The strike called on September 15 by the American Auto Workers Union is another sign that the transition to electric vehicles (EV) will not be smooth. If the United Auto Workers (UAW) decided to strike hard by launching for the first time a simultaneous strike in factories of General Motors (GM), Stellantis and Ford, it is because its members are very concerned about this transition which threatens to eliminate thousands of jobs in assembly plants and manufacturing parts for internal combustion engine cars.
Electric vehicles have many fewer parts than the latter; this is why the electric transition would result in a net loss of jobs in the automobile industry. What’s more, the electric battery factories that the automobile “Big Three” are building with foreign partners are not unionized.
Workers’ concerns also explain the UAW’s decision not to support President Joe Biden in his bid for re-election in 2024. The union has almost always supported Democratic candidates in the past. “The transition to EVs seriously risks becoming a race to the bottom,” argued the president of the UAW last May. This decision is, to say the least, indicative of the difficulties Mr. Biden is experiencing with white, working-class American voters. They voted massively for his rival Donald Trump in 2020, and they are preparing to do the same in 2024.
The Biden government’s massive subsidies to electric battery factories through its “ Inflation Reduction Act » come as U.S. automakers reap record profits from sales of combustion-powered light trucks and sport utility vehicles (SUVs). The UAW fears that these subsidies will mainly benefit shareholders, without benefiting workers. What will happen if GM, Ford and Stellantis fail in their attempt to transition to electric cars, knowing that Chinese manufacturers and Tesla (which is expanding more in China than in the United States) remain far from the champions in this field?
The same question arises in Canada, now that the liberal federal government of Justin Trudeau and the progressive-conservative government of Doug Ford in Ontario are partners in a vast operation to subsidize electric battery factories. The $28.2 billion they are sinking into Volkswagen and Stellantis-LG Energy Solution factories is far from being a safe investment.
The Parliamentary Budget Officer (DPB), Yves Giroux, has just published a report which postpones to 20 years the moment when Canadian and Ontario taxpayers will have recovered the sums invested, much longer than the “less than five years” put forward by Mr. Trudeau during the announcement of the construction of the Volkswagen plant in the Ontario town of St. Thomas last April.
The Minister of Innovation, François-Philippe Champagne, disputes the conclusions of Mr. Giroux, who limited himself to calculating the tax revenues from the two factories in question. Ottawa bases its projections on a study that includes potential investments across the entire EV supply chain. Mr. Giroux is right to reject the minister’s more than optimistic projections. After all, these investments are theoretical for now. And even if they materialize, it would be difficult to establish a direct link with the subsidies granted to the battery factories of Stellantis-LG and Volkswagen.
The PBO report does not constitute a cost-benefit analysis. Such an analysis would take into account the public debt costs incurred to subsidize these factories and would include a calculation of the present value of future public revenues and expenditures. It should also take into account the opportunity cost. “What else could we do with this money to create wealth?” Mr. Giroux asked himself. There are other things that could be done with such a large amount of money. »
By embarking on the frantic race for investments in the supply chain of electric cars in Canada, Mr. Trudeau’s government is embarking on a costly exercise, both political and economic. The economic results of investments in the Stellantis-LG and Volkswagen factories will not be known for several years, if not several decades. The federal Liberals hope that Ontario voters will be grateful for this generosity in the next election.
But for the same reasons that American auto workers won’t run to the polls to vote for Mr. Biden, the Liberals may find the next campaign difficult in the manufacturing strongholds of southern Ontario. According to an Abacus poll released September 14, the Conservative Party of Canada (CPC) holds an 18 percentage point lead over the Liberals (42% versus 24%) among Canadian voters without a post-secondary degree.
The riding of Elgin-Middlesex-London, which includes the town of St. Thomas, is won by the PCC and Pierre Poilievre’s party seems assured of also retaining that of Essex, a suburb of Windsor. A PCC-New Democratic Party (NDP) race is emerging in Windsor-Tecumseh, while the NDP dominates in Windsor West.
Reacting to the PBO report, the NDP MP for this riding, Brian Masse, accused the Liberals of “favoring corporate profits over Canadian jobs”. This is proof that the transition to EVs will continue to shake up politics, here as elsewhere.
Based in Montreal, Konrad Yakabuski is a columnist at Globe and Mail.