Stellantis stops construction of the Ontario EV battery module plant over federal funds

Stellantis and LG Energy Solution (LGES) on May 15 ceased some construction of its planned electric-vehicle battery factory in Windsor, Ont., as it continues to spar with the federal government over financial assistance.

The automaker is accusing Ottawa of reneging on a previously made promise.

“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 Monday.

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

The 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.

‘WE CONTINUE TO NEGOTIATE’

A spokesperson for Champagne said on May 12 the “auto industry is crucial to the Canadian economy and to the hundreds of thousands of Canadian workers.”

“We continue to negotiate in good faith with our partners. Our top priority is and remains getting the best deal for Canadians,” the spokesperson said.

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 offered in the United States.

Earlier, Finance Minister Chrystia Freeland said Canada was having “good discussions” with Stellantis, after a newspaper reported that automaker was looking for better government subsidies than originally offered by Ottawa.

“We are, as the federal government team working very, very hard on Stellantis, we’re very, very focused on it,” Freeland told reporters on a call after meetings with G7 partners in Japan.

Stellantis is now threatening to pull the plug on the module portion of the plant unless the deal with the government is sweetened to the level Volkswagen received this year, The Toronto Star newspaper reported May 12, citing unnamed sources.

Canada’s 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 St. Thomas, Ont.

The incentives nearly match those in the US Inflation Reduction Act, which includes 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.

The planned St. Thomas investment is only for cells, Parmar told Automotive News Canada. The IRA incentive for those is US$35 per kWh of cell production.

“The US Inflation Reduction Act puts Canadian battery production at a significant disadvantage. Corresponding support is needed to level the playing field if Canada is going to be part of the emerging North American battery supply chain,” said Brian Kingston, head of the Canadian Vehicles Manufacturers’ Association, which represents the interests of and lobbies on behalf of the Detroit Three in Canada.

Ontario Premier Doug Ford told the Canadian Press that the federal government needs to support Stellantis in the same way it did Volkswagen.

“It really worries me,” Ford said after an unrelated announcement in Mississauga, Ont. “We need the federal government to come to the table and show their support like they have all along.”

The province put up $500 million for both deals, Ford said, and is ensuring roads and energy for the plant.

“We’ll go toe to toe with any state down in the United States,” he said. “The only thing we can’t do is go toe to toe with the US federal government. That’s the Canadian federal government’s job, and they can do it. We’re confident that they made a promise to the people of Windsor – I was down there with the prime minister – now they need to keep their promise to the people in Windsor.”

URGENT TO END DISPUTE

Meanwhile, Windsor Major Drew Dilkens and Unifor, the union representing Detroit Three hourly workers in Canada issued separate statements on the weekend, urging the two sides to resolve their dispute.

“Government and Stellantis are playing a high-stakes game that is betting the livelihoods of tens of thousands of Canadian autoworkers,” said Unifor National President Lana Payne. “Commitments were made and Unifor and our members fully expect that all parties live up to them.”

Dilkens laid the blame on Ottawa. “The entire deal is now in question due to the federal government not fulfilling their commitments, jeopardizing not only the completion of the EV plant, but also our efforts to attract additional investment to the region.”

The city, he noted, “played a crucial role … assembling land and providing funding to support servicing and preparing the lands for the facilities.”

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, also weighed in, expressing optimism that the investment will proceed.

“Fortunately, both parties are very committed to the city, the supply chain and it’s workers,” Volpe said in a tweet posted May 13. “I expect that we will see this through.”

What has been exposed, he added, is “a tough negotiation has gone public. When Canada landed this incredible investment, the USA countered with the biggest subsidy offer in automotive history. Stellantis is addressing its fiduciary responsibility to its shareholders as it should.”

With files from Reuters, The Canadian Press and David Kennedy of Automotive News Canada.