UPI reports on recently-released documents which detail the extent to which states went to secure GM’s recent compact car manufacturing contract. Wisconsin had committed “$213.14 million in concessions from United Auto Workers Local 95, $100 million in Enterprise Zone tax credits and $24 million in discounts from health insurers and providers,” according to the report. Another $100M was added to the incentive package after Wisconsin officials learned that it was falling behind in the bidding, bringing the total package to $409M. Which wasn’t even close to enough to beat out Michigan’s winning bid, which totaled $1B.
Yes, that’s one billion dollars from Michigan’s less-than-swollen tax coffers for the right to assemble next-generation Aveos (presumably) at Orion Township instead of Wisconsin’s Janesville or Tennesse’s Spring Hill plants. “Definitely, it’s going to be a loss leader for them,” Wisconsin Deputy Secretary of Commerce Aaron Olver says of Michigan’s billion dollar baby. “These types of offers have to be grounded in some kind of economic reality . . . You see numbers that big — you just know they don’t pencil out in terms of a return to the treasury.” Ya think?
Wisconsin dodged a bullet there.
Yet the Detroit automakers and UAW complain about the southern states’ incentive packages for the transplants. Pity the Michigan taxpayer who has to foot this bill (and the US taxpayer who’ll end up bearing the brunt of it too).
Doesn’t GM sell the Aveo at/near cost to improve its CAFE rating so they can sell more trucks?
In Canada, the Aveo is also sold as a Pontiac Wave and Suzuki Swift. I guess the nut jobs who pushed this through can claim they’re making three cars, as I’m sure GM will stick to its old ways once production of the new car starts.
I’m proud that my state/hometown wasn’t dumb enough to pony up $1 billion dollars to just hand over to GM.
On rare moments you make me proud, Janesville, WI.
$1 billion to lure in a money-losing operation?
Makes you wonder what Michigan could get for $2 billion… Enron?
That’s it … in the next election, I’ll write in the candidate who wants to build Zeppelins in Michigan.
Hey, do you have any better ideas?
Pity the Michigan taxpayer who has to foot this bill
I live in Michigan and the people running the show still live like it is 1958 when Michigan was the greatest state in the nation. Now, we are dead last.
Sure, Michigan was stupid, and Wisconsin dodged a bullet, but what is a state or community to do when an important, or the most important employer threatens to pull out of the area? The city of Fond du Lac, WI just added a special tax so Mercury Marine would not move its manufacturing to OK. The union agreed to serious wage and benefits cuts . . . again, what could they do?
This is not a fair fight, for multi-nationals have the ability to go anywhere they want for labor, but towns, states, nations are stuck where they are, and they are willing to do anything to keep businesses “home.” These are scary times my friends, and I do not mean because of socialization, nazification, death panels, or worries about the “chosen one.” These are distraction to keep us from looking at the real issues we face.
Might I suggest that this might be a down-side of term limits. Granholm can walk away from this mess and act as if it never occurred because the day of reckoning has been kicked down the road. For those of you who live in Michigan and don’t derive your income from the auto industry I would suggest that you may wish to relocate. You will be left holding the bag on this one. Granholm already has a $2 billion shortfall to deal with for this next year. Just wait until this puppy starts to hit.
Yep, sure was a good thing that Janesville didn’t get that small car contract. Smart! I’m sure they’ll end up building something more profitable there … oh, wait.
How much of that incentive money ends up coming back as property taxes, income taxes, payroll trickling down through the regional economy … or NOT paid out in unemployment benefits and medicare, do you suppose?
@ruckover:
Q: “what is a state or community to do when an important, or the most important employer threatens to pull out of the area?”
A: Let them leave. Blackmail has a very high price; in this case $1B on the backs of Michigan’s taxpayers. GM is accelerating towards Bankruptcy #2, and this plant will eventually be left unoccupied. Western Pennsylvania has experienced this twice with the New Stanton Chrysler plant, sold to VW, then sold to Sony, and now abandoned. Each company was courted with millions of dollars of incentives. In the end, market realities dictate the viability of these businesses, not the artifical disruptions incurred through blackmail-like incentives.
When will the world learn that the only thing GM does is playing musical chairs about who’s gonna pick up the bill? Any which way, someone is going to get screwed…
Hopefully, these incentives are spread out over a long enough time period that when/if the production of small cars at Orion township ends in a few years, the state will not have spent anywhere near $1B by that point.
What’s $1B, BTW, divided by the number of workers expected at that plant (he asks, afraid of the answer).
The real kick in the pants is that maunfacturers will make their choice based on factors that can’t be ponied up by the states, e.g. available labor force, infrastructure, etc. They play one locale off of another for gravy, but it doesn’t really affect the final decision.
These sorts of establishment subsidy games by corporations need to be stopped.
Where are the free market neo-cons that usually talk carp about market distortion?
PeteMoran,
You’re right. Here’s one “con” who’s sick and tired of corporate welfare. I wish elected officials in both parties would target that first before cutting any benefits aimed at the poor.
A study was released recently that showed Michigan’s tax credits have produced far fewer jobs than were promised when granted. I’m sure this Orion debacle will be another example.
$ 1 Billion could go towards, hmmm, K-12, higher ed, vocational training, or even provide start up capital to entrepreneurs who could provide lasting jobs and growth.
derm81,
I live in Michigan too. I agree with you, people here do not accept that the Michigan based US auto industry has declined, permanently. None of our “leaders” can face reality.
that tells you how desparate states and communities are for good paying manufacturing jobs.
Don’t worry about all those jobs going overseas – all 200 million workers in the country can get “consulting” or “marketing” jobs.
Economic profiles suggest that all American workers become sports stars or entertainment figures.
Vote for my post!!!!!
We were told not to worry about the systematic destruction of US blue collar jobs. Information economy jobs were supposed to replace all those nasty, dirty factory jobs.
Guess what folks, it hasn’t worked out that way.
Now that the information age jobs are also being moved offshore, what exactly is left? Even the highly skilled job of reading x-rays is being outsourced to India.
Not everyone can be a deal maker. The nature of those roles is that only a relatively small fraction of the working population is required to do them.
Instead of billion dollar incentives, Michigan should just eliminate all business taxes and fees.
John Horner,
Offshoring jobs will eventually end. Japan and Germany were once low cost producers. As China and India develop, wages will go up.
Ronnie,
Some have suggested that MI do just that. We used to have something called the SBT, which businesses hated and said was unfair. So, it was replaced by the MBT, which businesses hate and say is unfair.
The funny thing is, MI has skewed both its business taxes to the benefit of manufacturers and the detriment of retailers, services companies, etc.
Michigan has a reputation as a bad place to do business, I would argue because of its history of labor/management hostility. Things may start to change, mainly because Michigan has fallen so hard it is becoming a cheaper (wage) place to do business.
PeteMoran: Where are the free market neo-cons that usually talk carp about market distortion?
There are plenty on this board and in the real world. They regularly get lambasted for not “caring about the workers” or being foolish Ayn Rand worshippers who don’t understand how the real world works.