Politicians love to gamble with your cash but, based on their record, you’d think they were rookies getting fleeced by a card shark at a shady bar.
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The latest epic failure is the gamble on electric vehicle battery manufacturer Northvolt.
The Legault government bet buckets of cash. And now the company is broke.
“Northvolt’s liquidity picture has become dire,” reads the Swedish EV battery manufacturer’s bankruptcy protection filing.
It turns out Northvolt accumulated $5.8 billion of debt. Its CEO just resigned. The company’s future is bleak. New leadership is hoping it can remain afloat with the help of a $100-million loan from one of its shareholders.
Both the government of Quebec and the province’s pension fund bet hundreds of millions of dollars on Northvolt. They bought stakes in the company worth a combined $470 million.
That’s money Quebec taxpayers and pensioners may never get back.
Quebec Economy Minister Christine Frechette admitted the money is “at risk” and taxpayers will only know if that investment remains intact after the company goes through its bankruptcy process.
As bad as the loss is for Quebecers, Canadian taxpayers might also soon be facing billions in losses. That’s because Northvolt has a Canadian subsidiary that also received buckets of taxpayer cash.
Northvolt’s Canadian subsidiary is currently building a $7-billion EV battery plant in Quebec. Quebec Premier Francois Legault and Prime Minister Justin Trudeau gave a combined $2.4 billion to Northvolt to build it.
Northvolt says its Canadian subsidiary is funded separately from the global company that was forced to file for bankruptcy and will “operate as usual outside the Chapter 11 process.”
But if the parent company’s finances have spiralled out of control, there’s every reason for taxpayers to worry its Canadian operation will, too.
Northvolt repeatedly missed its in-house global production targets this year and curtailed some of its operations in Sweden.
If Northvolt is cutting back on global production, what reason does it have to ramp up production on a new facility in Canada?
With Northvolt’s global finances on the rocks, Canadian politicians might be tempted to throw even more cash at the company’s Canadian operation to keep the company afloat.
But throwing good money after bad isn’t a solution. Politicians in Ottawa and Quebec City need to stop gambling with taxpayers’ money.
Sadly, the implications for taxpayers are much wider than the future of one EV battery company.
Canadian politicians bet $57 billion of taxpayer cash on the EV industry.
But the entire industry is in jeopardy. Other than Tesla, every EV manufacturer is losing money making them.
General Motors lost $3.5 billion on EVs in 2023. The Ford Motor Company lost $7.7 billion. And both of those companies received billion-dollar handouts from the Trudeau and Ford governments to build EVs here in Canada.
The only reason GM and Ford aren’t in Northvolt’s position is because they have gasoline-powered cars to sell for a profit, allowing them to balance their earnings (or lack thereof).
But there are signs of a pull-back.
Ford, for example, cancelled plans to produce two different models of electric SUVs, which were supposed to be built in Canada. This is costing the company billions. Meanwhile, the Canadian plant is pivoting back to building gasoline-powered cars.
Northvolt’s bankruptcy and the heavy losses traditional auto manufacturers are seeing on EVs are evidence that betting billions on the industry was a terrible gamble for Trudeau, Legault and Ontario Premier Doug Ford.
This is a very expensive lesson: Politicians should never gamble with taxpayer dollars by throwing billions at corporations. Businesses don’t need handouts to make investments that make sense.
In all these cases, the financial well-being of Canadian taxpayers should never have been at risk.