The Canadian government is officially preparing to issue a default notice to Stellantis (STLA) over a C$500 million, or $358 million, aid package. This comes after the automaker decided to move production of its Jeep Compass SUV from Brampton, Ontario, to the U.S. Industry Minister Mélanie Joly told a House of Commons committee the government will not back down and stated that Canadian jobs and industries are essential to the country’s economy and the stability of many families.
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In October, Joly warned that moving Jeep Compass production would violate the company’s earlier agreement to keep its full presence in Canada, including the Brampton plant, and said that legal action could follow if the plan went ahead. Joly also reminded the company that Canada supported it during the 2009 financial crisis and now expects the same in return. However, Stellantis is facing around $1.74 billion in import tariffs and sees U.S.-based production as a way to cut those costs.
As a result, it will shift production to Belvidere, Illinois, as part of a $13 billion investment in U.S. manufacturing over the next four years. Of the $13 billion investment, $600 million will be used to reopen the Belvidere plant, which was shut down in early 2023 to save money. Interestingly, the plant’s reopening became a key issue for autoworkers during 2023 contract talks, and the union secured a commitment to bring it back online.
Is STLA Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on STLA stock based on seven Buys, nine Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average STLA price target of $11.19 per share implies 7.7% downside risk.
