A standoff over government subsidies for the first electric-vehicle battery plant being built in Canada has dramatically escalated, bringing into public view the bind in which Ottawa finds itself as other automakers demand public backing comparable to the unprecedented sums recently committed to Volkswagen for another battery factory.
The companies behind the first plant, Stellantis NV STLA-N and LG Energy Solution, announced on Monday that they have stopped all construction on the $5-billion project in Windsor, Ont., “effective immediately.” Just three days prior, the companies had made a surprise public statement saying they were developing “contingency plans” to relocate their facility.
Stellantis and LG issued a brief statement on Monday attributing the stoppage to Canada “not delivering on what was agreed to,” and did not offer further comment. But government and industry officials suggested that the issue is money – specifically how much additional government funding will be made available to the project, beyond the roughly $1-billion pledged by the federal and Ontario governments when Stellantis and LG committed to Windsor last year.
That commitment was made months before the United States government implemented the Inflation Reduction Act, which offers many billions of dollars in production tax credits to comparable battery facilities in the U.S., and prompted Stellantis and LG to begin making inquiries about Ottawa’s willingness to increase its support.
The demands from the companies intensified after Ottawa proved willing this spring to match the U.S. subsidies in the case of the Volkswagen battery plant in St. Thomas, Ont., for which it committed as much as $13-billion over the next decade.
Prime Minister Justin Trudeau’s government has expressed openness to increasing the subsidies for Stellantis and LG, to bring them closer to what is being offered to Volkswagen. On Monday,Finance Minister and Deputy Prime Minister Chrystia Freeland signalled optimism about resolving the current dispute.
“I’m confident that we’re going to get there, because I know there is goodwill among all the parties,” Ms. Freeland told reporters.
The Stellantis-LG factory is considered pivotal to Canada’s aspirations of developing a full electric-vehicle supply chain. Alongside the Volkswagen plant, it is meant to attract investment in a range of business areas, including the mining of battery components, parts manufacturing, vehicle assembly and battery recycling.
But the pressure from Stellantis and LG has exposed some discomfort in Ottawa about continuing to use federal dollars to try matching the U.S. levels of support for the growing EV industry. And it has turned up the heat on a simmering dispute with the Ontario government over whether it should also bear some of that responsibility.
Ms. Freeland touched on the federal-provincial dynamic, noting that “the resources of the federal government are not infinite.” In addition to “counting on Stellantis to be reasonable,” she said, her government is “counting on Ontario to do its fair share.”
A senior federal official close to the talks, whom The Globe and Mail is not identifying because they were not authorized to speak publicly on the matter, was more pointed. The official suggested that beyond just negotiating with Stellantis and LG in the coming days, Ottawa will also be negotiating with Ontario to get it to provide a portion of the subsidies needed to keep the project in Windsor.
The official said that while the Ontario government has traditionally shared the cost of financial support for the auto industry centred in that province – and did so by putting up about half of the roughly $1-billion initially committed to Stellantis and LG – it has so far shut the door on increasing its subsidies to help match the Inflation Reduction Act.
Speaking to reporters on Monday, Ontario Premier Doug Ford portrayed that form of cross-border competitiveness as solely Ottawa’s domain.
“We’ll go toe to toe with any state, down in the United States,” Mr. Ford said. “The only thing we can’t do is go toe to toe with the U.S. federal government. That’s the federal Canadian government’s job, and they can do it.”
By Mr. Ford’s account, his government has not even been privy to negotiations related to Inflation Reduction Act matching. He said that in addition to giving $500-million each in investment subsidies to the Stellantis-LG and Volkswagen factories, the province is providing additional infrastructure, such as roads and energy.
“They need to come up and support Stellantis like they did with Volkswagen,” Mr. Ford said.
Despite the seemingly unwieldy dynamics of two levels of government struggling to get on the same page to avoid losing a pivotal clean-economy investment, auto-industry veterans said such haggling is common, though it is usually conducted behind closed doors.
”We’re seeing the sausage-making, and normally we don’t,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
The way the negotiations have spilled into public is attributable partly to the Inflation Reduction Act laying plain the current going rate for auto subsidies. Whereas the terms of negotiations between automakers and governments had often been closely guarded secrets previously, the U.S. legislation guarantees annual tax credits correlated to units produced, effectively challenging other jurisdictions to match them.
Stellantis and LG’s escalation also likely relates to the current stage of their investment and planning. The deeper into construction the project in Windsor gets, the less practical it will be for them to abandon their investment. And if they were to begin elsewhere, they would have to launch construction very soon to have any chance of starting to produce batteries at the facility in 2024, which is their stated goal.
Mr. Volpe, along with the federal official, cited the improbability of the companies even now acceptingtheir sunk costs in Windsor, let alone being able to achieve their target dates elsewhere.They said these are reasons to believe a deal will be worked out.
Not everyone is quite as sanguine.
“I’ve never seen brinksmanship of this sort,” said Greig Mordue, a former auto-sector executive who chairs advanced manufacturing policy at McMaster University’s engineering school. “So I would assume that it’s not brinksmanship.”
(Reuters) – Shares of Lululemon Athletica Inc soared 15% in early trade on Friday, after the premium apparel retailer defied investor worries with a full-year outlook lift amid little pullback from consumers and a sharp rebound in China sales.
The rosy outlook comes in contrast to the general trend of U.S. retailers ranging from Macy’s to Dollar General warning of weak discretionary spending by American consumers.
At least 11 brokerages raised price targets on the company, with Piper Sandler hiking by the highest margin to $445, above the median of $424.
“We think (Lululemon) is one of the select brands continuing to drive outsized demand in this more challenging macro environment with innovation and newness,” said Abbie Zvejnieks, analyst at Piper Sandler.
Lululemon’s first-quarter results also beat estimates as the company saw traffic across both its stores and online go up about 30%.
“Lululemon’s stores continue to be a key catalyst for customer retention and acquisition,” analysts at TD Cowen wrote in a note.
The company also reported a 79% rise in sales in China, bolstered by the rollback of COVID restrictions. Lululemon’s exposure to China could be “a solid source of sales and margin upside for the rest of the year,” analysts at Barclays wrote in a note.
A loyal customer base has also given the company a leg up, helping it sell more of its popular products, such as the Align high-rise yoga pants which retails between $98 and $118, at full price, even amid an uncertain economy.
“Lululemon is just very popular right now and seems to be immune from the slowing trend,” David Swartz, an analyst at Morningstar Research said.
The company’s strong results also lifted shares of other athletic wear makers including Nike Inc and Athleta owner Gap Inc by 4% and 3%, respectively. Shares of European sportswear companies Adidas and Puma were also up.
(Reporting by Savyata Mishra and Aishwarya Venugopal in Bengaluru; Editing by Krishna Chandra Eluri)
Oil prices were trading up on Friday afternoon as shorters got a little nervous heading into the OPEC+ weekend, with new rumors circulating about the group’s discussions about another 1 million bpd in production cuts.
The OPEC+ group is scheduled for three separate meetings beginning this weekend and concluding on June 4. While the general sentiment has been that the group will keep the status quo as far as production targets are concerned. But Saudi Arabia’s Energy Minister has made boistrous threats against oil’s speculators in the runup to the meeting, saying that shorters will be “ouching”.
On Thursday, Reuters suggested that the OPEC+ group would be unlikely to deepen its production targets at the meeting this weekend. But late on Friday, Reuters suggested that OPEC+ was indeed discussing an additional output cut of around 1 million barrels “among possible options” for the meeting on June 4.
Crude oil prices were already trading up ahead of the meeting, but increased even more in the afternoon hours, bringing Brent crude to $76.32 at 4:20 p.m., a $2.06 per barrel increase on the day. WTI was trading at $71.90 per barrel at that time.
The OPEC meeting will begin at 1 pm Vienna time tomorrow, with OPEC+ meeting on Sunday.
The latest price hike could prompt OPEC+ to keep production targets the same. But Saudi Arabia appears to still be in control of OPEC+, and he could decide to make good on his threats to punish short sellers for their speculative trades that fly in the face of market fundamentals.
“I keep advising them (referencing oil speculators) that they will be ouching, they did ouch in April, I don’t have to show my cards. I am not a poker player…but I would just tell them watch out,” Saudi’s energy minister said late last month in the runup to the meeting.
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.
An airline consumer advocate says Air Canada should face tougher consequences for stranding passengers after two disruptions in a week.
Gábor Lukács, president of Air Passenger Rights, said Canadian airlines such as Air Canada currently don’t face enough consequences from the government each time they delay or cancel a flight.
“It feels like the airlines just have a free pass,” Lukasc told CTVNews.ca in an interview Friday.
Air Canada’s operations were jolted not once but twice in a span of seven days, impacting over 670 flights combined. On May 25, 241 Air Canada flights were delayed, and 19 were cancelled. This past Thursday, 362 flights were delayed and 48 cancelled, according to tracking service FlightAware.com.
Air Canada said the recently implemented system used to communicate with aircraft and monitor the performance of its operations was having technical problems.
In a statement to CTVNews.ca yesterday, the airline confirmed that both incidents occurred in the same system but were unrelated.
Currently, a traveller is entitled to between $125 and $1,000 in compensation for delays up to three hours or more, unless the disruption is a result of events beyond the airline’s control.
However, Lukács said he believes Air Canada is gatekeeping what really happened so they don’t have to pay passengers compensation.
“I’m confident that this is within the airline’s control,” Lukasc said.
Air Canada said no one was available for an interview on Friday.
By Friday afternoon, the Montreal-based airline told CTVNews.ca through an email statement the communicator system was stabilized and “it is functioning normally.”
However, “due to the effects of Thursday’s IT issues on our schedule, some flights may be delayed this morning as we reposition aircraft and crew,” Air Canada said.
There were 164 Air Canada flights, or 30 per cent of the airline’s scheduled load, had been delayed Friday as of 6:00 p.m. EDT, along with 36 cancellations, as seen on FlightAware.
Additionally, Air Canada Rouge had 62 flights delayed and 25 cancellations.
“That’s absurd, especially for a massive huge airline like Air Canada,” said Lukács.
A spokesperson for Transport Minister Omar Alghabra said the ministry has been in touch with Air Canada since the situation began, but did not confirm whether the airline could face any consequences, including fines.
“We expect all air carriers, including Air Canada, to uphold their obligations to keep passengers safe and protect their rights, and ensure all delays and cancellations are mitigated as soon as possible,” Alghabra’s office said in an email statement sent to CTVNews.ca on Friday.