Key Points
- Automakers Volkswagen and Stellantis join forces with ACG Acquisition to create a publicly traded mining company in Brazil, focusing on nickel and copper extraction for electric vehicle production.
- The partnership enhances their business models and innovation profiles, but raises sustainability and governance challenges in managing environmental and social impacts, as well as utilizing a special-purpose acquisition company.
On Wednesday, July 19, WSJ reported that Stellantis and Volkswagen are teaming up in a $1 billion deal with ACG Acquisition, a special-purpose acquisition company, to create a publicly traded company focused on mining nickel and copper from Brazilian mines. The mines operate using hydropower, aligning with the automakers’ goals of sourcing crucial metals for their zero-emissions electric vehicles. This move reflects the industry-wide trend of car companies integrating the production and sourcing of raw materials and components to support the transition to a low-carbon economy.
While this venture presents immediate benefits for Volkswagen and Stellantis in terms of enhancing their business models and innovation profiles, it also brings forth long-term challenges related to sustainability. The automakers will now need to address the social and environmental impacts associated with mining operations. While the use of hydropower will help mitigate carbon emissions, there are still environmental risks, including habitat destruction and water pollution, that will fall under the responsibility of the two companies.
Entering the mining sector also introduces corporate-governance challenges for the automakers, such as managing operational disruptions, environmental liabilities, and compliance with additional regulations. Moreover, mining operations often face social externalities like labor-rights violations and conflicts with local communities. To maintain their sustainability reputations, Volkswagen and Stellantis must ensure transparency, traceability, and responsible sourcing in these areas. Failure to do so could have negative consequences for their overall sustainability standing.
The use of a special-purpose acquisition company in building the mining company raises concerns for governance-focused investors. This method has been criticized for its regulatory laxity and potential for misleading investors or fraud. While the involvement of experienced investors like Glencore and La Mancha Resource Capital may alleviate some concerns, the auto industry has a mixed track record with SPAC mergers, with some electric-vehicle makers making ambitious claims without a functioning factory. Several investigations by the U.S. Securities and Exchange Commission and going-concern warnings have emerged within the industry.
In terms of sustainability considerations linked to business model and innovation, both Stellantis and Volkswagen outperform the global automotive industry average. According to Dow Jones sustainability data, Volkswagen scored 69.4, while Stellantis scored 63.6, surpassing the industry average of 58.3. In comparison to European automakers, Volkswagen ranks third behind BMW and Renault, while Stellantis secures a place within the top five at the regional level.
In summary, Volkswagen and Stellantis are forming a partnership with ACG Acquisition to establish a publicly traded mining company in Brazil. While this move bolsters their business models and innovation profiles, it also presents challenges in terms of sustainability and corporate governance. Managing the social and environmental impacts of mining operations, ensuring responsible sourcing, and addressing concerns related to the use of a special-purpose acquisition company will be critical for both automakers. Nonetheless, their efforts to integrate the production and sourcing of raw materials reflect the industry-wide shift towards a low-carbon economy.
About Stellantis
Stellantis N.V. (NYSE: STLA / Euronext Milan: STLAM / Euronext Paris: STLAP) is one of the world’s leading automakers and a mobility provider. Its storied and iconic brands embody the passion of their visionary founders and today’s customers in their innovative products and services, including Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS Automobiles, Fiat, Jeep®, Lancia, Maserati, Opel, Peugeot, Ram, Vauxhall, Free2move and Leasys. Powered by our diversity, we lead the way the world moves – aspiring to become the greatest sustainable mobility tech company, not the biggest, while creating added value for all stakeholders as well as the communities in which it operates. For more information, visit www.stellantis.com.
