It’s deja-vu all over again — this time south of the border..Americans were shocked and awed after the US Department of Energy doled out US$9.2 billion to the Big Three US automaker to build three EV assembly and battery factories in Kentucky and Tennessee under the Biden administration’s Inflation Reduction Act..The state governments of Kentucky and Tennessee also agreed to chip in some $2.7 billion for the three factories that are expected to create 7,500 jobs..Though it was structured as a loan, it was the largest ever outlay from the DOE in its history which was also responsible for the infamous Sloyndra bankruptcy in 2011. However, its $465 million loan helped Tesla open its first factory in 2010..Ford’s cars and SUVs made with domestic batteries will also be eligible for billions of dollars in incentives embedded in the Inflation Reduction Act’s $370 billion in clean-energy funding. The US government will further subsidize battery manufacturing with additional tax rebates of up to $7,500 for buyers..It comes as Ford’s electrification plans face challenging economics. The auto maker last year lost $3 billion on EV sales and posted a negative 102% operating margin on EVs in the first three months of this year, according to a scathing op-ed in the Wall Street Journal..That means buyers of its profitable gasoline powered cars and trucks — particularly the F-150 — are subsidizing its money losing EV business. Ford plans to make as many as two-million EVs by 2026, up from about 132,000 it made last year..Ironically, the biggest pushback came from US autoworkers unions that called it a massive handout to creating “low-road jobs.”.“Why is Joe Biden’s administration facilitating this corporate greed with taxpayer money?” UAW President Shawn Fain said in a statement Friday..“The switch to electric engine jobs, battery production and other EV manufacturing cannot become a race to the bottom. Not only is the federal government not using its power to turn the tide — they’re actively funding the race to the bottom.”.That’s notwithstanding the subsidy battle unleashed by Biden’s IRA has indeed turned into a race to the bottom for governments looking to attract EV manufacturing investments, in what Engineering & Technology magazine called a “clean energy arms race.”.The dollar value of Ford’s US subsidy is roughly equivalent to the $13 billion in Canadian dollars Ottawa granted Volkswagen to build a similar plant in Ontario..The level and degree of the largesse prompted Fraser Institute economists Tegan Hill and Matthew Mitchell to proclaim in the Ottawa Citizen “the corporate welfare bums are back in business.”.“Politicians like corporate welfare because they can claim credit for job creation and investment,” they wrote..“But in reality, according to a large body of research, corporate welfare does little if anything to actually create economic growth. It may in fact hurt the economy.”
