Opinion: Germany looks beyond VW and Mercedes deals to deepen Canadian partnerships

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German Chancellor Olaf Scholz, second from left, and Canadian Prime Minister Justin Trudeau, second from right, look on as Volkswagen AG CEO Herbert Diess, third from left, and Canada’s Minister of Innovation, Science and Industry, François-Philippe Champagne, signing a Memorandum of Understanding at the German-Canadian Chamber of Commerce and Industry in Toronto on August 23.COLE BURSTON/AFP/Getty Images

The people who revolutionized the automobile industry by launching the Beetle are now changing the way they make cars, for the benefit of Canada.

On Tuesday, Volkswagen AG VWAGY unveiled a new approach to its supply chain as the company prepares to fill the roads with electric vehicles. The German automaker said for the first time it plans to take direct stakes in mining companies – with a focus on investments in Canada – to ensure a reliable supply of key minerals.

VW’s announcement ahead of a business conference in Toronto overshadowed appearances by the German chancellor and Canadian prime minister, usually headlining whenever they take the stage. For Olaf Scholz and Justin Trudeau, watching someone else get attention was a sign they were doing something right.

The two executives were in Toronto over breakfast to smile approvingly as executives from two of the world’s largest automakers – Volkswagen and Mercedes-Benz AG MBGAF – signed partnerships with the Canadian government to develop vehicle companies electricity and batteries in this country. Just before the ceremony, a Volkswagen executive said the company plans to start investing directly in Canadian miners.

Opinion: Canada’s moment with Germany won’t last long if it doesn’t move fast

If you want to inject buzz into a crowd of cash-strapped CEOs, tell them that VW and Mercedes want to inject cash into companies that can fuel a green economy. You get a feeding frenzy that rivals anything sharks put on. After the announcement, the crowd in suits around the auto executives dwarfed the queue to shake hands with politicians.

Tuesday’s ceremony marked the latest European investments in Canada’s emerging electric vehicle industry. Federal Minister of Innovation, Science and Industry Francois-Phillipe Champagne’s tireless networking landed a $1.5 billion factory near Kingston from Belgian company Umicore SA UMICF last month and a commitment of similar size in March from Germany’s BASF for an installation in Bécancour, Quebec.

In an interview, Mr. Champagne said that there is a new spirit of economic cooperation between democratic countries like Germany and Canada, as the COVID-19 pandemic and the invasion of Ukraine by the Russia have highlighted the need for common solutions to energy, health care and technological challenges.

Can Canada replicate its recent success in securing investment in EV factories in other sectors? Despite all the ambitious announcements from Canadian and German politicians — Mr. Scholz and Mr. Trudeau were traveling to Stephenville, Newfoundland, on Tuesday to launch a hydrogen production plant — the true test of a commitment to a new way of doing business is whether CEOs continue to invest in green initiatives.

German Vice-Chancellor Robert Habeck – Mr Champagne’s counterpart as Minister for Economic Affairs and Climate Action – said CEOs in Europe are ahead of politicians when it comes to the need for change. The very real possibility that Russia will cut off natural gas supplies – leaving factories dark and homes without heat – adds urgency to the decision-making.

Business leaders are top politicians in Germany with a message that we need to act fast, that we need to accelerate change in our economy,” said Mr Habeck, a former leader of the Green Party. In an interview, he said recent sessions between Canadian and German politicians and business leaders had already led to discussions about solutions to common industrial problems.

Both Germany and Canada have seen their shipbuilding industries decline in recent decades, with Asian manufacturers winning contracts to build the bulk of ocean-going vessels. Habeck said recent face-to-face meetings with Canadian counterparts have led the two countries to look at ways to build ships that would transport green hydrogen across the Atlantic or service offshore wind farms.

At the end of Tuesday’s conference, as CEOs pressed business cards from VW and Mercedes executives, Business Council of Canada chief executive Goldy Hyder delivered two final messages to German and Canadian political leaders.

The head of an organization that represents 150 of the country’s biggest companies has warned that politicians should never take corporate support for granted, because capital has never been more mobile. Mr. Hyder also stressed that politicians and CEOs must ensure that voters – who are also consumers – bear the costs associated with new policies, as the public has been conditioned to expect a free lunch. It was a welcome note of realism at a time when automakers are spending big to deploy electric vehicles and a town in Newfoundland is striving to become a leader in green energy.

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