By on June 29, 2009

Er, bought. According to the Freep, the Michigan Economic Growth Authority put together the $779 million tax credit package which secured Orion Assembly’s future as the home of the Chevy Aveo’s replacement. A 25-year, 100 percent tax abatement from the municipality of Orion Township (worth some $100 million) didn’t hurt either. Nor did Oakland County’s $136.5 million in retraining money. GM will drop $600-$800 million retooling the plant, “saving” some 1,200 jobs at Orion and another 200 at nearby Pontiac Stamping. But this decision wasn’t a simple dollars-and-cents deal, according to the the parties involved. Oh, no.

“Proximity to suppliers was a significant advantage, especially when it came to heavy materials such as axles and transmissions,” offers Rep. Gary Peters, by way of explanation to the outbid Wisconsin and Tennessee plants. “Let’s not forget about our membership that produced three No. 1 J.D. Power quality awards in recent years,” added Mike Dunn  of UAW Local 5960 (Orion). “And the current (Pontiac) G6 and (Chevrolet) Malibu finished second and third in their segment in this year’s quality survey.” Yep. That must have been it.

“If they hire enough lower wage people, they can come within $100 to $150 of the cost of building a comparable car in China,” explains Sean McAlinden of the Center for Automotive Research. See, now we’re talking. And Shenzhen probably wouldn’t offer those kinds of tax breaks.

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23 Comments on “How Orion Township Won Chevy Viva Production...”


  • avatar

    And yet the UAW and the Detroit automakers criticize the southern states for the tax deals and other incentives they give the transplants to locate there…

  • avatar
    golf4me

    Can someone “in the know” explain to me how it costs 800m to retool a plant that is already built to build FWD platforms? (Same basic processes) Oh, that and it’s going to take about 2 YEARS? IMO this is one of Detroit’s biggest faults, something the transplants seem to do much better. I think I remember reading a story where Honda (I think) took 3 WEEKS to do a major model change at it’s Ohio plant. I forget the details, but it wasn’t 2years/800m. That’s just crazy and just one of the reasons that Det3 can’t keep up with the Transplants & Imports. Too bad it doesn’t look like falling into BK has changed this fatal flaw…

  • avatar
    Nicholas Weaver

    golf4me: Honda in particular has specialized in making its plants as agile as possible: able to quickly transition from one vehicle to another. EG, the line that does the Ridgeline can also produce Civics.

    However, this has a cost: such plants are, on an absolute basis, slightly less efficient than one that produces only ridgelines or only civics.

    Such flexibility does have its costs in the design process as well.

    Thus most car makers have done more specialized plants, one centered around a specific platform. Thus going from a midsized FWD platform to a small FWD platform may need to change lots of details, from the jigs the cars are assembled on to who knows what else.

    But Honda’s answer is probably the right one. Look at how much trouble Toyota has gotten into by making a specialized plant for the Tundra, rather than a generic plant that could produce Tundras and Prii

  • avatar
    MikeyDee

    So, this plant will be hiring Michigan UAW workers, which means they will be way overpaid for their labor. How is GM going to price this vehicle to make a profit?

  • avatar
    GS650G

    I’m sure there is a kickback or two in there somewhere. Still, people have to buy the cars and if they are a flop it’s not going to matter. In the end these are things people have to want, not something they need or can’t get elsewhere. If the plant was producing food necessary for human survival it would be a different matter.

    At the root of all GM’s problems is reduced sales.

  • avatar
    geeber

    I have a hard time believing that people will rush to buy a small Chevy named after a brand of paper towels…

  • avatar
    psarhjinian

    So, this plant will be hiring Michigan UAW workers, which means they will be way overpaid for their labor. How is GM going to price this vehicle to make a profit?

    GM couldn’t make a profit on cars if they were using slave labour. As has been pointed out before, the problem is not labour.

  • avatar
    John Horner

    What would the cost to Orion’s local economy and tax base be if GM shut that plant down?

    With regard to GE, in recent decades GE’s banking arm (GE Capital) has been the primary profit engine for the company. I’m not surprised it is getting to participate in the banking bailout in a big way. GE is a bank! From the Washington Post article: “GE Capital is one of the world’s largest and most diverse financial operations, lending money for commercial real estate, aircraft leasing and credit cards for stores such as Wal-Mart. If GE Capital were classified as a banking company, it would be the nation’s seventh largest. ” Headlines can be deceiving.

    It is ironic that Socialist-bashing conservatives have become big pro-China outsourcing advocates. China is still a communist nation. If GM can really build a small car in the US for only a few hundred dollars more than it would cost to build it in China and import the thing, then it is a big win for the US to build ‘em here. There isn’t a product I buy for which I wouldn’t happily pay 10% more to get a US made version. Sadly for most products I don’t even have that choice anymore.

  • avatar
    grog

    GM couldn’t make a profit on cars if they were using slave labour. As has been pointed out before, the problem is not labour.

    Yeah but that does’t stop the Greek Chorus of socialist-bashing conservatives from spouting the long-established talking points.

    It’s clear that the GOP’s war on the UAW is paying dividends in that now a municipality in Michigan is lifting a page from the Southern States playbook in terms of giving away every piece of financial leverage they have in order to lure a plant to the area. A generation ago when the transplants were finding places south willing to sell their souls for such a facility, the UAW would have made damn sure it didn’t happen in Michigan.

    Plus, I wonder how many of the workers in this new plant will the newer, Tier 2 UAW types? Ie, the ones making no money.

  • avatar
    geeber

    grog: A generation ago when the transplants were finding places south willing to sell their souls for such a facility, the UAW would have made damn sure it didn’t happen in Michigan.

    The domestics have been wrangling concessions from towns and cities in Michigan to upgrade or build new plants for many decades now, and the UAW has been on the side of the car makers throughout the whole process. The UAW has been making sure that it DID happen.

  • avatar
    dzot

    So GM is going to spend $360-$480 million of taxpayer money (60% of 600-800 million) to get a $779 million credit from taxpayers? Awesome.

  • avatar
    troonbop

    “the Greek Chorus of socialist-bashing conservatives”

    As I remember it, the Greek chorus provided helpful insight about the play, because the dopes in the audience often didn’t get it.
    I guess I’m guilty along with the other socialist bashing conservatives.

  • avatar
    TonyJZX

    i wonder if when you add up all this ‘expenditure’ you couldn’t just write a cheque for $150,000 to each of those 1,200 workers to just kindly get lost?

  • avatar
    derm81

    It’s clear that the GOP’s war on the UAW is paying dividends in that now a municipality in Michigan is lifting a page from the Southern States playbook in terms of giving away every piece of financial leverage they have in order to lure a plant to the area. A generation ago when the transplants were finding places south willing to sell their souls for such a facility, the UAW would have made damn sure it didn’t happen in Michigan

    It is not just a Southern thing anymore. Michigan is pulling this Sh*t with Hollywood filmmakers as well. It seems to me that every corporation in the US looks out for incentives due to our high tax rate. The term “incentive” is what boosters like Mike Randle use in a positive manner. There is absolutely nothing that is positive from this for that vast majority of taxpayers. Michigan cannot afford to be giving tax breaks and “incentives” to anyone. We have now become a nation of 50 states competing with one another at the expense of other states. How would a tax break to an auto plant in the Lower Peninsula benefit a taxpayer in the UP? Incentives rarely spread the wealth around and the plant could pull out or shut down in X amount of years.

  • avatar
    derm81

    GE manages to pocket billions and then announces they will build a plant in Michigan

    Actually, it is not a plant at all. It’s an engineering center. Obama personally called Immelt on this and requested it for MI

  • avatar
    Unibody

    I found a couple “errors” in two editorials in Sunday’s Freep concerning Orion and sent them a letter, here is the text.
    Steven Henderson in his column concerning the hard work of our elected representatives in securing a new model for the Orion plant stated “But the entire delegation (minus Rep. John Conyers, D-Detroit, who was conspicuously absent) managed to get together with GM officials to sell Michigan over Tennessee and Wisconsin, which also made strong pitches.” In a nearby piece on the same subject, Gary Peters shows his misplaced loyalty in the following sentence. “Michigan’s entire congressional delegation –10 Democrats, seven Republicans — laid out the business case for Orion”. Either Mr. Henderson lied, Mr. Peters lied or the Free Press in incapable of editing the content of editorials.

  • avatar
    Captain Tungsten

    @ Frank: The UAW and the Detroit automakers are not criticizing the southern states for the tax deals and other incentives they give the transplants to locate there. They are criticizing them for the holier-than-thou “how dare you” attitude of those same elected representatives when they were approached for Federal Government support.

  • avatar
    agenthex

    Michigan cannot afford to be giving tax breaks and “incentives” to anyone. We have now become a nation of 50 states competing with one another at the expense of other states.

    It’s only pathetic when those same states then turn around and get a net surplus of federal money from other states.

    It’s amusing when the wingers now gloat about california being bankrupt when they tend to live in places that steal the golden state’s tax dollars.

    i wonder if when you add up all this ‘expenditure’ you couldn’t just write a cheque for $150,000 to each of those 1,200 workers to just kindly get lost?

    The real world don’t work like hillbilly math.

  • avatar
    John Horner

    Accord to the latest census bureau information, Tennessee got $978 per person more back from the federal coffers than its people and companies paid in federal taxes. Michigan, on the other hand, was -$1,250 per person, California -$366 while Alabama scored a positive $1,603. Connecticut was the biggest looser at -$2,380. Quintessential Real America wanna-be independent Alaska took in $2,108 per resident from the coastal elites.

    http://www.allcountries.org/uscensus/545_federal_balance_of_payments_per_capita.html

    Senator Corker should be called Senator Porker considering the great job he is doing helping his state raid the US Treasury. He certainly enjoys playing the earmark game he claims to despise:

    http://www.legistorm.com/earmarks/details/member/814/Sen_Bob_Corker/page/1/sort/amount/type/desc.html

  • avatar
    d002

    “I have a hard time believing that people will rush to buy a small Chevy named after a brand of paper towels”

    It’s named after a great English car (Ho ho ho):

    http://www.pebblesfromparadise.com/wp-images/blogimages/VauxhallVivaHA.jpg

  • avatar
    mattstairs

    “But the entire delegation (minus Rep. John Conyers, D-Detroit, who was conspicuously absent) managed to get together with GM officials…”

    Rep. Conyers’ wife is going to jail, he was probably preoccupied with that.

    TonyJZX, you are right. That is essentially what GM and Chrysler are doing for other workers, with our tax money.

    It isn’t “hillbilly math”. We’d be better off giving money to entrepreneurs who could build new, innovative, progressive companies, rather than throwing it at GM and Chrysler.

    Complain about Sens. Corker and Shelby all you want. Everyone who advocated a managed bankruptcy last year was right. GM and Chrysler should have gone into Ch. 11 last December. Even with the same eventual government DIP financing and ownership, it would have saved billions for US taxpayers.

    One bad thing for Michigan about the auto bailouts – after the billions poured into GM and Chrysler, we can no longer complain that we don’t get “our fair share” from the federal government.

    Actually, the weakness about the donor/recipient argument is that it confines benefit to one state. Do all Americans benefit from military installations in Alaska, North Carolina, etc? Yes. Do I benefit from tax dollars spent on highways in other states? Yes, since I buy stuff that travels on trucks that use those highways.

    “Communist” China? In name only. China is essentially following the East Asian capitalist model, heavy state guidance of the economy and authoritarian rule. Hopefully, like South Korea and Taiwan before them, they ditch the authoritarian rule and go democratic before long.

  • avatar
    agenthex

    It isn’t “hillbilly math”. We’d be better off giving money to entrepreneurs who could build new, innovative, progressive companies, rather than throwing it at GM and Chrysler.

    The two kinds of spending is not the same. One is to create new industry, the other is to clean up toxic waste.

    It is great value? Hells no. But it’s the way money moves around and has always moved around in washington. Just be glad the middle class got some benefit out of it.

    GM and Chrysler should have gone into Ch. 11 last December. Even with the same eventual government DIP financing and ownership, it would have saved billions for US taxpayers.

    They should’ve gone into 11 or some kind of serious reorg years ago, the earlier the better for taxpayers. Unfortunately that all efficient free market let it drag on until we’re stuck with the bill.

    Do all Americans benefit from military installations in Alaska, North Carolina, etc? Yes

    That money is more often than not grabbed by their senator and congressmen, in large part to get local jobs. That’s just how our political system works.

    I don’t see how anyone can complain about michigan getting some money now when the southern states have been rolling in fed cash for ever.

    There’s a republic for you, vote for a dictator if not satisfied, or better education system so people demand better than this crap.

  • avatar
    windswords

    John Horner:

    “It is ironic that Socialist-bashing conservatives have become big pro-China outsourcing advocates.”

    Did I miss the memo? I’m a conservative, and I have never been in favor of outsourcing anywhere, let alone China. None of my conservative colleagues do either. Maybe you just hang out with the wrong conservatives.

    grog:

    “Plus, I wonder how many of the workers in this new plant will the newer, Tier 2 UAW types? Ie, the ones making no money.”

    Since when did making, what, $14 an hour with bennies (which with OT will be $30,000+ a year)” become making no money”? Did I miss that memo too?

    agenthex:

    “It’s only pathetic when those same states then turn around and get a net surplus of federal money from other states.”

    Really? Isn’t that the model liberals like you advocate? From each according to his means to each according to his needs? Since you advocate taking from the “evil” rich and giving it to the poor, why would would you object taking money from the “evil” rich northern states and giving it to the poor southern or western states? The same model, no? I think yes. I hope you like your new socialist utopia. By the way I am enjoying those “evil” rich northern state dollars in my southern state. Hollywood is paying for my kids education. It’s about time you paid your “fair” share!


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