By David Shepardson

(Reuters) -Ford Motor said on Monday it has paused work on a $3.5 billion battery plant in Michigan, citing concerns about its ability to competitively operate the plant.

The announcement comes as Ford has repeatedly raised its offer to the United Auto Workers union in contract talks without securing a deal. President Joe Biden on Tuesday is set to visit Michigan to join a UAW picket line in support of striking workers at the Detroit Three automakers.

Republicans in Congress have been probing Ford’s battery plant plan in Marshall, Michigan, using technology from CATL, the world’s largest battery maker, over concerns it could facilitate the flow of U.S. tax subsidies to China and leave Ford dependent on Chinese technology.

“We are pausing work and limiting spending on construction on the Marshall project until we’re confident about our ability to competitively operate the plant,” Ford said Monday, declining to say what specific reason triggered the decision. “We haven’t made any final decision about the planned investment there.”

Michigan Governor Gretchen Whitmer said: “Ford has been clear that this is a pause, and we will continue to push for successful negotiations between the Big 3 and UAW so that Michiganders can get back to work doing what they do best.”

Ford in July forecast a full-year loss of $4.5 billion on its electric vehicle unit – 50% higher than projected earlier this year – and said it was slowing its EV production ramp up. Ford also has said it plans to quadruple sales of gas electric hybrids over the next five years.

The auto industry is watching how new rules around future EV tax credits will be implemented as carmakers make investment decisions on producing batteries for the transition to EVs.

In 2022, Congress passed the $430 billion Inflation Reduction Act (IRA), which will bar $7,500 in future consumer EV tax credits if any battery components are manufactured or assembled by a “foreign entity of concern.”

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Ford has been awaiting guidance to determine if batteries operated by the Marshall plant would run afoul of the requirements.

It had urged the Treasury to take a narrow view of the restriction, warning that “an overly expansive interpretation of this provision risks … making the clean vehicle credit largely unavailable.”

Some Michigan Republicans have questioned the $1.7 billion in planned state incentives for the Marshall plant that Ford has said is expected to employ 2,500 workers.

The UAW and some in Congress want automakers to pay workers at battery plants the same higher wages that workers at assembly and engine plants receive.

(Reporting by David ShepardsonEditing by Nick Zieminski and Deepa Babington)