The great Canadian giveaway
Trudeau and his Liberals have made stupidity a replacement for policy
The Trudeau government just released the announcement that they are giving Volkswagen a $10 billion U.S. ($13 billion Canadian) subsidy to locate an electric vehicle (EV) battery plant in Canada. To be fair, the Liberals were mum about how much they are giving VW - it was a former automotive executive who claimed the cost was at least $1 billion and could run as high as $10 billion. That executive, Greig Mordue, now chairs advanced manufacturing policy at McMaster University and was responsible for Toyota’s Ontario auto plant. He based his estimate in part on the reportedly $5 billion Trudeau and Ontario offered Stellantis to build an EV battery plant in Windsor. The planned St. Thomas EV battery plant will employ about 3,000 people and the Stellantis plant about the same.
Tesla’s Nevada gigafactory came online at an estimated total cost of $5 billion. Tesla announced it will double capacity at the gigafactory for another $3.6 billion. The expanded plant will employ some 11,000 people at its peak according to Tesla.
Assume Trudeau cut a deal at the low end of the range and ponied up $1 billion of taxpayer’s money to bribe VW to locate a plant in Canada, presumably rather than in U.S. or Mexico who must have come up short with their “bribes”. Or, alternatively, the only real bribes going on went to Trudeau and his cabinet ministers involved in the decision? Who knows? Without transparency in Ottawa and plenty of evidence of corruption in the Prime Minister’s Office (dating back to WE, SN Lavalin and a plethora of more recent scandals) there is every reason to believe not all is well in the state of Denmark.
Tesla’s Gigafactory will build enough batteries for two million EV’s and after an all-in capital cost of less than $10 billion. The total Canadian automobile sales market for all types of vehicles including internal combustion (ICE) vehicles as well as the nascent EV production runs about 1.7 million vehicles a year. The St. Thomas VW plant and the Stellantis Windsor plant will produce more batteries than Canada’s entire car market consumes regardless of where those cars are assembled. Stellantis is also buildng an EV battery plant in the U.S.
Canada produces more vehicles than Canadians buy, with annual output running between 2 million and 3 million vehicles per year. Many Canadian produced vehicles are exported to United States.
The entire North American auto industry runs about 17 million new light vehicles per year. For VW and Stellantis to fill up the two planned Canadian plants which combined should have capacity to produce batteries for 4 million EV’s, all Canadian car companies would have to source their batteries from VW and Stellantis and capture about 25% of North American vehicle output. Seem likely? Not in any world I have ever lived in.
Tesla will source its batteries from Tesla. GM, Ford, Hyundai, Honda, Toyota, and many other vehicle manufacturers making EV’s will produce their own EV battery facilities. VW commands less than 5% of North American vehicle sales and Stellantis sold only 1.5 million vehicles in North America in 2022. Batteries are heavy and costly to ship. The likely outcome of these “handouts” will not be a thriving Canadian EV industry but a couple of “white elephants” continually feeding at the Ottawa trough to keep their unionized workforces in indexed pensions for decades to come.
Canada is less a location for automobile manufacturing than it is a location for subsidized labor to enjoy high paying jobs with outsized benefits dependent on government largesse to exist. Trudeau’s handouts to VW and Stellantis (at Doug Ford’s part of the same disgraceful trend) should be labeled “the great Canadian giveaway” and recognized for the displacement of policy by outright stupidity.
In my 25 years a Chief Executive Officer of a Canadian auto parts sub-assembler, I am proud to state my company (Automodular Corporation) never took a dime of government money, paid above average compensation to our unionized workforce (I personally invited Buzz Hargrove to organize our plants) and enjoyed industry leading quality and profitability. Frank Stronach and Linda Hazenfratz typify the real Canadian automotive industry - strong sensible leadership of profitable companies who earn their profits the old fashioned way - by managing well-trained workers in efficient plants and paying them well for their work - and don’t walk around with their hands out asking for government help. What Trudeau is doing is encouraging European companies with a history of government dependency to import that socialist concept into Canada, and it looks like he is succeeding, at the expense of Canadian taxpayers.
The giveaway of billions to VW and Stellantis is nothing to crow about.