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Stellantis has what it needs to make decision on Windsor battery plant: Champagne

OTTAWA -

The federal government has delivered a written offer to Stellantis and LG Energy Solutions, Industry Minister Francois-Philippe Champagne said Tuesday.

Champagne said that should be all the companies need to make a decision on the fate of their planned electric vehicle battery plant in Windsor, Ont.

The minister said the negotiations are progressing, and "I think we're getting to the end of it."

He would not say if this was a final offer, but he did say he expects an answer from Stellantis soon.

"You know, they have what they need, and therefore I think that should be very short now," he said.

A spokeswoman for Stellantis confirmed the offer had been received but would say no more beyond the fact it is "currently under financial and legal review."

Champagne would give no details on the size of the offer except to point out his government's repeated promise to respond as needed to the massive subsidies created in the United States under the Inflation Reduction Act.

"There should be no surprise," he said. "I mean, we said that in the fall economic statement, we would be levelling the playing field with the United States when it comes to the IRA."

He added that these are "generational opportunities."

"These large manufacturing facilities, most of them will be decided within the next six to twelve months in North America. So therefore, either you win now, or you're out of that industry for 50 years or until there's a new technology."

Canada and Ontario's deal with Volkswagen to build a battery plant in St. Thomas, Ont., is worth $1.2 billion in capital and up to $13 billion in production subsidies through to 2033.

The Stellantis plant is half the size, but is set to begin making batteries three years earlier, so it could get even more in subsidies.

Prime Minister Justin Trudeau characterized the offer as a prudent one in order to ensure that Canada is part of the transition to a net-zero economy.

"It's an offer that is both respectful of the taxpayer dollars that are going into it, but mostly it's one that is reasonable to create great jobs for the future, for generations to come," he said before the Liberals' weekly cabinet meeting in Ottawa.

All of this is because of the Inflation Reduction Act in the United States, which last August put forward enormous production tax credits for advanced manufacturing including EV batteries.

The tax credits are so generous they will cut the cost of producing a battery in half, and companies have made clear to Canada that it must match the IRA or be left out.

Those includes Stellantis and LG Energy Solutions, which announced in March 2022 that they would be building a 45 gigawatt electric vehicle battery plant in Windsor, aiming for the first batteries to come off the line in early 2024.

Canada and Ontario each agreed to provide $500 million toward the $5 billion capital price tag. But as a result of the IRA, the two companies asked to renegotiate their deal and Canada agreed.

The discussions went slowly.

In April, the companies wrote to Trudeau warning that they would have to make tough decisions if his government did not make good on its promise to come back to the table with more cash.

In mid-May, they stopped construction on the plant, ratcheting up the pressure on the federal government to get a new deal. Champagne and Finance Minister Chrystia Freeland both said they needed Ontario to contribute more, and that the companies needed to be "reasonable."

Ontario did not contribute to the production subsidies for Volkswagen, but it is spending several hundred million dollars on infrastructure including to roads and utilities around the planned factory site.

Champagne and Freeland both said Ontario would have to contribute to the subsidies for Stellantis, noting that the federal government has 13 provinces and territories to support and the benefits of the plants would largely be felt in Ontario.

Premier Doug Ford initially balked at that. But he later agreed to contribute additional dollars.

Ontario's economic development minister said Tuesday the federal government's offer contains a commitment from the province to pay up to one-third of the cost, and he hopes to hear good news from Stellantis and LG "very, very shortly."

"I hope it happens very quickly," Vic Fedeli said Tuesday.

"The people of Windsor are looking for answers and we want to have those answers as soon as possible."

Fedeli wouldn't say how much more money Ontario could be on the hook for with the promise to foot one-third of the new bill, but he said it will be worthwhile to spur an end-to-end EV production chain in the province.

"When we think of these plants, there's still many, many more plants to come -- all of the companies that need to feed the two battery plants that we have here," he said.

"Each of those not only are billion-dollar plants, they all add thousands of employees. So we're growing all of Ontario, and this is the investment that we're making to be the leader."

The deal with Volkswagen was tailored to mimic the IRA, so much so that if the U.S. reduces or eliminates its subsidies earlier than 2033 as planned, Canada's subsidies will be reduced by the same amount.

The IRA offer includes a full tax credit of $35 per kilowatt hour until 2030, and then smaller amounts until the credits disappear entirely in 2033.

This report by The Canadian Press was first published June 6, 2023.

-- With files from Allison Jones in Toronto.

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