The U.S. Department of Energy (DOE) on Thursday announced a conditional loan of up to $9.2 billion to a joint electric vehicle venture between Ford and Korean battery maker SK On.
When combined with state subsidies offered to the joint venture, known as BlueOval SK, the record-breaking loan means that taxpayers will be financing nearly the entire $11.4 billion investment by Ford and SK, according to Blomberg.
The loan is the latest in a series of increasingly large offers from the DOE’s Loan Program Office (LPO), which had its lending authority surge to $400 billion — more than 10 times the $33 billion it has issued since 2009 —following the passage of President Joe Biden’s signature climate law, the Inflation Reduction Act.
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Adjusted for inflation, the loan is slightly larger than the $5.9 billion loan that Ford received amid auto-industry bailouts in 2009, a loan Ford only repaid in June 2022.
Ford is worth roughly $56.9 billion, while SK is worth roughly $6.9 billion, meaning the $9.2 billion loan represents roughly 14.4% of the combined value of the two companies, according to data from The Wall Street Journal.
The loan will be disbursed through the DOE’s Loan Program Office (LPO), which is most well-known for issuing a roughly $500 million loan to solar startup Solyndra, which collapsed in 2011.
Although the LPO is tasked with supporting and scaling up emerging companies and technologies, the BlueOval SK plant is not considered cutting edge, and is instead receiving support due to the project’s perceived importance to the Biden administration’s strategy for building a U.S. manufacturing base, Bloomberg reported.
“The goal of the [battery-lending] program is not innovation but to get more of the supply chain to be manufactured in the US,” LPO Director Jigar Shah told Bloomberg.
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The government’s support will be a significant boon for Ford, which committed last year to spending roughly $50 billion as part of a four-year strategy to scale up its electric vehicle business, Bloomberg reported. The company’s electric vehicle division is on track for $3 billion in losses in 2023 and is losing more than $60,000 on each electric vehicle sold, but the company expects to begin turning a profit by the end of next year.
“The DOE’s commitment to this project will strengthen battery manufacturing in the U.S. while reducing carbon emissions, providing customers with high-performance vehicles, and creating good jobs for future generations,” Robert Rhee, CEO of BlueOval SK, said in a statement shared with the Daily Caller News Foundation. “BlueOval SK and our parent companies, Ford and SK On, are expanding demand for batteries and the exciting vehicles they will power. This federal loan from the DOE helps with that mission.”
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