touted by President Joe Biden as a model for the transition to electrification. During a visit to Dearborn, he highlighted Ford's production of the electric F-150 in the U.S., using a union workforce.

Though Ford officials on Thursday emphasized the automaker's status as the largest employer of UAW members in the country, they stopped short of guaranteeing anything. 

"We're in a memorandum of understanding phase. We don't have our labor strategy defined yet," said Lisa Drake, Ford's chief operating officer for North America. "That will be determined by the joint venture itself once that entity is set up, and that will be part of the definitive agreement later this summer."

In response to the announcement, Gerald Kariem, a UAW vice president who heads the union's Ford department, said in a statement that Ford "has a moral obligation, regardless of any joint venture arrangement, to ensure that the battery jobs that replace gas engine and transmission jobs are the same good paying union jobs that have fueled this American economy for generations."

Crosstown rival General Motors Co. is further down the path of setting up battery cell production with joint venture partner LG Energy Solution. Their first plant, in Ohio, is slated to open next year, and the companies recently announced plans to build a second plant in Tennessee.

Those operations so far are not unionized, but the UAW has been pressing GM about representing workers at those plants.

Experts say the entire automotive industry is looking at ways to shore up EV supply chains as production volumes grow.

"Most of the larger OEMs have been moving toward in-sourcing cell production, at least through joint ventures," said Sam Abuelsamid, principal analyst at Guidehouse Insights. "As the volumes of EVs increase, manufacturers are going to want to make sure they have a steady supply of cells. They don't want to get caught out by a supply chain that has limitations and have to battle with other automakers to get enough cells from third-party suppliers."

And partnering with an established battery maker makes sense, he said, because it gives the automakers access to the intellectual property and manufacturing know-how those partners bring to the table.

Ford's EV, battery strategy

The joint venture with SK is just one way Ford is looking to shore up its supply of the parts needed for a coming wave of electrified vehicles. 

The automaker in recent months has sped up its push toward electrification, increasing its planned investment in EV development to $22 billion through 2025, rolling out its first all-electric vehicle, the Mustang Mach-E, and establishing 2030 as a target to electrify much of its European lineup, among other moves. 

Ford also recently announced plans to build a $185 million global battery development center, dubbed Ford Ion Park, somewhere in southeast Michigan before the end of next year. 

Already, a team of 150 experts in battery technology development, research, manufacturing, planning, purchasing, quality and finance is working on accelerating Ford's research and development efforts on batteries and battery cell technologies. The Ion Park team will develop, test and build battery cells and cell arrays.

And earlier this month, Ford announced it was increasing its investment in Solid Power, a startup that produces solid-state batteries, which are widely viewed within the automotive industry as a promising alternative to the lithium-ion batteries that now dominate the EV market.

Ford and the BMW Group became equal equity owners in the company after contributing to a $130 million Series B investment round in the company.

"The creation of BlueOvalSK is the latest in a series of strategic actions that really signals Ford's intention to grow our expertise and secure our competitiveness in terms of the battery space," Thai-Tang said.

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski