Ford is forming a joint venture that will build two North American factories to manufacture batteries for about 600,000 electric vehicles per year by the middle of this decade.

The deal with Korean battery maker SK Innovation, announced Thursday, sets up a potential showdown between the companies and the United Auto Workers, which issued a statement saying Ford has a moral obligation to do so. ensure that factory workers receive union wages.

The UAW and President Joe Biden have pleaded for union jobs at the new factories as the country switches from gasoline-powered vehicles to electric-powered ones. The issue will almost certainly be part of negotiations for a new UAW national contract in 2023.

The joint venture called BlueOvalSK is the start of Ford’s plan to vertically integrate key elements of the electric vehicle supply chain. The companies say they have signed a memorandum of understanding, but details on the ownership structure and factory locations have yet to be worked out.

Business executives would not say whether factory jobs would be unionized. Lisa Drake, chief operating officer of Ford North America, said the companies are still in the MOU phase. “We have not yet defined our workforce strategy. This will be determined by the joint venture itself once this entity is created,” this summer, she said.

SK Innovation already has a U.S. battery plant in Commerce, Georgia, to help supply the Volkswagen plant in Chattanooga, and says it is expanding production in Europe and China. It plans to be one of the top three suppliers of electric vehicle batteries in the world by 2025, according to a statement. The company has a contract with Ford to manufacture batteries for a new F-150 electric pickup truck, which is due in showrooms next spring. Ford’s F-Series Pickup Trucks Are America’s Top Selling Vehicles

The UAW has made its voice heard as General Motors and Ford has now announced plans for joint ventures with battery companies to supply what is expected to be a growing market for electric vehicles. Biden plans to spend $ 15 billion to build half a million electric vehicle charging stations by 2030 and offer billions in unspecified tax credits and rebates to lower the cost of vehicles and make them more attractive for buyers.

The strategy is a key part of its plan to tackle climate change by cutting US greenhouse gas emissions to at least half by 2030, as well as creating “well-paying union jobs.” in a clean energy economy.

But the union, which represents around 150,000 American workers at Ford, General Motors and Stellantis (formerly Fiat Chrysler), fears automakers will try to use joint ventures to keep factories out of national union contracts with the three companies.

Currently, automakers are contracting parts suppliers to make batteries for electric vehicles, and those factories pay far less than the roughly $ 31 an hour UAW workers earn at auto factories. Unionized workers fear that as the country switches to electric vehicles, thousands of jobs in gasoline engine and transmission manufacturing will be replaced by lower paying batteries.

“UAW members believe Ford has a moral obligation, regardless of any joint venture agreement, to ensure that battery jobs that replace gasoline engine and transmission jobs are the same high-paying union jobs that have fueled this US economy for generations, ”Vice President Gerald Kariem, who manages the Ford negotiations, said in a statement.

Government incentives for electric vehicles should be tied to U.S. jobs with access to unions, the statement said.

Ford said it has more UAW jobs in the United States than any other automaker and pays union wages to make components for electric vehicles at a plant in Sterling Heights, Mich., North of Detroit.

Ford said the two factories combined would produce the equivalent of 60 gigawatt hours of electricity per year. This is equivalent to the batteries of 600,000 Mustang Mach E extended range SUVs, which can travel approximately 300 miles per charge.

It sees strong demand for electric vehicles, predicting that its annual energy demand in North America will reach 140 gigawatt hours per year by 2030, equivalent to the output of four to five battery factories.

The announcement comes after Ford was caught up in a trade secret battle between SK Innovation and LG Energy Solution. The United States International Trade Commission ruled in February that SK had stolen 22 trade secrets from LG Energy and that SK should be banned from importing, manufacturing or selling batteries in the United States for 10 years.

The move gave SK four years to make batteries for Ford, and that could have left the company scrambling to supply the electric F-150, called the Lightning. The dispute was settled in April, with SK agreeing to pay $ 1.8 billion and an undisclosed royalty.

Yoosuk Kim, head of SK Innovation’s battery marketing division, said there were no lingering issues between the two battery companies.