Volkswagen's $13B is Biggest Corporate Welfare Payout in Modern Canadian History
Volkwagen’s $13B is the biggest corporate welfare payout in modern Canadian historyBombardier’s $4 billion, which was collected over 50 years, doesn’t even come close.
After weeks of both the Ontario and federal governments sidestepping questions about how much they paid Volkswagen to open a battery factory in St. Thomas, Ont., the final figure was just obtained by Bloomberg News: The German carmaker will be getting $13 billion in grants and subsidies over the next 10 years.
It is, quite simply, the largest single payout of corporate welfare since the construction of the Canadian Pacific Railroad.
The next leading contender would be Bombardier, which received about $4 billion in government subsidies between 1966 and 2017. But the Montreal-based aerospace firm racked up the total through dozens of tax credits, interest-free loans, and subsidies spread out over five decades.
Volkswagen will not only receive a payout equivalent to as much as triple Bombardier’s lifetime total, but it will receive it in one go.
Also on the all-time leaderboard for highest corporate payouts is the $13.7 billion that Ottawa used to bail out GM and Chrysler in 2009. But in that case, Ottawa was purchasing an equity stake in the automakers. And although it would ultimately sell that stake at a loss, the bailout’s ultimate $3.5 billion cost to taxpayers is still less than half of what just got promised to Volkswagen.
The Trudeau government also spent $4.5 billion to buy the Trans Mountain pipeline in 2018, although they can now count the pipeline as a Crown asset. By contrast, the Volkswagen deal doesn’t come with any equity stake.
In March, the governments of both Prime Minister Justin Trudeau and Ontario Premier Doug Ford offered high praise to Volkswagen’s “vote of confidence” in choosing to build a “giga factory” for EV batteries in St. Thomas, Ont.
“We’ll keep working to attract investments like this as we grow our electric vehicle supply chain,” read a statement by Trudeau greeting the announcement.
Both levels of government refused to confirm at the time whether any public money had incentivized the deal, even though Volkswagen has openly declared its intention to locate the factory wherever it could find the best subsidy offer.
Just one week before the announcement, Volkswagen had threatened to scotch plans for a similar plant in Eastern Europe unless the European Union could match the massive green subsidies being offered by the administration of U.S. President Joe Biden.
At the time, VW calculated that a battery giga factory in the United States could easily yield up to US$10 billion in subsidies.
“When we put the figures together, the conditions they offer are much more interesting than the conditions they offer in Europe,” one VW executive said at the time.
Bloomberg revealed the $13 billion figure on Thursday, along with a quote by industry minister François-Philippe Champagne saying the sum was necessary to seize “generational opportunities.”
When factoring in the exchange rate, the $13 billion offered by Canada effectively matches the U.S. promise of US$10 billion, which came about through the recently passed Inflation Reduction Act, a package of more than $369 billion in green technology subsidies.
According to Volkswagen, the St. Thomas factory is expected to employ up to 3,000 people. This means that the payout works out to $430,000 per worker.
The Automotive Parts Manufacturing Association has estimated that the factory’s construction could spur the creation of an additional 5,000 jobs. But even when peripheral job creation is factored in, that’s still a subsidy of $162,500 per worker.
The Volkswagen deal is only the most high-profile example of an increasing trend towards government subsidies of private industry, often through the guise of supporting green technology.
Nevertheless, the late 19th-century construction of Canada’s transcontinental railroad still remains the all-time undisputed heavyweight in terms of government openly handing wealth to private corporations.
Railroad companies were given massive land grants and 20-year monopolies, as well as government contracts that completely covered the cost of construction — and removed any risk whatsoever for the firms’ investors.
One of the most egregious examples was the E&N Railway, the Vancouver Island branch line that effectively formed the last link in the Trans Canada Rail System. Coal baron Robert Dunsmuir received generous contracts to build a railway that primarily served his own coal and timber holdings. Then, to top it off, he was given private ownership of one-fifth of the entire island.
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