Canada's New Battery Boondoggle: It Ain't Peanuts

Things have been rough in St. Thomas, Ontario for more than a decade now. Two of the area's major employers -- Ford's St. Thomas Assembly plant and a Sterling Trucks factory -- shutdown for good in the wake of the 2008 financial crisis, putting more than a thousand people out of work. And their famous Jumbo the Elephant statue, which commemorates the circus elephant who was struck by a train and killed in the city in 1885, doesn't attract as much business as you might think.

But that's all about to change, says Justin Trudeau. Canada's prime minister has proudly announced that Volkswagen has selected St. Thomas as the site of its brand new “gigafactory,” which will manufacture one million E.V. batteries a year once it's fully operational, and bring “up to 3,000 direct jobs and up to 30,000 indirect jobs” to the area. Speaking at the announcement, Trudeau's Industry Minister, François-Philippe Champagne said,

[This] is a true testament to our highly skilled workforce and Canada’s strong and growing battery ecosystem. Volkswagen’s decision to establish its first overseas gigafactory in Canada speaks to our country’s competitiveness when it comes to attracting major investments. It is also a vote of confidence in Canada as the green supplier of choice to the world.

Which must sound great to a lot of Canadians. But when they look at the details, they might begin to wonder if perhaps Trudeau is selling them a lemon. Or, more accurately, if Volkswagen has sold Trudeau a lemon and he's used their money to pay it off.

It's that simple!

The first tip-off is in the claim that this will bring in "up to 3,000" jobs. As John Robson points out, "the “up to” is a giveaway that these numbers are fantasy." But even if they end up being accurate, they wouldn't be all that impressive considering the price tag. The Trudeau Government is "subsidizing" (that is, bribing) Volkswagen to the tune of $13.8 billion to bring this plant to town. That's a whole lot of loonies! Blacklock's Reporter website comments this "giveaway is nearly triple the average annual cost of all federal aid for all corporations nationwide." And Robson again: "At $13 billion, how much did each [job] cost? A mere $4.3 million per. We’d have saved money by picking 3,000 random Canadians and giving them a million each to stay home."

The Trudeau government has defended the massive outlay, saying that Canada is competing with Joe Biden's America, which allocated hundreds of billions of dollars towards so-called "green energy" projects in the deceptively named Inflation Reduction Act. Indeed, the contract is reportedly written in such a way that leaves Canada on the hook only as long as the I.R.A. remains in force south of the border. So conservatives can dream of a world in which Republicans repeal the act to the benefit of both Canadian and American finances. Extremely unlikely, but theoretically possible.

Of course, their other defense is that this is good for St. Thomas, and its environs. Trudeau & Co claim to have single-handedly brought back those jobs which disappeared after 2008, and then some! Except, this presumes that the bill for that $13 billion will never come due. In reality, St. Thomas is filled with taxpayers, who will have to shoulder the tax burden for this deal alongside their fellow Canadians. They're already paying inflated prices on goods and services due to the Trudeau government's ever-increasing carbon tax, and this type of unprecedented government outlay will have the same effect. For the same reasons, the cost of doing business has been going up in Ontario, and any business that might have grown up organically in St. Thomas -- that is, without being artificially nourished with piles of cash -- will now have a harder time of it, if it gets off the ground at all.

The dream never dies, it just runs out of gas.

Moreover, what happens if, as seems likely, Electric Vehicle numbers don't end up being the sure thing that conventional wisdom seems to think? After all, barely 40 percent of Americans say they'll even consider an E.V. for their next car, a number that's unlikely to go down much in the near term considering that many electric vehicles will soon no longer be eligible for the federal government's $7,500 tax credit. (Funny how governments have to pay companies to build these cars and they have to pay consumers to buy them.) And even the Biden administration's own optimistic projections for E.V. numbers over the next several years don't add up.

If the E.V. industry, which has spent its entire existence coasting on government money, massively under performs, does Volkswagen continue to employ 3,000 Ontarians in St. Thomas? Or does it eventually follow Ford out of town? We all know the answer to that.