Cars for Subs? Maybe.

Noah Note

Another day, another tease of what the Canadian government wants to see for CPSP. Of course, if you're not new here, you'll probably remember our recent discussions on Korean vans for CPSP.

The Koreans, for all their worth, are a shockingly open people when it comes to these kinds of discussions. They are more than happy to share what’s being said and discussed behind the scenes—something that a person like me can respect.

Now we are once again revisiting automotive discussions for CPSP. Kang Hoon-sik, Chief of Staff to the President of the Republic of Korea, is coming to Canada (and the United States) in the latest high-profile visit the Korean government has sent to Canada in an attempt to sway a choice on the Canadian Patrol Submarine Project.

Secretary of State Fuhr is also set to visit Korea in, I believe, two weeks to take a tour of Hanwha’s yard in Okpo, or Geoje if you prefer. He is the last major official on my list of Canadian officials needed to visit both TKMS and Hanwha, so I’ll be glad to complete my little challenge with this visit.

Anyways, Mr. Kang appeared yesterday on Kim Eo-jun's Humility is Hard program to discuss what he's currently up to. For those of my followers who speak Korean, I have included the link to the stream for your viewing.

Anyways, the important thing we want to discuss at this moment is what he said about Canada, the automotive industry, and CPSP. Here is the quote of interest, many thanks to the folks at Maeil Business Newspaper for translating:

"In Canada, there's a demand saying, 'We need a car. Can Hyundai Motors of Korea also join us?' The Canadian Minister of Industry came to me last time and made that request. The Minister of Industry then said, 'Germany—Volkswagen is thinking of doing it again.'"

"Canada's request is something like, 'We wish we had an automobile factory in our country. Korea makes some automobiles.' The competition (for the submarine order) itself is expanding to that level, and (Canada) is buying 60 trillion won worth of weapons, so they are demanding that we build an automobile factory."

While rumors had previously circulated about such a request, this is the first time that an official on any side is confirming that it is something up for discussion, and the first we have heard of Volkswagen potentially looking at a new Canadian factory as part of the economic package for CPSP.

The Federal Government has an expectation that CPSP will be used as the anchor of a larger economic package. As part of that, the Federal Government also expects Korean and German industry to step up its investments in Canada to offset the purchase of these submarines.

Automotive is one of the sectors most heavily hit by ongoing U.S. tariffs, and despite valiant efforts to support the industry, the Federal Government is very clearly looking for a win on the industrial side of things.

This year we have seen the loss of the future Compass at Brampton, CAMI in Ingersoll, cuts in Oshawa, and a pause on Honda’s $15 billion EV plans in Ontario. All of this on top of supplier cuts, such as those to Qualtech Seating Systems, Northvolt, and Linamar's sale of its near-new Welland facility.

Along with steel, automotive is proportionately being hurt by ongoing tariffs, and securing a new manufacturing facility would certainly be a major win for the current government at a time of volatility.

Korean sources, though, don't paint a hopeful picture. It's already well established that Hyundai has no plans to set up or expand production in Canada. The company already maintains existing facilities south of the border in Montgomery, Alabama, and Ellabell, Georgia. Both facilities are, as far as I know, undergoing or are in line for major expansion.

While Hyundai and her brands consistently rank as a top supplier to Canadians, that business alone isn't enough to seemingly generate interest from the company. I should also note, to save confusion from last time, that Hyundai Heavy Industries—who is currently partnered with Hanwha in CPSP—and Hyundai Motor Company are separate companies. I assumed that was common knowledge, but apparently not.

Anywho, I can't speak to the status of Volkswagen. I have no idea how they feel about all this and so I won't blindly speculate. One possibility for Hyundai COULD be leveraging their existing strategic partnership with GM to use the now-vacant CAMI facility to manufacture something. What? I don't know. The two companies are currently codeveloping several vehicles, including an electric van for the North American market not too dissimilar to the previous Brightdrop vans made at CAMI.

That’s 100% speculation on my part though, and a very bare one at that. An idea, if you will. There seems to be very little enthusiasm for anything in that department, however I do think it's an interesting look at the politics involved in CPSP.

Of course, with the stakes put on the project to serve as a sort of strategic catalyst both politically and economically, you really gotta expect that at some point the process will shift more from the defence side of things to the political.

We're talking a tens-of-billions-of-dollars project, with offsets expected to match in scale. That is something that everyone is going to be a part of, y'all, and will advocate for their desires for. Like if you expected anything different, I’m sorry to be the one to tell you that.

We already talked a bit about that with Marmen. To recap, Marmen was a company heavily promoted by certain ministers—primarily Joly and Champagne as I know it—as someone they thought both companies could and potentially should work with.

Now, I won't speculate on motive because that is a disservice to Marmen, who really are a very talented company with a lot of unique industrial capabilities that could be leveraged in a project like this. We have previously talked briefly about such things; however, I don't want this to be used to label this as a handout or such to the company.

That doesn't change that there was an inherent, deliberate push to have both potential suppliers include them in their partnerships. The Canadian government is not being subtle in informing everyone what they want to see investments in, and even what companies they think could fulfill them.

That kind of stuff interests me greatly, and these little snapshots pull back that veil a bit to showcase what the government is looking for out of CPSP. It gives us a chance to see where the deeper conversations about the benefits of the project may be heading.

It also gives us a snapshot into what might be on the horizon as part of the larger economic packages in the works. The Koreans are rumored to be close to proposing a comprehensive economic package for CPSP that will tie in multiple industries, investments, and strategic partnerships in areas like energy, LNG, aerospace, space, and Arctic co-operation.

Of course, some of these have been rumored for a while. If you've seen my little partnership chart you'll remember that Team Korea has engaged with both Telesat and MDA in recent months, something that immediately piqued my interest as Canada takes a renewed push to rebuild our domestic space capabilities.

Of course, time will tell what such a package will include, and what areas it will tackle. I imagine the German side of things are preparing similar, building off recent German acquisitions and the August Joint Declaration of Intent on Critical Minerals.

Only time will tell, I guess. I don't think we'll have to wait long on this front. Call it a feeling in my chest. I think everyone is prepared to drop things and are just waiting for the right moment.

What that moment is? No clue. If it were me I would just drop everything at once, but I'm also not subtle and can't build hype well.