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Ontario’s economic development boss Vic Fedeli remembers the moment the government decided to secure Ontario’s spot as the second-largest auto hub in North America behind Detroit.
It was a few years ago when Sergio Marchionne, the former chairman of Fiat Chrysler (now called Stellantis) logged a complaint.
“The then-chair of what was then called Fiat Chrysler suggested that the government of Ontario create the conditions to be more competitive,” Fedeli told the Detroit Free Press.
Marchionne died in July 2018. But when Doug Ford was elected premier of Ontario that year, Ford’s new government went to work on Marchionne’s request, said Fedeli, Ontario’s minister of Economic Development, Job Creation and Trade.
“We promised the automakers we would lower the cost of doing business,” Fedeli said. “We go to the companies now with a package that saves them $7 billion ($5.5 billion U.S.) a year in operating costs.”
Fedeli credits this package, which is one in an arsenal Canada uses to lure business, for prompting many companies to invest in their operations in Ontario, including the $6 billion in investments General Motors and Stellantis recently announced for the province.
Ontario, and Canada as a whole, are aggressively pushing to win auto industry investment and to dominate raw material supplies used for electric vehicle batteries. But the push is not competitive with Michigan, Fedeli insists: It is a partnership.
“I don’t see it as competitive, I see it as collaborative,” Fedeli said. “There’s always spirited competition, but we need each other as partners … we buy 10% of all the cars made in the U.S. We need each other, we’re innovating, we innovate together.”
The cost savings
The Ontario government achieved the operational cost cuts several ways, Fedeli said, including with workforce and property incentives.
The government was able to lower the cost for workers’ compensation insurance (called Workplace Safety and Insurance Board in Canada) by $2.5 billion ($1.98 billion U.S.) since 2018 without impacting coverage, he said.
It was done by eliminating the WSIB’s unfunded liability in 2018, which was $14.2 billion. The unfunded liability was the shortfall between future obligations to pay injured workers and the money available to pay them. Eliminating the unfunded liability resulted in dramatically lower premiums in subsequent years without having to reduce worker protection, he said.
This year, the average premium rates are being reduced by 5.1%, which returns $168 million ($133 million U.S.) to employers to reinvest in new jobs, technology, and health and safety protections for workers, he said.
In February, the Ontario government said some “safe employers” will get a total rebate of up to $1.5 billion spread among them as WSIB surplus funds are returned for the first time. This rebate will give 300,000 businesses back 30% of their annual premium payments. The government said employers will get the rebates this month.
Another way the government garnered savings to lure businesses, Fedeli said, was to allow companies to write off the cost of their new equipment in that fiscal year and that’s a billion in annual savings. In U.S. dollars, that’s about $790 million.
Fedeli said businesses that invest in Ontario get a 15% reduction in the cost of electricity and a lower “province share of local property taxes” which is a $450 million ($357 million U.S.) annual savings.
“We’ve reduced regulations, too,” Fedeli said. “That saves companies $400 million ($317 million U.S.) a year.”
The government also touted nonmonetary benefits that Ontario offers, such as “a unique talent pool,” he said. There are 12 universities and 24 colleges in the province that offer “auto-focused programs,” Fedeli said.
“We are putting out employees, some of the best and brightest talents. We are the second-largest auto sector,” Fedeli said. “We are the second-largest IT cluster behind Silicon Valley. You put the auto industry, IT together, it’s attracting companies.”
Fedeli said Ontario also has 700 parts companies and 300 connected and autonomous development companies related to the auto industry.
Unifor represents approximately 37,000 workers in the auto sector across all of Canada, its data shows. Of those, about 20,000 work in Detroit Three auto assembly and powertrain plants in Ontario and an estimated 17,000 work at independent parts suppliers.
In the U.S., the UAW represents 155,000 workers for the Detroit Three. About 75,000 of them are in Michigan, said UAW spokesman Brian Rothenberg.
Why Stellantis chose Windsor
Late last month, Chrysler parent Stellantis and South Korea’s LG Energy Solution announced they will invest $4 billion to build an electric vehicle battery plant in Windsor, Ontario. The automaker said it also plans a second battery plant at a U.S. location yet to be publicly named.
It was a huge win for Ontario, because the plant is to be the first large-scale EV battery plant in Canada, promising to create 2,500 new jobs. Work on the 220-acre, 4.5-million-square-foot plant in Windsor is expected to begin later this year, with production to launch in the first quarter of 2024.
Stellantis and LG considered several “jurisdictions” for “localized battery production in North America” before choosing Windsor as the winner, Stellantis spokeswoman Lou Ann Gosselin told the Free Press.
“Windsor is known for its strong ties to the automotive industry and its close proximity to the U.S.,” Gosselin said. “There is access to a talented, skilled workforce, a strong supplier base in southwestern Ontario, and targeted government policies at all levels to attract this type of innovation and technologies … to name a few of the factors that went into this decision.”
Stellantis and LG have not said which vehicles the plant’s lithium-ion battery cells and modules would supply, only that they would “meet a significant portion” of Stellantis’ production needs in North America. The timing lines up with plans for an electric Ram 1500 pickup and Dodge muscle car. Stellantis also owns and sells the Jeep, Fiat, Alfa Romeo and Maserati brands in North America.
Neither of the companies, nor Ontario’s leaders, have detailed the types or amount of public support that was given for the new plant, but in a previous Free Press article, Stellantis said each level of government had agreed to “fully support” the operation.
Ontario Premier Ford put the total in the “hundreds of millions,” but declined to disclose the specific figures because that would compromise negotiations with other companies.
GM’s big investment
Earlier this month, General Motors said it is making a $2 billion investment in two plants in Ontario and the Canadian government is kicking in $259 million to contribute to the investment.
GM Canada’s leaders told the Free Press it worked with the government on policies that made doing business in Ontario more attractive.
“GM Canada has engaged with the Minister and Ontario in all these policy areas and agree these improvements are helping establish a strong investment profile,” said David Paterson, vice president, GM Canada Corporate and Environmental Affairs. “Our recent announcements underscore that we continue to see a very positive future in Ontario and Canada.”
As part of the investment, GM will develop the first all-electric assembly plant in Canada at CAMI Assembly in Ingersoll, Ontario. GM will start building commercial electric vans there for GM’s BrightDrop subsidiary in December.
More:GM’s BrightDrop adds Walmart as EV customer, expands order with FedEx
GM also said it will expand production at Oshawa Assembly plant in Ontario to include the light-duty Chevrolet Silverado gasoline-powered pickup in the next few months. The plant currently builds the heavy-duty version. GM will add a third shift to the plant and create 2,600 jobs as part of the expansion, GM said.
More:GM starts a second shift at Canada plant, will add new pickup to production
Federal Industry Minister Francois-Philippe Champagne has said Canada’s government wanted to ensure that “the car of the future is built right here in Canada” so the country is providing $259 million from its Strategic Innovation Fund to support GM’s investment, Champagne said.
Canada developed the Strategic Innovation Fund in 2017 for the purpose of driving innovative businesses to Canada by funding large projects.
“We are cementing our position as the second-largest automotive jurisdiction in America,” Champagne said, standing near the assembly line of GM’s Oshawa Assembly plant early this month. “This $2 billion investment that we have secured from GM, will make a huge difference in Ontario.”
Oshawa Assembly plant’s future is a reversal of fortune. In 2018, GM CEO Mary Barra said the automaker would permanently close five plants in North America and Oshawa was one of them. But during 2020 contract negotiations with Unifor — the union that represents autoworkers in Canada — GM agreed to restart Oshawa.
More:Here’s how Canada’s autoworker union won big with GM, Ford and FCA
Michigan’s incentives
Michigan is doing its part to remain competitive.
In December, Michigan Gov. Gretchen Whitmer signed into law a package of bipartisan bills that will put $1 billion into a fund to attract businesses to invest in Michigan and bring more than 1,000 new jobs to the state.
The package includes the Critical Industry and Strategic Site Readiness Programs.
The programs are incentives for business investment in the state. The Critical Industry program allows Michigan leaders to grant significant investments to businesses that are critical to closing deals and creating and keeping jobs and capital investment. The Strategic Site Readiness program provide grants, loans, and other economic assistance to create investment-ready sites that attract investment in Michigan.
The funding may be used to support business expansion or development of sites to attract future projects, an MEDC statement said.
A spokesman for MEDC did not respond to questions about whether Michigan, like Ontario, was also offering operational cost savings and whether it views Ontario as a competitor for additional auto industry investments.
But Bobby Leddy, a spokesman for Whitmer’s office, said Wednesday the state is “always competing for every job and every dollar of investment to ensure that our state remains the automobile capital of the world as it transitions to electric vehicle production.”
Under Whitmer’s leadership, Leddy said, Michigan’s auto industry is stronger than ever with 20,000 additional auto jobs and “billions of dollars in historic investments from the automakers.”
“We’ve secured the largest investment from GM in the company’s history, built the first auto plant in Detroit in 30 years by partnering with Stellantis, and just recently announced an additional $250 million to create 450 jobs in Dearborn, Ypsilanti, and Sterling Heights to support the production of the new Ford F-150 Lightning,” Leddy said.
He is referring to Ford’s September announcement that it would invest in the Rouge Complex for the all-electric F-150 Lightning’s production. Also, workers at Rawsonville Components Plant in Ypsilanti will assemble the batteries and Van Dyke Electric Powertrain Center in Sterling Heights will increase its capacity to supply electric motors and electric transaxles for the Lightning.
“All of this is possible due to the fact that we have better economic development tools and a better skilled workforce than we’ve had under previous administrations,” Leddy said, adding Whitmer will continue “to get deals done that create jobs and put Michiganders first.”
The state’s economic efforts manifested in GM’s January announcement it will invest $7 billion in four manufacturing facilities, making the state the hub of electric vehicle development and manufacturing.
Of that, GM will spend $2.6 billion to build a new battery cell factory in the Lansing area and $4 billion to convert its existing vehicle assembly factory in Orion Township to make electric pickups. It will also spend about half a billion dollars to make upgrades to its two existing vehicle assembly plants in Lansing. GM said the investment will create 4,000 jobs and retain 1,000 others. GM currently employs 50,631 people in Michigan.
GM’s announcement was the same day the state approved a series of incentives that total about $824 million for GM’s investment in its Michigan projects. The state’s incentives include $666.1 million in connection to the Orion plant expansion and the new battery cell plant. Of that, $600 million came from the Critical Industry fund and $66.1 million from the Michigan Strategic Site Readiness fund. But there is a hitch: The state gets its money back if the project doesn’t create at least 3,200 jobs.
Orion Township also voted to give GM a big tax break to expand the plant where GM builds the Chevrolet Bolt EV and Bolt EUV.
GM President Mark Reuss has said the $7 billion investment in Michigan made sense because of GM’s existing relationships with suppliers based in the state and its work with local government on incentives.
Michigan wasn’t so lucky when it came to Ford Motor Co. In September, Ford announced it would invest $11 billion to build several new plants, including battery factories and an EV assembly plant, in Kentucky and Tennessee. That investment will create 11,000 jobs, Ford said.
State leaders and the Tennessee Valley Authority offered millions of dollars in incentives, inexpensive and reliable energy to lure Ford. In addition, officials in Tennessee have set up a fund to pay for vocational training and develop curriculums that teach the skills needed in the workforce.
In Kentucky, Ford has two plants already in Louisville, so the state government worked to close a deal for a new battery plant by offering a $250 million forgivable loan, which requires Ford to meet its projections for investment and jobs. Ford can draw on the loan over a 20-year period.
A town called Cobalt
Meanwhile, back in Canada, a new auto industry region is emerging in a tiny, rural town called Cobalt.
About a six-hour drive north of Toronto in northern Ontario, the mining town of about 1,100 people first made a name for itself more than 100 years ago by mining silver. It eventually became one of the top procurers of silver in the world.
The silver ore contains cobalt, an important metal used in the production of EV batteries. It gives the batteries energy, density and longevity.
More:GM announces multiyear agreement to source raw material for EVs
Today, the aptly named town is home to the only permitted cobalt refinery in North America, First Cobalt Refinery, producing battery-grade cobalt used in EV batteries.
Last month, construction begin on a $400 million-$500 million ($317 million-$396 million U.S.) battery materials industrial park in the Cobalt area by Electra Battery Materials, a Toronto-based mineral processing company. This potential manufacturing hub could create 300 jobs, Ontario’s government said.
By 2026, the proposed “one-stop shop” complex will have cobalt and nickel sulfate production plants, a large-scale lithium-ion battery recycling facility, and a battery precursor materials plant, reports North Ontario Business.
‘Unleashing Ontario’
Canada is the “only country in this hemisphere,” Fedeli said that has all the key minerals needed for EV batteries. Prime Minister Justin Trudeau’s government has said, “it will spend nearly $1.5 billion ($1.19 billion U.S.) by 2030 on the infrastructure to get those materials from the ground to factories,” according to the Financial Post.
“Nickel, lithium and cobalt will be needed in North America and quite frankly a lot of that is sitting in the ground in northern Ontario,” Fedeli said.
Fedeli said leaders expect that area to “”grow considerably” in the near future as more automakers look to bring an increasing number of EVs to market by the end of the decade.
“We are exploring a way for all of it to be mined and processed here,” Fedeli said. “We call what we’re doing, ‘unleashing Ontario’ because there’s so much activity in the auto sector that ties in the mineral sector.”
More:Here’s how Canada’s autoworker union won big with GM, Ford and FCA
Staff writer Dave Boucher contributed to this report.
Contact Jamie L. LaReau: 313-222-2149 or [email protected]. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.
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