Feds and Ontario play public blame game over Stellantis battery plant dispute

The federal and Ontario governments have resorted to finger-pointing in a high-stakes dispute over funding for the $5-billion Stellantis-LG Energy Solution battery cell plant in Windsor, Ont.

The two companies ceased some construction of its planned electric-vehicle battery factory in Windsor May 15 as they sparred with the Ottawa over financial assistance.

“As of today, the Canadian Government has not delivered on what was agreed to therefore Stellantis and LG Energy Solution will begin implementing their contingency plans. Effective immediately, all construction related to the battery module production on the Windsor site has stopped,” Stellantis said in a statement. 

Federal Industry Minister Francois-Philippe Champagne turned to Twitter May 15, urging the province to “pay its fair share.”

“We’ve always said we will be competitive with the U.S. when it comes to the auto sector,” he said. “But we need to work together at all levels of government. “

Ontario Premier Doug Ford, however, told reporters in Mississauga that it was up to “Ottawa to step up as they did for Volkswagen.”

“We’ll go toe-to-toe with any state, the only thing we can’t do is go toe-to-toe with the U.S. government. That’s the Canadian federal government’s job,” said Ford, adding that the province pledged $500 million each for the Stellantis and VW projects.

“We’ve signed a deal with Stellantis … quite some time ago … on infrastructure and we gave them the exact same amount as we gave Volkswagen, and we need the federal government to come to the table and show their support like they have all along.”

Ahead of a G7 leaders’ summit in Japan, Prime Minister Justin Trudeau is meeting in South Korea this week with top LG officials to discuss the plant, according to The Windsor Star newspaper.

Trudeau and Champagne Trudeau will be in Seoul as part of a state visit May 16 to 18 before attending the G7 meetings in Japan.

The $5 billion plant, slated to begin operations in August 2024.

It will be able to produce 45 gigawatt-hours (gWh) of lithium-ion cells and modules a year to feed the automaker’s assembly operations in Canada and the United States, Stellantis previously said.

Cells and modules are two separate parts, both to be assembled at the Windsor site.

Framing of the module portion of the factory is partially complete. Construction of the cells section of the facility is in its early stages.

Some activity continues on the 220-acre (90-hectare) site.

At the time of the plant’s announcement, in March 2022, Canada's Innovation Minister Francois-Philippe Champagne described the deal, which included about $1.48 billion from LGES and undisclosed contributions from federal and provincial governments, as the largest ever in the Canadian auto sector.

In a letter dated April 19, the heads of Stellantis LG Energy Solution told Trudeau the project was in jeopardy if he did not honour what the company says was a promise in writing to close the “competitive gap posed by the U.S. legislation,” according to a report in the Toronto Star newspaper.

The letter, signed by Stellantis CEO Carlos Tavares and LG Energy Solution CEO Young Soo Kwon, asked the prime minister to “urgently” sign off on an agreement reached at the end of February to match U.S. production subsidies for green energy and manufacturing projects offered by the Biden administration, the Star report said.

The CEOs state the Trudeau government provided “five separate written documents confirming your commitment to match the production incentives under the U.S. Inflation Reduction Act,” including a “mutually satisfactory special contribution agreement by your government” at the end of February this year.

But, they warned, “continued delay in executing this agreement is bringing significant risk to the project.”

“In the event our agreement is not promptly executed, we will be forced to make difficult decisions regarding this project and other respective investments in Canada in order to deliver on our commitments to bring new technology to the North American market.”

Last year, Stellantis pledged $3.6 billion to retool its Windsor and Brampton Assembly plants to produce electrified vehicles and expand its research and development centre in Windsor.

VW DEAL

Canada recently signed a deal with Volkswagen for a battery gigafactory in St. Thomas, Ont., worth up to $13 billion in incentives and announced in April, is the biggest single investment ever in the country's electric-vehicle supply chain.

The federal government has committed to provide up to $13.2 billion in manufacturing tax credits through 2032, while Europe's largest carmaker is investing up to $7 billion to build the plant St. Thomas, Ontario.

The incentives nearly match those in the U.S. Inflation Reduction Act, which includes an incentive of US $35 per kWh of cell production and a US $10 per kWh incentive for battery module production.

However, Volkswagen will receive no federal support for battery modules made in St. Thomas., according to Hans Parmar, a spokesperson for Innovation, Science and Economic Development Canada. Parmar said Ottawa will only match incentives per kWh of cell production.

Laurie Bouchard, spokesperson for Champagne, on May 15 did not respond directly to a question about Ottawa's willingness to match the US $10 per kWh module credit for Stellantis.

With files from Greg Layson and David Kennedy.