The Ontario government is finally putting “more money on the table” to prevent Stellantis from giving up on building its electric vehicle battery plant in Windsor, Premier Doug Ford confirmed Friday.
Automaker Stellantis and LG Energy Solution announced to great fanfare last year the construction of a $5 billion plant in Windsor. But the two companies recently halted work at the site and said they were implementing contingency plans because the federal government failed to honor the funding agreement.
PHOTO CHRIS YOUNG, THE CANADIAN PRESS
Ontario Premier Doug Ford
Following Premier Ford’s comments, federal Industry Minister Francois-Philippe Champagne said Friday that “we are making progress” in finalizing the deal and getting the project back on track.
Champagne said he had a two-hour “productive meeting” with LG Energy Solutions Chairman Kwon Young Soo during a visit to Seoul this week. The minister added that Mr. Kwon had replied to him on Friday morning.
“I think we have a common understanding of the way forward,” Champagne said from Washington, where he was attending meetings.
The original agreement with Stellantis and LG, signed in March 2022, called for Ontario and Canada to each contribute $500 million towards the capital costs of the new battery plant in Windsor.
But businesses came knocking on Ottawa’s door again last August after the Americans signed into law Inflation Reduction Actwhich offers companies production tax credits of up to $35 per kilowatt-hour for each battery produced.
In a letter to Prime Minister Justin Trudeau last month, the CEOs of Stellantis and LG argued that the Canadian government had confirmed in writing five times that it would match US production incentives, but that Ottawa would not had not kept its commitments.
A ‘special contribution agreement’ was reached last February, but the federal government has pressured Ontario’s to also contribute more money, saying the province must also pay its ‘fair share’ .
Production subsidies
Mr. Ford said he was disappointed earlier this week with the way Ottawa handled this file, since his government had not made any commitments in terms of production subsidies. However, he said he was working with officials in Ottawa to resolve the impasse.
And on Friday, after a separate announcement in St. Catharines, Mr. Ford confirmed that his government was putting “more money on the table” in this project. “This is about saving jobs and giving people the quality of life they deserve in southwestern Ontario,” he said.
Stellantis’ battery plant in Windsor would supply its car manufacturing plants in North America and employ around 2,500 workers. Auto parts makers expect the total impact to be around 10,000 indirect jobs.
Stellantis and LG wrote to Prime Minister Trudeau around the same time the terms of an agreement were made public with Volkswagen to build its electric vehicle battery plant in St. Thomas, south of London. But Minister Champagne said Friday that there was no correlation between the two agreements, which were negotiated in parallel.
Ontario also committed $500 million in capital as part of the deal with Volkswagen, but Canada’s offer included $700 million in capital and up to $13 billion in “production subsidies” for the batteries it will manufacture during the first decade, in order to offer what the German manufacturer would obtain in production tax credits thanks to the Inflation Reduction Act in the USA. There is a provision that reduces or eliminates these subsidies if US law is adjusted or reversed.
Ontario has not contributed production subsidies for Volkswagen, but Canada expects the province to do so for Stellantis. Champagne dodged a question about the reason for the disparity, but argued that Ontario would benefit the most from the plant.
“A lot of the benefits will go to Ontario workers, to Ontario’s auto industry,” he said.
Federal officials said earlier this week that Ontario had provided more than $500 million in capital to Volkswagen, highlighting what Ford described as “hundreds of millions” of dollars Ontario has invested in infrastructure to support the Volkswagen plant, including roads, highways and the electrical distribution network.
Finance Minister Chrystia Freeland said Wednesday that MPs from other provinces and provincial governments who see Ottawa pouring billions into Ontario have asked what their provinces will get. Minister Freeland therefore believes that the provinces that benefit from the federal Green Industrial and Manufacturing Facilities Program, worth more than $120 billion, should “pay their share” in the projects supported by Ottawa.