Now that Stellantis and Volkswagen have negotiated a collective $31-billion handout from the feds and Ontario, no doubt other automakers will follow. Photo credit: Bloomberg/Emily Elconin
Thirty-one billion dollars.
That’s how much of your money Prime Minister Justin Trudeau and Premier Doug Ford are handing over to two of the world’s largest and most profitable auto giants, Volkswagen and Stellantis.
In April, Trudeau and Ford announced the largest corporate welfare deal in Canadian history. It quickly became clear they were willing to do anything to get Volkswagen to build a new electric car battery plant in Ontario. In the end, Trudeau and Ford announced they were ponying up $14 billion of your cash to coax Volkswagen to come to St. Thomas.
The part they didn’t say out loud is that they’re giving $14 billion to a massive company that had a $33-billion profit last year.
But it gets worse.
The plant Volkswagen is building costs $7 billion. Trudeau and Ford have committed to pay Volkswagen double what the new plant will actually cost.
Only a couple of bumbling politicians could have inked this kind of a deal.
And then there’s the cost overruns. In the case of Volkswagen, the price tag climbed faster than even the most cynical taxpayers might have expected. The cost of the deal is already up to $16 billion.
Of course, every other auto giant took notice. Before the ink was dry on the Volkswagen giveaway, Chrysler’s parent company, Stellantis, began demanding a similar handout.
In 2022, Stellantis and the Ontario and federal governments had reached a deal for each government to chip in $250 million for Stellantis’s new plant in Windsor. But once Stellantis heard about the Volkswagen deal, the company stopped construction and demanded more money.
After a month of hostage negotiations, the governments caved and gave Stellantis $15 billion. That’s 30 times more than previously agreed. And all of this was caused by Stellantis demanding a similar sweetheart deal in line with Volkswagen.
The news contained in the Stellantis deal is even worse for Ontario taxpayers than the original Volkswagen announcement. When Volkswagen got its new deal earlier this spring, the Ford government committed $500 million to help Volkswagen build the plant while the feds promised over $13.2 billion in production subsidies.
But this time, Ford agreed to foot the bill for one-third of the production subsidy for both Stellantis and Volkswagen. Ontario is now in the production subsidy game, to the tune of $9 billion.
Now that Stellantis and Volkswagen have negotiated a $31-billion handout, no doubt other automakers will follow.
Sadly, Ontario’s economic development minister says the Ontario and federal governments have agreed to a new framework to give similar deals to other companies interested in building electric car battery plants in the province. For all future deals, the feds will foot two-thirds of the bill and the province the rest. That’s a policy that could hammer taxpayers for years to come.
Consider the opportunity cost of the two deals already signed: with $31 billion, we could have built a couple dozen new hospitals or cut every Ontario taxpayer’s provincial income tax bill in half. No doubt most taxpayers would take either of those alternatives.
The feds and the province are playing a dangerous game. Handing out tens of billions of dollars to profitable corporations to lure auto companies to Canada instead of the United States isn’t a viable long-term strategy. Our politicians should be looking for ways to increase competitiveness across the board through creating a more desirable business environment, not just cherry picking a couple of winners and a whole lot of losers.
Instead of setting up a framework for future deals, the federal and provincial governments should be coming out and shutting the door to any additional handouts.
Jay Goldberg is the Ontario Director at the Canadian Taxpayers Federation. He previously served as a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.