Lawmakers challenge Ford and its Chinese battery partner over forced labor

A CATL battery factory under construction in Ningde, China on Nov. 17, 2021. (Qilai Shen/The New York Times)

A CATL battery factory under construction in Ningde, China on Nov. 17, 2021. (Qilai Shen/The New York Times)

A licensing deal between Ford Motor Co. and a major Chinese battery maker is coming under scrutiny from Republican lawmakers, who say it could make a U.S. automaker dependent on a company tied to forced labor in China’s Xinjiang region.

In a letter sent to Ford on Thursday, the chairs of the House Select Committee on the Communist Party of China and the House Ways and Means Committee asked for more information about the deal, including what they said was a plan by Ford to employ several hundred Chinese workers at a new battery plant in Michigan.

Ford announced plans in February to build the $3.5 billion plant using technology from Contemporary Amperex Technology Ltd., known as CATL, the world’s largest maker of batteries for electric vehicles. CATL produces about a third of the world’s electric vehicle batteries and supplies General Motors, Volkswagen, BMW, Tesla and other major automakers.

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Ford defended the collaboration, saying it will help diversify Ford’s supply chain and allow a battery that’s cheaper and more durable than current alternatives to be made in the United States for the first time, rather than imported.

But lawmakers, who have previously criticized the deal, cited evidence that CATL had not relinquished its ownership of a company it helped establish in Xinjiang, where the United Nations has identified systemic human rights abuses.

CATL publicly divested its stake in the company, Xinjiang Zhicun Lithium Industry Co., in March after announcing its deal with Ford. But the shares were purchased by an investment partnership in which CATL had a partial stake when it was formed, as well as a former CATL director who holds senior positions at other companies owned by the battery maker, according to company records.

The circumstances of the sale raise “serious questions about whether CATL is attempting to obscure ties to forced labor,” wrote Representatives Mike Gallagher of Wisconsin, chairman of the select committee, and Jason Smith of Missouri, chairman of the ways and means committee.

Lawmakers, citing details of Ford’s license agreement that are filed with the select committee, also criticized the automaker’s commitment to employ several hundred Chinese workers. Chinese employees would install and maintain CATL equipment at the Michigan plant until around 2038, lawmakers said. The plant is expected to employ 2,500 American workers, Ford said.

“Ford argued that the agreement will create thousands of American jobs, reinforce ‘Ford’s commitments to sustainability and human rights,’ and lead to advances in American battery technology,” they wrote. “But the newly uncovered information raises serious questions about each claim.”

TR Reid, a spokesman for Ford, said the company is going through the letter and will respond in good faith. He said human rights were fundamental to the way Ford did business and the automaker was thorough in assessing these issues.

“There’s been an awful lot of things said and implied about this project that are incorrect,” Reid said. “At the end of the day, we think the creation of 2,500 well-paying jobs with a new multi-billion dollar investment in the United States for great technology that we will bring to large electric vehicles is a good thing on all counts.”

CATL responded after the publication saying it had no equity relationship with the investment partnership that bought the Xinjiang company, but it did not immediately provide any documents.

CATL’s collaboration with Ford could be a bellwether for the electric vehicle industry in the United States. Critics called the deal a “Trojan horse” for Chinese interests and called for the partnership to be scuttled. If successful, they say, reliance on Chinese technology could become the norm for the US electric vehicle industry.

Ultimately, China’s control over key technologies such as batteries could leave the United States “in a much weaker position,” said Erik Gordon, assistant clinical professor at the University of Michigan’s Ross School of Business.

“The profit margins go to the innovators who deliver the cutting edge technology, not the people with screwdrivers who put the cutting edge technology together,” he said.

But CATL and other Chinese companies have battery technology that isn’t readily available from suppliers in the US or Europe. The Michigan plant would be the first in the United States to produce so-called LFP batteries that use lithium, iron and phosphate as the main active materials.

They are heavier than the lithium, nickel, and manganese batteries currently used by Ford and other automakers, but cheaper to manufacture and more durable, capable of handling many loads without degrading. They also don’t use nickel or cobalt, another battery material, which is often mined in ways that are harmful to the environment, and sometimes with child labor.

Without the most advanced or cheapest batteries, US automakers could fall behind Chinese rivals such as BYD expanding into Europe and other markets outside of China. Americans may also have to pay more for electric cars and trucks, slowing sales of vehicles that don’t emit greenhouse gases.

A battery unveiled by CATL last year offers hundreds of miles of range after charging for just 10 minutes.

“The hard truth is that the Chinese have taken a huge bet on electric vehicles and invested more than a trillion Chinese dollars and subsidies on this industry, and that bet just happens to have been successful,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.

“If you decide not to partner with a very large battery maker, you’re essentially committing to delaying America’s energy transition,” he added.

Ford plans to use batteries made with CATL technology in cheaper versions of vehicles like the Mustang Mach-E and F-150 Lightning pickups. The cheapest version of Tesla’s Model 3 sedan comes with an LFP battery that CATL would have supplied.

For decades, Western companies have had a monopoly on the world’s most advanced technologies and have sought to gain access to the Chinese market while protecting their intellectual property.

But China’s dominance in electric vehicle batteries, as well as the production of solar panels and wind turbines, has reversed this dynamic. This has created a particularly delicate dilemma for the Biden administration and other Democrats, who want to reduce the country’s dependence on China but also argue that the United States must quickly transition to cleaner energy sources in an attempt to mitigate climate change.

The exposure of the solar and electric vehicle battery industry in Xinjiang further complicates the situation. The Biden administration has condemned the Chinese government for perpetrating genocide and crimes against humanity in the region.

Last year, the United States banned imports of products made in whole or in part in Xinjiang, saying companies operating in the region are unable to guarantee their facilities are free of forced labor.

In 2022, CATL and a partner registered a lithium processing company in the region called Xinjiang Zhicun Lithium Industry Co., which promoted plans to become the world’s largest producer of lithium carbonate, a key component in batteries.

Through a series of subsidiaries and shareholder relationships, this Xinjiang lithium company has financial ties to a Chinese electric utility, Tebian Electric Apparatus Stock Co., or TBEA, according to documents the New York Times reviewed via Sayari Graph, a mapping tool for corporate ownership. The TBEA has been heavily involved in so-called poverty alleviation and labor transfer programs in Xinjiang, which the United States considers a form of forced labor.

While the Chinese government argues that the labor transfer and poverty reduction programs aim to improve living standards in the region, human rights experts say they also aim to pacify and indoctrinate the population, and that Uyghurs and other minority groups cannot say no to these programs without fear of arrest or punishment.

In December, CATL told The Times that it was a minority shareholder in the Xinjiang company and strictly prohibited any form of forced labor in its supply chain.

Republican lawmakers also expressed concern about whether batteries made at Ford’s Michigan plant would qualify for tax credits the Biden administration was offering consumers who bought electric vehicles under the Cut Inflation Act.

The law prohibits “foreign entities of concern” — such as companies in China, Russia, Iran or North Korea — from receiving government tax credits. But because Ford is licensing the CATL technology for the factory — rather than forming a joint venture, as has often been the case with automakers and battery suppliers — Michigan-made batteries can still qualify for those incentives.

The Biden administration has yet to specify exactly how the restriction on foreign entities will be applied. But Ford officials said they had conversations with the administration about the Michigan plant and were confident the facility would be eligible for all the benefits of the law.

“We believe that batteries built by American workers in an American factory operated by a wholly owned subsidiary of an American company will and should be eligible,” Reid said.

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