Automotive News Canada - July 2023 - 11

* JULY 2023
11
Did the feds use Stellantis standoff to strong-arm Ontario?
IT TOOK STELLANTIS, LG ENERGY
Solution and two levels of government
nearly two months to
finalize a subsidy deal for the
companies' joint NextStar Energy
battery plant in Windsor, Ont.
Given the one-sided outcome,
it's tough to say what took so
long.
The joint venture partners
halted construction on part of
their battery plant site in midMay,
demanding Ottawa match
tax credits offered under the U.S
Inflation Reduction Act (IRA)
amounting to US $45 per kilowatt-hour
(about Cdn $60).
The tactic wasn't subtle, but it
proved effective. When work fully
restarted in Windsor on July 5,
the federal government had
The funding
deal between
the federal
government and
Ontario puts
the battery
supply chain on
firmer footing.
caved into the
demands - or
rather, agreed
to what
Stellantis said it
had been
promised in the
first place. The
final deal will
entitle the
NextStar plant
to the same
treatment it
would have got
on the opposite
bank of the Detroit River, at a
cost to Canadian taxpayers of up
to $15 billion over the next
decade.
In exchange, the federal government
said it got commitments
from Stellantis for production
mandates at the automaker's
Ontario vehicle assembly plants,
and a pledge for further investment
in research and development
in Windsor. This isn't anything
new as the company had
already announced both plans.
But while the feds gained next
to nothing from the companies
during the eight-week standoff, it
did manage to pull the Ontario
government into the fray. As part
of the final arrangement, the
province agreed to pay one-third
of the subsidies, not only for the
NextStar Energy site, but for a
similar Volkswagen Group plant
planned in St. Thomas, and any
future battery production hub that
would qualify for comparable tax
credits under the IRA.
The arrangement with Ontario,
it seems, was the federal government's
real goal over the weeks
of negotiation.
The outcome was helped
along by an impending sense of
loss in Windsor and a persistent
stream of opportune leaks to
media.
Ontario Premier Doug Ford
had previously resisted Ottawa's
attempts to get the province
financially entwined in countering
the IRA, but relented as Stellantis
warned of contingency plans, and
unnamed sources cited by local
media warned of alternate module
sites being prepared in
Michigan.
Ontario will be a major beneficiary
of the new plants, but there
might be more at play. Backroom
chatter pins federal support for
Highway 413, a controversial provincial
priority, as among the
other bargaining chips that the
feds might have traded to sweeten
the deal for the province.
ship between Ford and federal Finance Minister
Chrystia Freeland for getting the intergovernmental
agreement done.
DAVID
KENNEDY
TORONTO
BUREAU
CHIEF
Regardless of what, if anything,
was exchanged, the deal
puts Canada's battery supply
chain on firmer footing.
Flavio Volpe, president of the
Automotive Parts Manufacturers'
Association, credited the relationIt
shows an " incredible maturity " from the province
to focus on the long-term benefits for the auto
sector instead of the political climate, as well as the
skill of the Canadian finance minister to close out
the deal, Volpe said.
With Ontario on the hook for one-third of the
Windsor and St. Thomas production credits,
Canada's run of battery-cell plant investments might
not be over, Volpe added. It gives the federal government
the financial flexibility " to chase at least
another " battery plant, " if not several, " he said.
- ANC
After a short funding standoff, construction has
fully resumed at the NextStar battery plant in
Windsor. The federal government gave Stellantis
exactly what it wanted, but not without striking
a deal that increases the Ontario government's
financial commitment. FILE PHOTO
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Automotive News Canada - July 2023

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