Canadian Taxpayers Federation condemns $31 billion corporate handout to automotive industry

The $15 billion offer increased twenty-fold after Stellantis halted production to demand matching subsidies to Volkswagen, who received $16.3 billion to build a battery plant this year.

  • Rebel News
  • July 11, 2023
  • News Analysis
CTF condemns $31 billion corporate handout to automotive industry
THE CANADIAN PRESS/ Geoff Robins
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Cabinet approved billions more subsidies for battery factories Thursday, amounting to more than $31 billion in corporate handouts for three Ontario plants.

"The feds need to draw the line somewhere," said Franco Terrazzano, federal director of the Canadian Taxpayers Federation (CTF). "Taxpayers can't afford to bankroll everyone and their dog who wants to make batteries."

According to Blacklock's Reporter, the Department of Finance confirmed spending billions in "performance incentives" for Stellantis electric auto battery plants in Windsor and Brampton. Stellantis is the parent company of Chrysler and Dodge.

"Canada and Ontario are partnering to attract once-in-generation projects," said the finance department. The automotive company received $15 billion in subsidies, including $10 billion from Ottawa and $5 billion from Ontario.

On July 8, Stellantis and LG Energy Solution reached a 'binding' financing deal with the federal and Ontario governments to resume work on their electric vehicle battery plant in Windsor.

The construction hiatus earlier this year stemmed from both companies wanting more government money — in line with the U.S. offer under the Inflation Reduction Act (IRA).

Stellantis and LG Energy Solution reportedly wanted more than $19 billion over the next decade from Canadian governments.

Now, the automotive giants will immediately resume building the NextStar Energy plant. Production will launch next year with an annual capacity of over 45-gigawatt hours.

"We are pleased that the federal government, with the support of the provincial government, came back and met their commitment of levelling the playing field with the IRA," said Mark Stewart, Stellantis COO for North America.

Industry Minister François-Philippe Champagne shared that enthusiasm for the plant, expected to create 2,500 jobs, reported Blacklock's Reporter.

"It will create and secure thousands of jobs — both in the auto sector and in related industries across Canada — and will further solidify Canada's place as a leader in the global electric vehicle supply chain," said Deputy Prime Minister Chrystia Freeland and Champagne in a joint statement.

"The companies only assemble batteries, they don't make the components, so all these components need to be made here in Ontario now: cathode, anode, separator, copper foil, electrolytes, lithium hydroxide — each of those six major components will be a $1-billion-dollar-plus company coming to Ontario."

"What we're building is the economy of the future," Champagne told reporters on June 7. "I can tell you everyone would dream of having a Stellantis plant in their jurisdiction."

Windsor Mayor Drew Dilkens also expressed relief over the deal. "The last seven weeks have certainly been a rollercoaster ride for people in the community," he told The Canadian Press.

Dilkens called the Stellantis plant "monumental" for the region because "if this did not happen, it would certainly have had a very negative impact on the future of our region."

"Stellantis will get done, Volkswagen has been done, and others are looking," added Champagne. "It's creating momentum for all sorts of investments to come to Canada."

Cabinet first announced the $5 billion plant in 2022, with a corporate aid package of $529 million towards construction costs. 

In a letter Stellantis and LG's CEO sent to Prime Minister Justin Trudeau in April, the companies urged Trudeau to finalize their agreements with the companies in February. 

Both companies returned to the negotiating table months later when the U.S. IRA put billions of dollars in production tax credits on the table for battery makers south of the border.

The eventual July 8 offer increased nearly twenty-fold after Stellantis halted production to demand matching subsidies equivalent to the $16.3 billion awarded to Volkswagen to build a battery plant in St. Thomas.

"It's a good day not only for our joint venture but also for Canada," said Dong-Myung Kim, president of the Advanced Automotive Battery Division of LG Energy Solution.

"We are happy to finally move forward with building the country's first major battery plant and be a central part of the local battery ecosystem."

While neither the Volkswagen nor Stellantis agreements have been made public, the Parliamentary Budget Office (PBO), in a June 14 report, pegged the cost of Volkswagen subsidies at more than $16.3 billion — $2.4 billion more than advertised in March. 

Subsidies for the three plants combined in St. Thomas, Brampton and Windsor are six times the cost of all annual federal aid to all corporations in Canada. The Department of Industry, in a 2018 testimony, said federal aid for corporations averaged $5.5 billion a year.

"Trudeau set a terrible precedent with his Volkswagen handout," Terrazzano told Rebel News. How many other corporations will try to get their hands on taxpayers' cash?

"Taxpayers need politicians willing to say no to big corporations that want our money. Instead of dishing out corporate welfare, politicians should cut taxes and red tape to grow the economy."

Finance Minister Chrystia Freeland defended the record subsidies but concurred there must be limits, according to Blacklock's Reporter. 

"The resources of the federal government are not infinite," Freeland told reporters on May 17. "As finance minister, I'm going to be sure that we are careful with how we spend our money — that we are getting fair value."

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