The United Auto Workers Meet Electrification

August 21, 2023

The American Prospect: The United Auto Workers Meet Electrification

The word EV is written in roads. A road leads into the tall EV in the background and there is a blue sky and clouds.
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An article in The American Prospect lays out some of the challenges United Auto Workers are facing as they negotiate with company leaders of the Big Three automotive companies (Ford, GM, and Stellantis).

The companies, like automakers across the globe, stand to get billions of dollars in public subsidies from federal investments including the Inflation Reduction Act.

Per the story:

“WE’RE TALKING ABOUT WHERE THE VALUE of the credits exceeds the capital expenditures and exceeds the wage bill,” Greg LeRoy, founder of the federal contracting watchdog organization Good Jobs First, told me. “Those are historically exceptional ratios.”

When I spoke with LeRoy and another researcher at Good Jobs First, Jacob Whiton, the two had recently published a report, “Power Outrage,” examining the cost of subsidies from the Inflation Reduction Act’s $200 billion Advanced Manufacturing Production Tax Credit program, otherwise known as 45X. “It’s on steroids now,” LeRoy said.

The 45X program won’t be exclusive to EV manufacturing; the Department of Energy defines its use for “clean energy component[s] domestically produced.” As long as the automakers realize the domestic production requirements, according to conservative estimates, 45X could subsidize one-third of the costs for EV battery manufacturing. The subsidization ratio could even increase as the automakers more efficiently build EVs.

Cantor explained how 45X is applied in two stages: first for the battery cell, and then the battery module. Manufacturers are eligible for up to $35 per kilowatt-hour (kWh) of a battery cell’s capacity. Then manufacturers can receive $10 per kWh based on the battery module’s capacity. If a battery module doesn’t use cells, the $35 per kWh is rolled into the module credit. The tech, energy, and finance law firm Orrick, Herrington & Sutcliffe, LLP gave the example of a 75kWh battery pack being eligible for up to $2,625, plus another $750 for the module.

Those credits are for future production, but in the first year since the IRA passed, the money has already flowed. The Department of Energy’s Loan Programs Office, using an expansion in funding under the IRA, has doled out large sums for battery plants across the country, including a whopping $9.2 billion loan for Ford’s BlueOval SK joint venture. That figure, the largest the U.S. government has given to an automaker since the Great Recession bailouts, almost covers the entire buildout of the three proposed BlueOval battery plants in Kentucky and Tennessee.

Read the full story at The American Prospect.