Ford Motor (F.N) halted development on a $3.5 billion electric car battery facility in Michigan on Monday, citing worries about its ability to operate competitively during contract talks.

UAW President Shawn Fain called the news “a shameful, barely-veiled threat by Ford to cut jobs…. We are simply asking for a just transition to electric vehicles and Ford is instead doubling down on their race to the bottom.”
Ford has regularly upgraded its contract offer to the union without a compromise, while battery factory employees’ fate has remained a crucial issue in Detroit Three discussions.

“We are pausing work and limiting spending on construction on the Marshall project until we’re confident about our ability to competitively operate the plant,” Ford said Monday, omitting to specify the cause but citing many factors. “We haven’t decided on the planned investment there.”

On Tuesday, President Joe Biden will join a UAW picket line in Michigan to support Detroit Three autoworkers.

Ford and Chinese partner CATL (300750.SZ) unveiled plans to establish the facility in Michigan in February, hoping to entice U.S. buyers to a lower-cost Chinese technology.

Gretchen Whitmer stated, “Ford has been clear that this is a pause, and we will continue to push for successful negotiations between the Big 3 and UAW so Michiganders can get back to work doing what they do best.”

The UAW and some in Congress want automakers to pay battery plant employees the same as assembly and engine plant workers.

Republicans in Congress are investigating Ford’s battery factory plan because it might allow U.S. tax subsidies to China and make Ford dependent on Chinese technology.

Representative Mike Gallagher, Republican chair of a House China select committee, said legislators were “encouraged to see Ford take a crucial first step to reevaluate its deal” with CATL. “Now, Ford must cancel this deal forever,” he said.

Ford predicted a full-year EV unit loss of $4.5 billion in July, 50% greater than earlier this year, and slowed its manufacturing ramp up. Ford intends to treble gas-electric hybrid sales in five years.

As automakers invest in EV battery production, the industry is monitoring how new EV tax credit regulations will be applied.

The $430 billion Inflation Reduction Act (IRA) of 2022 barred $7,500 in consumer EV tax credits if battery components are made or assembled by a “foreign entity of concern.”

Ford awaits word on whether Marshall plant batteries meet criteria.

It advised the Treasury to limit the restriction because “an overly expansive interpretation of this provision risks… making the clean vehicle credit largely unavailable.”

Ford has maintained the Marshall facility will employ 2,500 people, but some Michigan Republicans have questioned the $1.7 billion in state subsidies.