Rick Haglund: Threats to Michigan’s auto industry aren’t just coming from the South

Stunned by Ford Motor Co.’s decision to invest $11.4 billion in electric vehicle assembly and battery plants in Tennessee and Kentucky, Michigan in December created a $1 billion fund to lure new electric vehicle operations to Michigan.

An even bigger concern voiced by policymakers and local economic developers was that aggressive southern states were going to steal Michigan’s signature auto industry with huge financial incentives unless the state sweetened its economic development money pot.

But it’s not just the South that Michigan needs to worry about in its quest to become the electric vehicle capital of North America. Canada, our neighbor to the north, is proving to be an increasingly strong competitor for electric vehicle investment.

Detroit automakers have announced investments of more than $7 billion in the Canadian province of Ontario in a battery plant and retooled assembly plants to prepare for increased electric vehicle production since 2020.

Stellantis North America (formerly FiatChrysler, formerly DaimlerChrysler, formerly Chrysler) said in March it would invest $4.1 billion (U.S.) in Canada’s first battery manufacturing plant with South Korean battery maker LG Energy Solution. The facility, expected to employ 2,500 workers, will be located in Windsor.

General Motors is shelling out $2 billion to retool an assembly plant in Ingersoll, Ontario, that will produce electric vans and to reopen its sprawling Oshawa, Ontario, assembly plant, which the automaker closed in 2019.

And Ford has promised to spend $1.3 billion to build five electric vehicles at its Oakville, Ontario, assembly plant by 2025. 

Some of this investment by Detroit automakers was won in tough contract bargaining by Unifor, the labor union that represents about 37,000 Canadian auto workers.

But Canada is not content just to be a manufacturing hub for batteries and electric vehicles. It also is battling Detroit for new investment in the research and development of these new generation vehicles.

Illinois-based auto supplier Flex-N-Gate, which has major operations in Michigan, is partnering with the Ontario government to build a $20 million battery research center in Windsor. Canadian officials see the research center as a critical element in attracting more electric vehicle investment.

The province touts its 23 universities, 20 colleges, more than 400 “private career colleges” that offer skilled trades and other occupational credentials, and a handful of auto research centers in attracting auto investment.

A decade or so ago, it was unclear if Canada would even have an automotive future. Many of its auto plants owned by Detroit automakers were threatened with closure because of rising business costs and unfavorable exchange rates. Canada was viewed by automakers as the most expensive country in the world to build cars and trucks.

But the electric vehicle revolution has recharged Canada’s auto industry.  

Bernard Swiecki, research director at Ann Arbor-based Center for Automotive Research, said Canada has a “secret sauce” of ingredients that make it particularly well suited for battery investment.

Northern Ontario’s “Ring of Fire” contains virtually all the critical minerals needed to produce advanced vehicle batteries. Premier Doug Ford has proposed aggressive mining of those minerals, but has faced resistance from the First Nations indigenous communities that must approve opening the nearly 2,000 square-mile region to mining.

Canada’s recently passed federal budget includes $3.8 billion in spending over eight years to implement the country’s first “critical minerals strategy.”

The country also has an abundance of clean, low-cost hydroelectric power that’s attractive to automakers seeking to promote electric vehicles as an important element in combating global warming and climate change, Swiecki said in a recent CAR podcast.

Ontario has focused on cutting business costs in such areas as workers’ compensation, property taxes and energy prices. Province officials say those reductions and others are saving businesses $7 billion a year.

Plus, the Canadian federal government and Ontario are as aggressive in doling out business investment incentives as any U.S. state.

The two have committed nearly $1.8 billion in incentives in recent weeks for just three auto projects: GM’s Ingersoll plant upgrade, a $1 billion retooling of a Honda assembly plant in Alliston, Ontario and Stellantis’s $4.1 billion battery plant.

“That national prioritization of automotive is a very big deal, especially when it comes to an electrified supply chain,” Swiecki said. “You really see the importance of that reflected in these Canadian policies.”

Ontario isn’t just focused on capturing the next auto project that comes along. It has also created a 10-year plan that calls for the province to build 400,000 electric and hybrid-electric vehicles annually by 2030, capture more supplier investment, create a battery supply chain, boost innovation and invest in worker training.

And the new Gordie Howe Bridge connecting Detroit to Windsor will benefit Canada’s auto industry by increasing the flow of vehicles and auto parts between Canada and the United States.

No wonder Canada agreed to pay for the $5.7 billion structure after Michigan’s Legislature refused to do so a decade ago.