Stellantis, LG Energy implementing ‘contingency plans’ for EV battery plant in Canada

OTTAWA — Stellantis and South Korea’s LG Energy Solution are implementing “contingency plans” related to a more-than $4-billion battery plant investment in Canada because the federal government has not delivered on its promises, a Stellantis spokesperson said.

“As of today, the Canadian Government has not delivered on what was agreed to, therefore Stellantis and LG Energy Solution will immediately begin implementing their contingency plans,” Stellantis said in a brief emailed statement on Friday.

LG Energy and Stellantis announced the investment last year to establish a large-scale, domestic, EV battery factory in Canada.

At the time, Canada’s Innovation Minister Francois-Philippe Champagne described the deal, which included about C$1.48 billion ($1.1 billion) from LG Energy and undisclosed contributions from federal and provincial governments, as the largest ever in the Canadian auto sector.

A spokesperson for Champagne said on Friday that 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.

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 threatening to pull the plug on the battery plant unless it’s deal with the government is sweetened to the level Volkswagen received this year, The Toronto Star newspaper reported earlier on Friday, citing unnamed sources.

The Star said Stellantis began seeking an enriched deal in Canada shortly after the U.S. Inflation Reduction Act, which offers $369 billion of subsidies for electric vehicles and other clean technologies, passed into law last year.

Canada’s deal with Volkswagen for a battery gigafactory, announced this year, is the biggest single investment ever in the country’s electric-vehicle supply chain.

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

Canada, home to a large mining sector for minerals including lithium, nickel and cobalt, is trying to woo companies involved in all levels of the EV supply chain via a multi-billion-dollar green technology fund as the world seeks to cut carbon emissions.

URGED TO END DISPUTE

Meanwhile, Windsor Mayor Drew Dilkens and Unifor, the union representing Detroit 3 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 in 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 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.”