The automotive and energy sectors are witnessing significant shifts as companies and governments navigate the evolving landscape of electric vehicles (EVs) and sustainable energy. Two recent developments highlight these changes: Ford Motor Company’s scaling back of its Michigan battery plant and the Canadian government’s launch of a $1.5 billion Critical Minerals Infrastructure Fund.

Ford’s Revised EV Strategy Amid Market Realities

Ford Motor Company’s (NYSE: F) decision to scale back its $3.5 billion battery plant in Michigan, reducing its production capacity by 43% and cutting jobs, reflects the challenges facing the EV market. Despite the initial excitement and investment in EVs, consumer adoption has been slower than expected, and labor costs are rising.

Political and Economic Implications

Ford’s partnership with Chinese manufacturer CATL has stirred political debates, especially in the context of US-China relations. This move, along with broader market dynamics, signifies the complex interplay of economics, politics, and technological advancements in the EV sector.

Canada’s Strategic Move in Critical Minerals

Concurrently, Canada is stepping up its game in the critical minerals sector, crucial for clean technologies like EV batteries. The $1.5 billion Critical Minerals Infrastructure Fund, announced by Natural Resources Canada, aims to fill infrastructure gaps and promote sustainable mineral production.

A Synergistic Approach to Sustainable Development

Canada’s fund is not just an economic investment but also a strategic move to position the country as a key player in the global shift towards a net-zero-emissions future. This initiative complements efforts like Ford’s, focusing on the development of clean technologies and the reduction of carbon footprints.

The Road Ahead for Ford and Global EV Market

Ford remains committed to its EV strategy, planning to open its revised battery plant in 2026. This plant will be crucial in producing lithium iron phosphate (LFP) batteries, a cheaper alternative to traditional lithium-ion batteries, possibly giving Ford a competitive edge in the market.

Canada’s Vision for Clean Energy and Economic Growth

Canada’s investment in critical minerals infrastructure is a forward-looking approach to enhancing its role in the global supply chain for clean technologies. The focus on sustainable extraction, processing, and recycling of minerals aligns with the global agenda for a net-zero-emissions economy.

Conclusion: A Convergence of Efforts

The juxtaposition of Ford’s scaled-back plans and Canada’s aggressive investment in critical minerals infrastructure paints a picture of a world in transition. While challenges like market dynamics and political considerations shape corporate strategies, national initiatives aim to bolster the infrastructure and supply chains necessary for a sustainable future. Both Ford’s recalibration and Canada’s proactive steps are pivotal in driving the automotive and energy sectors towards a more sustainable and economically viable future.

Mark Your Calendars for a CMI Masterclass

The Critical Minerals Institute Masterclass is just around the corner, scheduled for Thursday, October 19th at 11 AM EST. Centering around the intriguing topic of Critical Minerals in the Congo, this event promises enlightening discussions. Don’t forget to register using the exclusive CMI member code CMC2 to avail your free entry (limited to 50). Featured speakers include CMI Board Members Melissa ‘Mel’ Sanderson and Russell Fryer. While Mel boasts a rich 16-year history in Congo relations through Freeport-McMoRan Inc. (NYSE: FCX), Russell is the dynamic leader of Critical Metals PLC (LSE: CRTM), a formidable name in Congo’s copper industry.

Fresh Off The Press: Dive deep into the CMI October edition of the Critical Minerals Institute Report, bearing the headline A slowing global economy continues to temper demand. Authored by the distinguished Matt Bohlsen, an Australian-based CMI Director, he’s a familiar name for many as the Senior Editor for InvestorNews.com and a distinguished voice on SeekingAlpha when it comes to critical minerals.

A Glance at InvestorNews.com’s Recent Critical Mineral Highlights:

• WATCH: Nano One’s Partnership with Sumitomo: Sustainable Cathode Materials for EV
• READ: Ara Partners Acquires Vacuumschmelze: Mission Critical in the Electric Vehicle Landscape
• WATCH: Russell Fryer on Critical Metals PLC’s Strategic Moves in the DRC and Global Expansion
• WATCH: Mark Billings on Auxico’s critical minerals project advancements in Bolivia and Colombia
• WATCH: Donald Swartz’s insights on ARR’s Halleck Creek Project unlocking America’s rare earth potential
• WATCH: Ian Fraser on Fathom Nickel’s Exploration Progress and the Critical Mineral Potential in Saskatchewan

A Quick Scan of Global Markets

Canadian futures are on a notable rise, drawing momentum from burgeoning copper prices. The U.S. market witnesses a cautious optimism, with futures making modest gains ahead of this week’s crucial corporate announcements and economic revelations. European shares are rallying, with mining stocks taking the lead, all thanks to growing enthusiasm over Chinese demand, although the looming Middle East tensions remain a concern. Over in Asia, Japan’s Nikkei grapples with a setback, predominantly influenced by the slump in chip-related stocks.

Corporate Chronicles

Chevron Corporation (NYSE: CVX) finds itself amidst a brewing storm. Initial peace agreements seem to crumble as unions at their Australian LNG setups gear up for renewed strikes. The pivot for this unrest? Chevron’s alleged retreat from prior commitments.

In a groundbreaking move, Ferrari NV embraces the future, rolling out cryptocurrency transactions for their luxury vehicles in the U.S. Europe is next on their radar. This initiative aligns with their ambitious goal of achieving carbon neutrality by the close of 2030.

Ford Motor Company (NYSE: F) encounters turbulence in its dealings with the United Auto Workers. In an anticipated move towards resolution, the union found itself presented with a deja vu, receiving an offer identical to one from two weeks earlier.

General Motors Co. (NYSE: GM) breathes a sigh of relief up north, as Canadian labor union Unifor members give a nod to a new contract. This positive stride contrasts with the simmering unrest led by hourly workers in the U.S.

Investor.Coffee Daily Updates are intended to hit a few business news highlights for the day.

Ford Motor Company (NYSE: F) hosted its investor event on Monday and it would appear that in a single investor day presentation the Company has gone from worst to first when it comes to securing battery-grade lithium supplies to scale up its electric vehicle production. I’m pretty sure all these deals didn’t come to fruition over the weekend, but they sure made a splash when they were presented on Monday.

In total, Ford announced deals with five separate companies sourcing lithium from all over the world, including Quebec, Chile, Argentina, Australia, and a few U.S. locations sprinkled in for good measure. These latest supply deals announced by Ford complement the ioneer Ltd (ASX: INR | NASDAQ: IONR) contract signed in July 2002.

Ford Investor Day Lithium Announcements

According to the Ford Investor/Analyst Day presentation transcript (yes I scanned most of the 78 pages and know way more about Ford than I ever wanted to know), they’ve now sourced about 90% of the nickel and the lithium to meet their future capacity targets, including producing 2 million electric vehicles (EVs) by 2026. On Monday, the Company announced lithium agreements with 3 of the top producing major global suppliers – Albemarle Corporation (NYSE: ALB), Chile’s Sociedad Química y Minera de Chile S.A. (aka “SQM”)(NYSE: SQM), and Nemaska Lithium.

Nemaska is a joint venture backed by Livent Corporation (NYSE: LTHM) and the investment arm of the Province of Quebec. According to Ford, these are some of the largest lithium producers in the world with the best quality, existing capacity, and IRA compliance (although Albemarle does have plenty of Chinese processing capacity but we’ll assume Ford knows that).

US-Based Lithium Development Deals

Coupled with these deals with major players to provide stability to its plants, Ford is also investing in U.S.-based development projects through agreements with Compass Minerals International, Inc. (NYSE: CMP), EnergySource Minerals LLC (private), and the previously announced deal with ioneer.

The interesting thing about these investments is that Ford is basically pursuing promising technology that has yet to be proven at scale. Ford claims they are developing extraction technologies to further diversify the industry, but if they are betting on the right horse, it could certainly give them a leg up on the competition.

A Bet on Direct Lithium Extraction Technology

Specifically, we are talking about direct lithium extraction (DLE) technology. The Holy Grail for lithium extraction as it seeks to extract the white metal from brine using filters, membranes, ceramic beads, or other equipment that can typically be housed in a small warehouse. It would enable miners to boost global lithium production with a footprint far smaller than open-pit mines and/or evaporation ponds, which are often the size of multiple football fields. 

Compass and ESM are using ESM’s proprietary ILiAD™ adsorption technology, which is a DLE technology that competes with what ioneer and Lithium Americas Corp. (TSX: LAC | NYSE: LAC) are pursuing at their respective projects. The pursuit and potential success of DLE technology is easily an article in itself, and probably well above my pay grade to do it justice.

FIGURE 1: Giga Factory Locations

Ford to Build 5 New EV Battery Giga Factories

So we’ll circle back to the Ford story and talk about why they’ve locked in several large, multi-year lithium supply contracts. Ford is building 5 new giga factories to produce batteries, with the first two, located in Kentucky and Tennessee, on track to open in 2025. Another plant, in Marshall, Michigan, will be dedicated to producing battery cells using LFP (lithium iron phosphate) technology.

With respect to the LFP facility, it helps explain one of the lithium announcements noted above, the SQM deal which supplies lithium carbonate. Lithium carbonate is required for LFP batteries versus lithium hydroxide, which is the primary component for the current generation of lithium-ion batteries. Ford now feels it has control of its value chain. Instead of relying on a cell supplier, Ford can now move material around where they need it, so If they wanted to flex more into LFP and use more lithium carbonate, no problem. If the Company wants to swing more towards hydroxide, it can also do that.

Final Thoughts

Granted this isn’t original thinking as Elon Musk was the first one out of the gates lining up sources of lithium (and other critical materials) for Tesla, Inc. (Nasdaq: TSLA), and in January, General Motors Company (NYSE: GM) signed a deal with the aforementioned Lithium Americas.

Nevertheless, it seems now that virtually all North American automakers are securing supplies of battery materials to boost EV output as demand for EVs continues to grow, and to take advantage of U.S. tax credits.

It would appear automakers are entering a ‘Brave New World’. Which, ironically is a dystopian novel written in 1931 by Aldous Huxley, where the citizens of the World State substitute the name of (Henry) Ford, founder of the Ford Motor Company, wherever people in our own world would say Lord. We shall see if the Ford Motor Company of 2023 will become the messiah of EV production.

The lack of understanding of the total supply chains for the complex, unseen components, that underlie and enable the operations of the technologies we now take for granted in our daily lives, is the main reason that we have given away our competitive advantage in so many of the technologies we invented. In fact it’s a prime example of the old excuse, “I didn’t know the gun was loaded.” Most of us only see, and are only interested in, the outer face of of a device

The financialization of American industry over the last 50 years has completed eroded the engineering and experiential skills that used to be de rigeur in the management suites of America’s manufacturing giants. The decline of understanding of the sourcing and sources of the components necessary to assemble an automobile is glaringly apparent.

The limits of American chemical manufacturing engineering, critical for the downstream processing of non-fuel minerals into end user products, versus the unrestrained limits of the imagination of policy makers and their academic and bureaucratic advisors have now reached a crisis point. Policy makers think that a skilled workforce and legacy engineering competence can simply be brought into immediate existence by funding amorphous programs with the appropriate names and with the correct distribution of money to bureaucratically approved recipients who do not need to demonstrate any prior competence in the production, on-time delivery, at the agreed price, of products meeting the customer’s specification. These recipients of the other-people’s money (a/k/a taxes), rather, need to demonstrate the proper cronyism and have the necessary lobbying in Washington.  

American manufacturers driven solely by quarterly reports have given up on supporting internal corporate R&D, which in the form of GE Schenectady, Bell Labs, Park Xerox, Ford Scientific, GM Engineering, and many, many more gave us not just the twentieth century’s rapid expansion of technologically based consumer and military goods, but Nobel Prize winners, medical advances, and most of all, our contemporary lifestyle and standard of living. President Nixon’s decision to shut down the Space Shuttle Program in 1972 began the rapid decline of the major funding of corporate R&D by government agencies that fueled all technological development up to that time. That foolish, short-sighted, decision was made to try to save money due to the enormous expense of the (successful) moon program and the war in Vietnam. The long-term benefits of the moon and space shuttle programs for the general economy were ignored in favor of the short term financial needs.

Fast forward to 2023. The greatest generation of manufacturing engineers and research scientists are long gone from the management suites of American industry. The font of technology that was the private corporate R&D labs in the United States is not even a memory.

I volunteered in the evenings as a graduate student at the Ford Scientific Laboratory in Dearborn, Michigan, in the early 1960s. I worked on a sodium-sulfur battery(!) project. My reward was to work with and meet scientists and engineers who were world class researchers. The library was open 24 hours a day, and the librarian would get me any paper or book I wanted, published anywhere in the world. Harold Urey, the Nobel Prize winning discoverer of deuterium, who was a friend of the Laboratory’s director, Dr, Jacob (Jack) Goldman came in one afternoon to hold a seminar on current developments in science, and I well remember not wanting to wash my hands after he shook mine and asked me about my work. A brash friend of mine who was the (Ford) Engineering Department’s budget analyst recommended in 1972 that the lab be defunded to save money. Henry Ford II (the “deuce” as he was affectionately called), came around to my friend’s office, surprising all of the peons, and asked who had made the recommendation. My friend piped up that he had done that. The deuce looked at him and said, “The lab is an integral part of my vision for the company. You are not. Rewrite that proposal to conform to my views, or leave.” (OK, he really didn’t talk like that. He was much more colorful in his language, but you get the point)

To paraphrase Mark Anthony speaking at Caesar’s funeral: Such was Henry Ford II, when comes such another?

Reviving that focus and bringing back C-suite engineer-managers and innovative R&D based on results, not credentials is the sole hope for reviving America’s technological security and excellence.

The American Ford Motor Company, in its domestic operations, has now adopted the current business operations model of the Chinese OEM automotive industry, but lags far behind on the Chinese approach to critical materials supply security.

The Chinese like to emphasize that their approach to politics and economics cannot be wholly understood as just an example or even a simple variant of these disciplines as practiced in the West and applied to China. They refer to their economic system as Socialism with Chinese Characteristics and say that the operating focus of their domestic economy is now dual circulation, the emphasis of domestic consumption leading to a declining importance of exports.

Nonetheless, foreign analysts continue to view China with a Western academic definitions filter.

This has allowed analysts to miss almost entirely the critical details of the growth of the business operations model of the (now world’s largest) Chinese OEM automotive industry as it has adapted to what the Chinese call the production of “New Energy Vehicles ” (NEVs).

To avoid internal conflict and increase efficiency, large Chinese auto companies now usually set up a separate NEV unit that runs independently from the traditional ICE car business.

I don’t know James Farley, the CEO of the Ford Motor Company, personally, but I do know that he is among the most perceptive and far-seeing of American OEM automotive top managers, and one who actually understands the business of manufacturing of cars and trucks and the markets for those vehicles. How do I know this? By the action he announced last week that reveals his financial and market acumen. The Ford Motor Company has announced that it will separate its EV operations and its ICE operations into two separately managed and organized internal units, each of which will focus on a powertrain. There will be the Ford Model-e Division and the Ford Blue Division. The Presidents of both divisions will report directly to the CEO, now Jim Farley.

As Farley states: “We still think that more than half our customers are going to be ICE, and they’re going to be ICE for a long time,” Farley said. “It’s almost like our industry’s kind of given up on that business. Even if the unit volume starts to fall over when mass adoption of electrification happens, in a lot of segments that’s not going to happen, and we want to have a dedicated team to run that business with passion.”

So, now, at least, one of America’s remaining, “Big Two” automotive OEMs have caught up with Chinese management “style” in product development.

But, there’s one more area where Capitalism with Chinese characteristics has outpaced the rest of the world. That is in security of supply of critical raw materials. China has an industrial policy that supports key industrial development, and it has had that policy for a long time.

When the Chinese domestic OEM automotive industry was in its infancy a generation ago China rapidly developed the domestic capability and capacity to produce a secure supply of raw materials to make ICE powered vehicles. Those main materials were steel, aluminum, copper and plastics. China soon overtook the USA and indeed the rest of the world combined in the production of those critical industrial materials.

About 6 years ago the Chinese government decided that the electrification of land transportation was critical to hedge against China’s dependence on foreign fossil fuels and to reduce pollution in its rapidly advancing urbanization. Accordingly, the government set out to determine what materials would be critical for such developments. Lithium-ion battery and rare earth permanent magnet motor construction materials were determined to be priorities, and a national program to find them, extract them, process them, and manufacture end-use products dependent upon them for their function was added to the five-year plan system of formulating and carrying out industrial policy. Today, China has sufficient domestic secure supplies of materials and processes already in place to build all of the BEVs it plans to build through most of this decade.

This is where America and Europe are woefully far behind.

Neither the Ford Motor Company nor anyone else can afford to wait for their national governments to catch up with China’s industrial policy planning and execution.

There is nowhere near enough non-Chinese production and processing of the critical materials for batteries and electric motors to fulfill any but a small part of the planned non-Chinese production of BEVs, wind turbines, energy storage, aircraft and ship components, and consumer goods.

It’s going to be every company for itself. I am hoping that the non-Chinese OEM automobile industry learns from the chart below what it will take to survive.

I am not optimistic.