30,000 jobs tied to VW's battery plant: An unsupported claim

The promise of 3,000 jobs at Volkswagen Group’s new Ontario battery-cell plant, and up to 30,000 indirect jobs linked to the site, are key selling features that the federal government has touted to promote the major investment and to justify the large amount of public spending needed to land it.

But Ottawa is providing few details about exactly how it derived its tally, while both supporters and opponents of the subsidies that Ottawa promised question whether the job creation claims are overly optimistic.

“It is fully anticipated that a significant portion of the supply chain surrounding this plant will be established within Canada, likely including new European-based suppliers, which will lead to a significant multiplier,” Hans Parmar, a spokesperson for Innovation, Science and Economic Development Canada, told Automotive News Canada.

A job multiplier is used to estimate the total number of jobs created by each direct position. It includes the single factory job, jobs at plant suppliers and jobs created by the plant-linked employment — everyone from local homebuilders and teachers to auto technicians and fast-food workers.

In St. Thomas, the federal government projects that the battery-cell plant will have a multiplier of 10, translating into 30,000 indirect jobs for the 3,000 expected within the plant. The multiplier is “derived from an internal study done by the Volkswagen Group regarding its plant in Valencia, Spain,” Parmar said.

Aside from referring to the Volkswagen study — conducted ahead of the March groundbreaking in Spain by Volkswagen’s battery subsidiary, PowerCo — the industry ministry would not expand on how the multiplier was calculated.

For its part, Volkswagen partially distanced itself from the claim of 30,000 indirect jobs, saying the Canadian government was the source of that figure. VW claimed in its press materials that the investment would create “tens of thousands” of indirect jobs, without landing on a specific figure.  

Volkswagen said it shared the “scope and the methodology” of the Spanish assessment with Ottawa, but not the complete study, which “contains competition-relevant information which needs to stay confidential.”  

‘PROMISING THE MOON’

The claim of 30,000 jobs is an example of politicians “promising the moon,” said Franco Terrazzano, federal director of the Canadian Taxpayers Federation and a vocal critic of the estimated $8 billion to $13.2 billion in subsidies that the federal government offered Volkswagen.

“Taxpayers have no reason to believe these numbers,” Terrazzano said. “[Government needs] to show the math.”

Rob Gillezeau, an assistant professor at the University of Toronto’s Rotman School of Management, sees the 30,000-job figure as a “huge overestimate.” He also questioned the value of the public spending when southern Ontario is “basically at full employment.”

“These are not new jobs that are just magically being filled,” he said. “It means that people are switching workplaces.”

Some workers who leave their jobs for positions at PowerCo’s St. Thomas plant may end up with higher wages, Gillezeau said. But it is not as if they were unemployed, meaning the benefits will be limited.

Automotive observers, on the other hand, view the competition for “generational” investments such as battery-cell plants as integral to the future of the sector in Canada.

“Not only is the funding important, it’s essential if we want to have a robust auto industry here for the future,” said Unifor President Lana Payne.

But the union, which represents the Detroit Three in Canada, is not just “cheerleading,” Payne said.

“We expect something in return from these investments. At the end of this, there have to be good-paying jobs.”

MUDDLED MULTIPLIER

As with the federal government’s St. Thomas estimates, Unifor has traditionally used a multiplier of 10 to calculate the number of indirect jobs linked to the vehicle assembly plants across Ontario where its members work. But electric vehicles have fewer parts than internal-combustion-engine vehicles, which likely means fewer workers at assembly and related parts operations.

The union is reevaluating its modeling but has not settled on a new multiplier for the EV era.

Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing, sees a short payback timeline for Ottawa’s investment in St. Thomas. But the job multiplier used by the federal government was higher than the one recently employed in battery-supply-chain analyses

by Trillium, a nonprofit that advocates on behalf of Ontario’s industrial sector.

“Our job multiplier would have been somewhere between six and eight,” Sweeney said, which would equate to 18,000 to 24,000 indirect jobs.

The range, he said, allows for more of the battery supply chain to come online. The multiplier would be about six in 2030 before jumping to eight by 2035, as longer lead-time projects such as mines ramp up and spur further job creation.

Yet there is a big upside to the multiplier used for battery plants versus assembly plants. In traditional auto plants, Sweeney said, the best-paying jobs are within the plant, and the indirect jobs are of lesser quality.

“This is different in a battery plant because there’s ... big chemical plant jobs which are similarly well-compensating,” he said. “Then the jobs in the mines pay way more than manufacturing jobs do.”

Sweeney estimates that about half of the workers indirectly linked to the new battery-cell plant “will know that the work they’re doing is going into a car battery.” The other half will be working jobs  induced by the resulting economic activity.

CANADA ALREADY ‘CRITICAL’

But not all auto experts are convinced that the pursuit of anchor plants such as Volkswagen’s cell site are needed to jump-start Canada’s EV battery supply chain.

If the country’s reserves of critical minerals really are that critical, they are certain to attract attention on their own, said Greig Mordue, chair in advanced-manufacturing policy at McMaster University in Hamilton, Ont.

“Investment, whether it’s in mining or processing, it would have come to Canada regardless because [critical minerals] are difficult to find and difficult to get at,” Mordue said.

Volkswagen likely wouldn’t have chosen St. Thomas for its cell plant without the federal subsidies, he said, but many of the battery-material supply jobs that the federal government has linked to the plant would have arrived anyway and without billions in government support.