Lion Electric factory rewrites Illinois manufacturing rules - Chicago Tribune

The most confounding thing about a Lion Electric school bus is that it’s so simple.

Workers start with a few steel beams, a couple of dozen fiberglass panels around a metal body shell, and an electric motor that has 20 parts and is as big as a picnic basket.

Diesel engines for large trucks, in contrast, have 2,000 parts. They’re as big as grizzly bears.

The Lion Electric factory is confounding, too, mostly because it’s not in Mexico or China or some southern U.S. state where companies go to escape labor unions.

The factory is in Joliet, 30 miles southwest of Chicago, on a bluff 60 feet above the Des Plaines River. It’s surrounded by warehouses, petrochemical plants and a Caterpillar factory that closed two years ago. It’s an unlikely place for zero-emission manufacturing to flourish. But, during the spring of 2021, Gov. J.B. Pritzker beat out a site in Texas and won the Lion Electric plant for Joliet with a new type of strategic argument.

Pritzker convinced the Canadian company that in suburban Will County, electricity is not just cheap, reliable and abundant. It’s also — thanks to a statewide commitment Pritzker was then shepherding through the legislature — on its way to being carbon-free by 2050.

Clean energy was a big plus for Marc Bedard, the Lion Electric chief executive officer. Bedard wants to run a zero-emission enterprise, and he’s telling suppliers that someday soon he’ll refuse deliveries from fossil fuel-burning trucks.

Bedard is writing an updated rule book for Chicago manufacturing, even though he’s new to town and even though state officials in Springfield have yet to throw their full weight behind his company.

Lion Electric brings the prospect of 1,400 jobs and the first new vehicle assembly plant to metropolitan Chicago since 1965. It offers hope that Illinois can put people to work attacking its most significant source of greenhouse gas pollution: tailpipe emissions from cars and trucks.

The Lion Electric factory is unquestionably a green feather in Pritzker’s cap.

Employees work on the frame of a LionC electric school bus at the Lion Electric plant in Joliet. (E. Jason Wambsgans/Chicago Tribune)

Today the factory is hiring new workers every week and hopes to have the capacity to make 2,500 buses annually by the end of 2023, Bedard said. In a few years, if all goes as planned, the Joliet plant could be building 20,000 buses and trucks a year, he said. That’s dozens of vehicles each day.

But two years have passed since the company’s Joliet announcement. During that time, Illinois has failed to join in the parade of electric vehicle and battery plant announcements fueled by President Joe Biden’s historic infrastructure spending.

[ Canadian electric vehicle maker to build buses and trucks at new Joliet factory, creating 745 jobs over next three years ]

Georgia has been a big winner, with a staggering $23 billion in new electric vehicle investments since 2018. Georgia won out in part with lavish incentives, including $1.5 billion for Rivian Automotive to build electric trucks and SUVs at a factory with 7,500 workers east of Atlanta. Rivian began building vehicles in downstate Normal two years ago, and now employs a similar number there.

Illinois spent just $7.9 million in incentives for the Lion Electric factory.

When the Democratic-controlled legislature finished its spring session last month, lawmakers approved bills to make it easier for public-private partnerships to expand I-55 to 10 lanes from six through Black and brown Chicago neighborhoods where life expectancy is already being suppressed by congestion and truck pollution.

[ Truck and rail backups clogged roads, creating more pollution and raising health risks for Chicagoans near freight corridors ]

But they adjourned without acknowledging the danger posed by this added pollution or considering any measures to mitigate it.

These include paying subsidies up to $120,000 per vehicle for electric trucks, and a requirement that Lion Electric’s competitors will also have to build more battery-powered vehicles.

Without such measures, the clean-air benefits of the electric vehicles Pritzker wants to build in Illinois will be going to other states, said Brian Urbaszewski, director of the Respiratory Health Association in Chicago.

Lion Electric has invited Biden to its official ribbon-cutting in Joliet on July 21. He’ll doubtlessly celebrate the $5 billion his Bipartisan Infrastructure Law set aside for electric school bus rebates last year. But like Lion Electric, the president’s clean energy revolution is still in a young and fragile state.

The Lion Electric plant in Joliet. (E. Jason Wambsgans/Chicago Tribune)

The company’s stock dropped to $1.92 on June 6 from $33.48 in January 2021 as concern spread through Wall Street that the transition to a zero-emission economy will be slower and more expensive than many investors had hoped.

Lion Electric is not yet part of Illinois’ economic bedrock.

It’s more like the piping plovers that showed up unannounced on Montrose Beach in 2019 and became the first of their species to nest in Chicago in half a century.

They’re both hopeful signs about the state’s environment. But they’re still seeking the shelter and support they need to thrive.

[ Piping plovers in Chicago: How the ‘love story’ between Monty and Rose unfolded at Montrose Beach ]

Lion Electric is based in Saint-Jérôme, Quebec, an industrial suburb 35 miles northwest of Montreal.

Bedard, 57, started the company in 2008, soon after leaving his job as a partner at accounting firm PricewaterhouseCoopers.

In person, Bedard comes across as a popular college professor more than a cigar-chomping industrialist. He’s never wavered from a simple idea — that school buses would be the first big vehicles to go electric and would provide an entryway for his company into the commercial truck market that’s 10 times bigger.

His basic logic has been impeccable so far, even if his timing has been off.

School buses operate for two hours in the morning and two hours in the afternoon over routes that mostly don’t change. This leaves plenty of time for charging in the same garage every night, often at off-peak electricity prices and with a relatively inexpensive slow charger.

In addition, the buses typically operate in stop-and-go traffic, allowing their brakes to capture more energy from the friction they generate as they stop the vehicle.

Best of all, they don’t subject school workers and their young passengers to dangerous diesel fumes.

School districts in the United States now spend about $350,000 for a new electric bus, or 3½ times more than a diesel counterpart, according to Curt Macysyn, executive director of the National School Transportation Association, a trade group.

By 2030, 30% of all new school bus sales in the United States will be powered by electric motors, according to a forecast by Gregory Genette of S&P Global Mobility. This implies total annual sales of 35,000 electric buses.

It’s estimated that battery-powered vehicles will make up 20% of medium-duty truck sales by 2030 and 14% of new heavy-duty trucks, according to the S&P forecast. This adds up to annual sales of about 95,000 battery-powered trucks, Genette said.

Francisco Lopez, of Joliet, smooths edges on a fiberglass body panel of a bus at the Lion Electric plant on June 5, 2023. (E. Jason Wambsgans/Chicago Tribune)

Lion Electric got a big head start in electric school buses because of determined efforts by government leaders in Quebec.

The province outlawed the registration of diesel school buses in 2021 and now offers subsidies up to $75,000 for each electric bus. Quebec also offers grants up to $150,000 for each electric truck.

The rebates are partly funded by a cap-and-trade system for carbon credits that Quebec launched with California in 2014. The program allows polluters to buy credits from companies reducing carbon dioxide emissions by, for example, using electricity from solar power instead of coal.

Kevin Matthews is head of electrification for First Student Inc., the largest North American school bus operator, with 46,000 vehicles providing 5.4 million student trips per day. The company operates 244 electric school buses, Matthews said, and Lion Electric built 230 of them. “We’ve been happy with their performance,” Matthews said.

Of the 2,490 bus replacements funded through the Biden infrastructure bill last year, Lion Electric has secured orders for 289 so far and is still trying to get more.

Most of the rest were divided among the traditional U.S. players — Blue Bird, Thomas Built and I.C. Bus. These companies convert a portion of their diesel fleets to run on electric motors and batteries.

According to Pierre Fitzgibbon, the cabinet minister for innovation and the environment in Quebec, after pushing Lion Electric to the forefront of the electric school bus race, the province is determined to help the company stay there.

In April, amid muddy construction roads and unpaved parking lots at a cargo airport near Montreal, the company dedicated a $140 million factory to build battery packs. Of this amount, $75 million came from loans from the federal government of Canada and the province of Quebec, both eager to support the creation of 135 jobs.

The factory starts with battery cells that, like those used by Tesla, are a bit bigger than a Size AA household battery. A line of robots stacks, welds and seals thousands of cells, along with the necessary electronic controls and cooling equipment, inside a battery pack that’s as big as a large suitcase.

The packs are central to Lion Electric’s strategy. They encompass 40% of the cost of a bus. They required more than a decade of software writing so they can keep the batteries at an optimal operating temperature as they charge and discharge under a variety of circumstances. This helps them last longer.

Batteries for a Lion6 electric school bus. (E. Jason Wambsgans/Chicago Tribune)

When the company’s factories are running at full speed, its electric buses won’t cost any more to build than a diesel model, said Nate Baguio, senior vice president for commercial development in the United States.

He wouldn’t specify when cost parity will happen, but he said it’s coming.

Performance data from the 950 Lion Electric buses on the road today indicate that many will last for 12 years, Baguio said.

The economics will improve even more, he said, as school boards learn to sell power back to the grid instead of letting the buses sit idle and as they start to recycle batteries.

Currently, many commercial fleets keep their diesel trucks for only five years before replacing them, Baguio said.

All these potential improvements are rooted in Lion Electric’s ability to build its own battery packs.

It’s a competitive advantage that all of the company’s competitors will need to match, said Sam Jaffe, senior director of business development for Addionics, a battery manufacturer based in London. And it’s only happening at Lion Electric because of government loans.

The roots of Quebec’s environmental activism go back to 1971. That’s when the province started building a $15 billion hydroelectric generating station on the shores of James Bay, 600 miles north of Montreal. The project required diverting the course of three rivers and the flooding of Indigenous villages.

Today, hydroelectric stations at James Bay and elsewhere generate 94% of Quebec’s power, according to a government of Quebec website. The electricity they produce is abundant, cheap and clean. It’s the cornerstone of Quebec’s effort to transform itself into a green manufacturing hub, starting with the mining and processing of lithium, the assembly and recycling of battery cells, and the delivery of finished vehicles by companies such as Lion Electric.

Fitzgibbon, the innovation minister, says Quebec is too small to compete with the United States or even the province of Ontario for passenger cars and trucks. So it’s concentrating on niche products such as buses instead. And it won’t bother with products that aren’t innovative and green.

“If you’re doing a gray battery, what’s the point?” asked Fitzgibbon, referring to batteries made with electricity from coal plants.

Pritzker also had energy on his mind as he tried to lure Lion Electric to Illinois.

In frequent phone calls with Bedard, Pritzker focused on a half-finished Joliet warehouse that could be converted quickly into a factory. And he touted the ability of Will County to produce power from every noncoal source: nuclear, natural gas, wind, solar and hydro.

The region’s energy sources are diverse and plentiful. And before ComEd’s pending delivery charge increases take effect, they’re 35% cheaper for industrial users than the average for the country’s top 20 metro areas, according to Diana Sharpe, the utility’s vice president for large customers.

Plus, under the Clean Energy Jobs Act, Pritzker was setting Illinois on a course to remove carbon dioxide emissions from energy productionby 2050. He did so partly by subsidizing nuclear plants in the last stages of their productive life and small towns dependent on coal plants that are closing.

[ Gov. J.B. Pritzker hails energy plan with ambitious climate goals, nuclear bailout as ‘a giant leap forward’ ]

This transition to largely renewable power is a significant drawing card for the low-emission industries that Illinois needs, said Doug Pryor, head of Will County’s economic development program and a direct participant in talks with Lion Electric.

Pryor said the state is constantly trying to recruit companies that make electric vehicles, batteries, solar panels, hydrogen-powered equipment such as fuel cells or hydrogen itself.

This electric motor will be installed on the chassis of a Lion6 electric school bus. (E. Jason Wambsgans/Chicago Tribune)

With the prospect of renewable power as a principal enticement, Pryor said he could turn his sales pitch to traditional Chicago-area advantages such as its central location, big consumer market, educated workers, abundant water and diverse transportation infrastructure.

Lion Electric quickly started plugging into the existing Illinois industrial base. Air conditioners come from Rockford, bumpers from Lockport and brakes from North Aurora.

But manufacturing as a percent of private-sector employment in the state fell to 11.9% in 2021 from 32% in 1950, according to Matthew Wilson of the Great Cities Institute at the University of Illinois at Chicago. Factory jobs disappeared as productivity rose and investment shifted to other countries and states.

And Chicago’s legacy as a union town was a constant issue.

Even with Biden’s pro-union stance, more than four-fifths of the clean-energy production facilities announced in the six months after the Inflation Reduction Act went to right-to-work states, according to a Reuters report. These states weaken unions by allowing workers to not pay dues.

Pritzker caught a lucky break when Bedard declined to join this right-to-work exodus.

“It’s going to be their decision in Illinois if they want to go with a labor union,” Bedard said.

The United Steelworkers union has already staked a claim with successful organizing drives at electric bus factories in California and Georgia and community benefit agreements that provide training and other assistance to workers who need it.

Bedard differs from many corporate executives in other ways.

Lion Electric does its best, he said, to avoid component suppliers based in countries that allow child labor or that are run by totalitarian governments.

Like many parts of the United States, Illinois has substantially more job openings than unemployed people.

A LionC electric school bus sits in the process of being assembled on June 5, 2023. (E. Jason Wambsgans/Chicago Tribune)

Eric Pansegrau, the general manager at Joliet, said he’s experienced no significant problems recruiting his workforce so far. He describes the starting hourly pay of $21 plus benefits such as health insurance and a 401(k) retirement savings plan as competitive with surrounding employers.

Keith Gullquist, 52, has worked as a team leader at Lion Electric for a year.

He said he doesn’t think much about protecting the environment with zero-emission vehicles. But he said he likes the challenge of launching a new type of factory for battery-powered vehicles.

Gullquist said he was the first worker in Joliet to use a spray gun to apply a rust-fighting coating to the bottom of the bus and enjoyed the challenges of hitting all the nooks and crannies.

“I like to have to figure stuff out,” he said.

Keith Gullquist, of Braidwood, works on a LionC electric school bus at the Lion Electric plant on May 24, 2023. (E. Jason Wambsgans/Chicago Tribune)

A big chunk of the factory’s 906,517-square-foot expanse is covered with boxes of parts and components since workers still haven’t finished the racks to stack them up in the back. Pansegrau says he has bar-coded and scanned each box to know where everything is.

Much of the work at Lion Electric now occurs by hand. For example, workers stand at a small table to attach rubber sealers and metal frames around the window panes.

In the future, Pansegrau said, such components will arrive fully assembled. This will help workers keep up with mobile robots called AGVs that will haul the buses along the assembly line at an accelerating pace.

As Bedard readily admits, the main cloud on this horizon is that electric truck sales are lagging years behind the company’s expectations.

A case in point is Amazon. Two years ago, the online retailer said it may buy as many as 2,500 trucks from Lion Electric by the end of 2025. So far, Bedard says, Amazon has purchased just 10.

Katie Loughnane, an Amazon spokeswoman, declined to comment.

Amazon has a similar but much larger agreement to purchase up to 100,000 trucks from Rivian. But the retailer dialed back its purchases from both companies amid a slowdown in e-commerce sales. That, in turn, could force Rivian to compete directly with Lion Electric for new delivery truck customers.

[ Rivian laying off 6% of its workforce as EV manufacturer aims to cut costs ]

Lion Electric is in regular contact with Amazon and will be ready “when they’ve really got to go electric,” Bedard said. As this crucial moment approaches, he said, he’d rather have too much manufacturing capacity than too little.

Bedard said he expects a significant boost in January when California starts requiring regional fleets that operate between the state’s ports and nearby rail yards to register only zero-emission vehicles.

LionC electric school buses are parked inside the Lion Electric plant in Joliet. (E. Jason Wambsgans/Chicago Tribune)

Lion Electric delivered 220 trucks and buses in the first quarter of 2023, up from 84 in the year-ago period. These sales generated $54.7 million in revenue, of which the company lost $15.6 million. According to management estimates, Lion Electric had orders on hand for 2,565 trucks and buses worth $625 million.

Lion Electric doesn’t provide formal earnings guidance to investors. When asked on an investor call when the company will break even, Bedard would say only that earnings will improve with higher volumes.

Bedard will get some breathing room as he finishes paying off the $105 million Joliet plant and as bus sales continue to grow.

“The bus business is pretty good,” he said. “We can go for a while.”

In the meantime, Bedard said he hopes and expects Illinois to follow the example of environmental leaders such as Quebec and California and offer incentives for electric trucks.

“I think Illinois is working hard on making this happen,” Bedard said. “Are they there yet? No. Is there still a very good potential? Yes.”

Bedard said he expects electric bus and truck sales to continue rising even if political parties with sharply different views on climate policies gain and lose power in the United States and Canada.

“This is where the market is going, even if some parties might think differently on a short-term basis,” Bedard said. “It’s a green thing, you know, where you can make money.”

For Pritzker, a big chance to lure more of this “green thing” to Illinois will come in September.

That’s when the United Auto Workers union and Stellantis N.V. will renegotiate their labor contract.

The union’s recently elected president, Shawn Fain, is demanding new investments in Belvidere, where the company closed a 58-year-old factory in February and laid off 1,350 workers.

[ Stellantis idling Belvidere Jeep Cherokee plant indefinitely, laying off 1,350 auto workers ]

“It’s unacceptable,” Fain told reporters. “I’ve been very clear with the corporation that we expect things there to change.”

Pritzker is standing by with a $400 million incentive fund that the legislature has already approved. He’s hoping the company will build a new factory for its coming electric flagship, the Ram 1500 Rev pickup.

“We’re in a pretty good place with Stellantis,” Pritzker said in an interview Wednesday. “They understand we’re providing significant incentives.”

But there’s no well-established political consensus in Illinois about whether and how to expand these efforts in the future, unlike in California or Quebec.

Pritzker shows no sign of embracing California-style mandates on how many electric vehicles must be sold in Illinois. He backs a plan that would require state and local government fleets in Illinois, aside from police departments, to purchase only electric vehicles starting in 2030. But that measure got sidelined as legislators rushed to approve hundreds of other bills before adjourning in May.

Lawmakers did approve a bill making it easier for public-private partnerships to expand I-55 to 10 lanes through the South and West sides. Pritzker said he hasn’t taken a position. “There are some unions on the one side, and there’s the environmental community on the other side,” Pritzker said. “You do need to reach some consensus.”

In the meantime, the governor is rolling out new incentives through his Reimagining Energy and Electric Vehicles program. These incentives don’t grab headlines. But just one provision, reduced payroll taxes, could be worth tens of millions of dollars to big manufacturers like Stellantis.

Pritzker said these incentives help him argue that electric vehicle incentives in Illinois “are as strong or nearly as strong as other states.”

In April, Pritzker announced a $27 million subsidy to help school boards buy electric school buses and charging stations.

“We’re going to continue to work on providing the right kinds of incentives so that companies like Lion, as well as the automobile manufacturers, see Illinois as a great place,” he said.

On Thursday, Crain’s Chicago Business reported that Pritzker interrupted leadership talks last week to meet with a battery-maker that’s eyeing a new factory in Morris, a Joliet suburb. The governor may have offered incentives worth $600 million, Crain’s said. Pritzker is in talks with three different companies, including one from China and one from Europe.

Politicians like such incentives because they demonstrate environmental progress without requiring voters to make really hard choices, such as driving less or building fewer highways, said Pierre-Olivier Pineau, chairman of energy sector management at HEC Montreal, a business school.

“From a political perspective, electric vehicles are perfect because you can tell people, ‘You just have to change the vehicle, but you don’t have to change your lifestyle,’” he said.

“Everyone will say, ‘Oh, for the kids, it’s very good to have a clean bus,’” Pineau said. “Lion Electric is not that big but they’ve been used as example so often that the government will continue to help them. It means they’re too big to fail.”

Chicago Tribune’s Dan Petrella contributed.

John Lippert is a freelancer.

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