Prime Minister Justin Trudeau upped the ante on corporate subsidies in his bid to keep Canada competitive as generous US green incentives threaten to lure business investment stateside.
(Bloomberg) — Prime Minister Justin Trudeau upped the ante on corporate subsidies in his bid to keep Canada competitive as generous US green incentives threaten to lure business investment stateside.
His government reached an agreement with Stellantis NV this week on C$15 billion ($11.3 billion) in public support for an electric-vehicle battery plant, ending a standoff that began in May when the carmaker halted construction on the project.
The plant, built in partnership with South Korea’s LG Energy Solution Ltd., will be located in Windsor, Ontario, across the border from Detroit. Premier Doug Ford’s provincial government agreed earlier to pick up a third of the cost.
First announced in March 2022, the project’s fate became uncertain after Stellantis demanded more state aid after the US passed the subsidy-rich Inflation Reduction Act.
In response, Canada publicly promised to create a level playing field. As part of that effort, it’s also offered C$13 billion in state aid over a decade to Volkswagen AG for a similar facility in St. Thomas, about 185 kilometers (115 miles) east of Windsor.
“The governments of Canada and Ontario are partnering to attract once-in-a-generation projects that will anchor our auto manufacturing sector and keep good jobs in Canada,” Canadian Finance Minister Chrystia Freeland and Industry Minister Francois-Philippe Champagne said in a joint statement Thursday with Ford and Ontario Economic Development Minister Vic Fedeli.
They said the provincial pledge to cover a third of the cost extends to the Volkswagen pact, describing the increased public funding as “a direct response” to the generous new American incentives.
“These performance incentives are contingent on, and proportionate to, the production and sale of batteries from each project,” the ministers said, adding they could be adjusted if the US incentives are reduced or cancelled.
Under the Inflation Reduction Act, the Stellantis plant would qualify for as much as C$19 billion in subsidies, according to one expert’s calculation. However, several factors — such as the fact the project was announced before the US subsidy plan existed — likely allowed Canada to bring that cost down.
At the original announcement, the federal and provincial governments committed about C$1 billion to Stellantis to offset capital costs.
When completed, the 45 gigawatt-hour factory is expected to have 2,500 jobs and supply Stellantis assembly plants in North America. Production is slated to begin next year and ramp up in 2025.
Unifor, a union that represents Stellantis workers in Windsor, is looking to organize the battery plant.
“People say this is corporate welfare — I say it’s a return on investment,” said Dave Cassidy, president of Local 444 in Windsor. That’s because of “the jobs that will be created from this, the spin off jobs, the housing market,” he said.
Canada’s second-most populous province, Quebec, is also working with Trudeau’s government to lure investment. Swedish manufacturer Northvolt AB is also close to a deal to build an EV battery plant near Montreal that’s expected to be worth about C$7 billion, people familiar with the matter told Bloomberg last week.
–With assistance from Mathieu Dion.
(Updates throughout with final cost.)
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