Michigan’s new economic development incentives, primarily designed to help Michigan compete better with other states for new electric vehicle and battery assembly plans, reminds me of a hilarious scene from the 1996 hit movie, “Jerry McGuire “.
McGuire, a sports agent played by Tom Cruise, is desperate to stop professional football client Rod Tidwell, played by Cuba Gooding Jr., from switching to another agent. Before signing a contract, Tidwell repeatedly makes McGuire yell over the phone, “Show me the money!”
It looks like automakers will demand state and local governments to show them billions of taxpayer dollars as they build battery factories and retool vehicle assembly plants in a historic transition to cars and trucks. electric.
Whether these public investments will eventually pay off in a net increase in auto jobs in Michigan is debatable.
In the early hours of Wednesday morning, the Legislative Assembly massively approved $ 1 billion in incentives to attract investment in auto and other businesses to Michigan. Governor Gretchen Whitmer is expected to sign the law.
Lawmakers were spurred on to act after Kentucky and Tennessee offered Ford Motor Co. more than $ 1 billion in combined incentives to build an electric truck assembly plant and battery plant in Tennessee and two battery factories in Kentucky.
There is a delicious irony here. While the legislative package gained bipartisan support, all of the bills were introduced by Republican lawmakers. Ten years ago, Republicans strongly supported the government of the day. Rick Snyder’s strategy to eliminate tax credits and lower the corporate tax rate.
Republican Snyder called the tax incentives “Government heroin infusion”. Many Republicans still view these incentives as the pick of winners and losers or, worse yet, “corporate welfare.”
It’s also funny to see Republican lawmakers, most of whom don’t believe climate change is caused by human activity, are enthusiastically adopting incentives to produce electric cars aimed at reducing greenhouse gases that warm the planet.
But there is nothing that excites elected officials on both sides of the aisle more than being able to announce that they have beaten other states for a big, new auto factory.
We are possibly on the cusp of one of the costliest economic development incentive wars of all time, as states vie for the hundreds of billions of dollars in investments that automakers expect to make. do over the next few years.
And the battles will be fought swiftly as automakers rush to meet ambitious electrification targets. American automakers Ford, General Motors and Stellantis (formerly Fiat Chrysler) promised that up to 50% of their sales will be electric vehicles by 2030.
Huge investments will be needed to achieve this goal, and automakers expect states to step up the game. States are more than willing to do so, despite research showing that incentives for economic development play no role in business location decisions.
“Everyone in the game is playing with really big incentives,” said Kristin Dziczek, senior vice president of research at the Center for Automotive Research in Ann Arbor.
The first Michigan project to take advantage of the state’s new incentives is expected to be in the Lansing area, where GM is considering building a $ 2.5 billion battery plant that could potentially create 1,700 jobs.
Members of Lansing City Council voted to support Application of the Renaissance zone of the state of GM. If approved by the state, the battery plant would be exempt from most state and local taxes for 18 years.
Putting the plant there seems like a logical decision, with or without incentives. GM already owns the proposed site, which would serve the automaker’s two assembly plants in the Lansing area.
But GM holds the trump card, and Michigan is highly unlikely to call its bluff by denying the project incentives.
“The whole geography of the industry is changing and incentives play a major role in this,” Dziczek said.
But Michigan’s long and lucrative financial support for its auto industry has stopped its steadily shrinking.
Michigan has about 44,000 jobs in auto manufacturing plants, less than half the number of auto manufacturing jobs in the state 20 years ago.
The new hourly battery and vehicle assembly jobs could, at best, recoup some of the thousands of jobs in engines, transmissions and related parts that may be lost with the demise of the internal combustion engine.
“There are a bunch of these companies in Michigan that are in absolute danger,” said Alan Baum, a West Bloomfield auto analyst who works with auto suppliers.
While auto manufacturing and parts production jobs still play a large role in Michigan’s economy, the state needs to focus more on growing the technical and managerial side of the auto industry.
Lawmakers in Lansing panicked when Ford announced major investments in an electric vehicle plant in Tennessee and Kentucky in September. But there was little noise when electric truck maker Rivian moved its headquarters from Michigan to California last year to take advantage of software engineering talents there.
Rivian announced on Thursday it would build a $ 5 billion truck and battery assembly plant in Georgia, employing up to 10,000 workers.
This points to another stark truth about Michigan’s new economic development incentives: They are unlikely to attract investment in batteries or other auto factories from automakers other than Detroit who have comfortably settled in them. Southern states.
These predominantly Asian and European companies account for just over 60% of auto sales in the United States. Economists at the University of Michigan predict that the collective market share of Detroit automakers will continue to decline in the long term for at least the next two years.
It is difficult to see how Michigan’s new economic development incentives will alter this trajectory.
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