Stellantis and LG consider Ottawa’s enriched subsidy offer as factory construction remains halted

Stellantis NV (NYSE:) and LG Energy Solution Ltd (KS:) are reviewing an enhanced subsidy deal from Ottawa designed to save an electric vehicle battery factory worth 2,500 Canadian jobs. Construction on the $3.7 billion factory was halted on May 15th when the companies alleged the federal government wasn’t holding up its end of a deal.

“Stellantis and LGES are in receipt of a written offer that is currently under financial and legal review,” Stellantis Canada communications head LouAnn Gosselin told reporters.

Canadian Prime Minister, Justin Trudeau on Tuesday emphasized it’s “an offer that is both respectful of the taxpayer dollars that are going into it but mostly, it’s one that is reasonable to create great jobs for the future for generations to come.”

In a letter dated April 19, the heads of Stellantis and LG Energy Solution told Prime Minister Justin Trudeau the project was in jeopardy if he did not honor what the company says was a promise in writing to close the “competitive gap posed by the U.S. legislation.”

The new auto plant was announced in March last year, but tensions emerged when the United States passed the Inflation Reduction Act (IRA), a massive package of clean-tech incentives for companies.

On May 19th, Ontario Premier Doug Ford announced that his government would increase its financial support after Canada’s Industry Minister Francois-Philippe Champagne said the federal government had increased its planned support to Stellantis to break the “stalemate”.

When asked by reporters if Ottawa had gone as high as it would go, both Trudeau and Champagne declined to answer.

“That is something between me and the company…as lead negotiator on that, you want to make sure that…there’s discussions on both ways on that, but I think they understand that now we need to bring that to an end, to bring more certainty to the workers to the industry,” Champagne said.

Sources, speaking confidentially in order to discuss internal deliberations, said Champagne delivered the enriched offer to Stellantis last Friday.

Shares of STLA are up 0.76% near end of day trading on Tuesday.