Ford CEO calls for US battery production to avoid shortage

Ford shares surged as much as 6.7 per cent, reaching a three-year high. PHOTO: AFP

UNITED STATES (BLOOMBERG) - Ford Motor's top executive said the United States must begin building batteries for the coming wave of electric vehicles (EVs) to avoid supply disruptions like the semiconductor shortage now shutting American auto factories.

"We need to bring large-scale battery production to the US and we'll be talking to the government about that," Mr Jim Farley, Ford's chief executive officer, said on Wednesday (Feb 24) at the Wolfe Research Auto Conference.

"We can't go through what we're doing with chips right now with Taiwan. It's just too important."

Ford shares surged as much as 6.7 per cent, reaching a three-year high. They finished the New York trading session up 5.6 per cent to US$12.27 ($16.29).

A global shortage of critically needed computer chips is causing a wave of factory idlings worldwide that could cut automotive earnings before interest and taxes by a third at Ford and General Motors this year, Moody's Investor Service estimates.

Many of the world's chips used in cars and consumer electronics come from the Taiwan Semiconductor Manufacturing, which has struggled to meet unexpectedly strong demand from both sectors.

SK Innovation of South Korea, Ford's battery supplier for its upcoming electric F-150 pickup, recently lost an intellectual-property case brought by rival LG Chem, also from South Korea.

The International Trade Commission banned SK Innovation from importing batteries to the US for 10 years, but allowed the company to import components for the next four years for the batteries that will power the plug-in F-150 coming in 2022.

Mr Farley has called on both companies to negotiate a settlement. But he also believes the US needs to in-source battery production to resolve supply and labour issues that could disrupt the industry's broad roll-out of electric vehicles over the next decade.

Ford has said it will spend US$22 billion on EVs through to 2025.

"This is a huge, multi-solution opportunity," Mr Farley said. "For legacy players, we have to deal with our labour issues, so more in-sourcing is more important to us."

He also said the company is "relentlessly and ruthlessly rooting out inefficiencies" in its auto operations.

He said Ford could reduce expenses from warranty-related repairs to its vehicles by between US$1 billion and US$2 billion annually.

"We are not competitive yet on cost. Warranty is a major opportunity."

Mr Farley, who became CEO on Oct 1 last year, sees a growth opportunity in selling services to drivers and providing data from the company's cars, which are now connected to the Internet.

He said that it already is a $4 billion market. "It could be bigger. And right now we're just getting started."

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