At a splashy press conference on Jan. 28, the federal government announced it was handing $169 million dollars to Linamar as part of a strategic investment in electric vehicles. The investment, said the company at the press conference, would be split among four different factories owned by Linamar, including the brand new facility in Welland.
And yet, just a few days later, Linamar put the Welland factory up for sale. Wow, crazy. Who could have seen that coming.
Well, anyone who was paying attention. As I was midway through writing this column, the Investment Management Corp. of Ontario (IMCO) announced it had completely written off a $400 million investment in Northvolt, the electric vehicle battery company which has been slowly imploding over the past few months. The Swedish company declared Chapter 11 back in November and has been circling the drain ever since.
A few weeks later, Stellantis – Europe’s largest EV battery company – announced it was “halting work” on its primary EV battery project in Germany.
Similarly, the writing was on the wall for Linamar around the same time. Way back on Nov. 13 – nearly two full months before the feds handed them $169 million – Linamar announced that it did not "expect to start shipping parts” from its Welland factory in 2025, due to “stalling progress” at the site. Hmm, seems like a pretty big red flag to me. Seems like a project into which I probably wouldn’t toss $169 million.
But hey, what do I know, I’m only the guy who predicted the EV bubble was going to crash, in a column I filed for this very publication a full nine months ago.
To be clear though, this is not a blanket condemnation of government investment in domestic industries. Done right, I think government investment can play a key role in making Canadian companies or industries successful on the global stage.
Strategic investment from our government has, for example, helped keep local journalism from total collapse, maintained a healthy horse racing industry, and encouraged telecoms to bring high speed internet to remote parts of the country. All worthy investments.
The Quebec government has, for decades, heavily subsidized the video game industry, turning Montreal into the unlikely epicentre of video game development, allowing Ubisoft to produce massive, industry-leading hits like Assassin's Creed and the Tom Clancy games. But done wrong, you end up with Bombardier, a company that seems to not actually produce anything other than requests for more government cash.
So how does one know if we are investing in an Ubisoft, a Bombardier, or a Linamar? Therein lies the rub. We don’t.
Knowing which companies to invest in can be tricky, but I do think we’re overlooking a fairly simple trick to figure this all out: CEO salary.
Ubisoft is a giant, industry-dominating force in the world of video games, with around $3 billion in annual revenue, and yet its CEO, Yves Guillemot, earns a comparatively modest salary of around $656,000. Compare that with Linamar, whose CEO, Linda Hasenfratz, is one of the highest paid people in Canada, with an alarming $17 million salary.
So a company with a $17 million CEO took $169 million from the federal government, partially to invest in a factory in Welland which they then closed (before it had even opened) and put up for sale mere weeks after cashing the feds' cheque.
I would hope that this would put Linamar on the blacklist and somehow bar them from getting future investment from our government, but it doesn’t seem to work that way. A few years from now, I’m sure Linamar will get another big fat cheque, a nice little reward for backing out of their commitment to Welland.
But hey, at least it only cost us $169 million—that’s enough to pay their CEO’s salary for nearly nine years.
James Culic is definitely not smug about his prescient writing about the EV battery bubble popping. Find out how to yell at him at the bottom of this page, or send an electrifying letter to the editor by clicking here.
