Prime Minister Justin Trudeau tours the Stellantis Windsor (Chrysler) Assembly plant in Windsor, Ont., on Jan. 17. Stellantis and LG Energy Solution say their joint electric vehicle battery plant in Windsor is back on track after reaching a new deal with the federal government over its financing.Nicole Osborne/The Canadian Press
Stellantis NV STLA-N and LG Energy Solution have reached a new deal with the federal and Ontario governments for as much as $15-billion in subsidies for their electric-vehicle battery factory in Windsor, bringing an end to a months-long saga in which the companies halted construction on the project while they pushed for greater financial backing.
The agreement was announced by Stellantis late Wednesday afternoon through a press release. It was subsequently confirmed by Ottawa in a statement issued by Industry Minister François-Philippe Champagne and Finance Minister Chrystia Freeland. Construction of the plant will resume immediately, according to Stellantis.
Ontario Economic Development Minister Vic Fedeli told The Globe and Mail on Wednesday that the deal will be worth “up to $15-billion,” with Queen’s Park footing one third of the bill and Ottawa covering the rest.
He called the agreement a “historic new auto pact” that recognizes the challenges posed by the Inflation Reduction Act in the U.S., which he said would have put an end to Ontario’s new auto opportunities were Canada not willing to match the financial supports that the U.S. offers for these sorts of facilities.
“The cost will always be based on the output of batteries … it’s like getting a tax break that wouldn’t happen if they weren’t here. So this is not like writing a cheque to an auto company to come here. This is based on the production,” Mr. Fedeli said in an interview from Japan, where he is on a trade mission.
He said the $15-billion is an estimate “but they have to actually make those batteries and ship them out of here and that will be the tax-break equivalent that they get.”
The statement from the federal ministers did not provide financial details, which they promised would be shared soon, but touted the deal’s merits.
Canada’s billions to Volkswagen and Stellantis are irresponsible and inflationary
“This agreement is good for workers and it is good for Canada,” Mr. Champagne and Ms. Freeland said. “It will create and secure thousands of jobs – both in the auto sector and in related industries across Canada – and will further solidify Canada’s place as a leader in the global electric-vehicle supply chain.”
Ottawa and Queen’s Park initially pledged approximately $1-billion combined in upfront subsidies for the factory’s capital costs, which are projected to total about $5-billion, when the plans were first announced last year. But that was before the Inflation Reduction Act’s passage in August of 2022.
Stellantis and LG received assurances from Ottawa shortly thereafter that it would increase its funding to bring it closer to what Washington would now offer. But with those talks seemingly moving slowly behind the scenes, Stellantis went public with its demands in May of this year, pausing the build and threatening to relocate south of the border.
The subsequent negotiations initially played out in public. That included the two levels of government debating whether Ottawa was solely responsible for matching Washington’s production subsidies, before the province agreed to pay a one-third share.
All parties were more circumspect in recent weeks, as the governments offered assurances that a deal was close.
The public funding for Stellantis and LG will be similar to what Volkswagen will receive for another battery factory in St. Thomas, Ont. That deal, reached after the Inflation Reduction Act’s passage and in line with the U.S. subsidies, is expected to cumulatively be worth between $8-billion and $13-billion in annual production subsidies between the plant’s opening and a phaseout of the subsidies in 2032.
Stellantis and LG could get more government backing because their plant is scheduled to begin production by the end of 2024, rather than in 2027 in Volkswagen’s case. However, it could eventually be less annually because the Volkswagen facility is expected to have greater capacity once operational.
The structures of the deals could also be somewhat different because while Volkswagen is only committed to making battery cells in St. Thomas, Stellantis and LG are planning to make both battery cells and battery modules.
Canada is getting played by Stellantis, but we asked for it
News of the resumption of construction at the facility, which the companies say will create about 2,500 jobs, was quickly welcomed by organized labour.
Lana Payne, the national president of Unifor, issued a statement thanking both Prime Minister Justin Trudeau and Ontario Premier Doug Ford, along with the company, for reaching a deal.
“We knew the high stakes. We knew these commitments had to be kept because the alternative would have been unthinkable for so many workers,” Ms. Payne said.
“I know what resonated with all parties was the persistent message from our union that thousands upon thousands of workers’ livelihoods were hanging in the balance throughout this dispute.”
With reports from Bill Curry in Ottawa