By on June 16, 2020

Image: GM

If you weren’t aware, the sprawling General Motors assembly plant in Lordstown, Ohio is no longer cranking out Chevy Cruzes. No plant is. And there’s now a strange “Lordstown Motors” sign adorning the complex, with some sort of crazy promise about building electric pickups? Wild.

The state of Ohio certainly took notice, recalling the economic development agreement it signed with the plant’s former owner more than a decade ago. Those public perks were dependent on GM continuing operations at the plant until a point many years in the future. Fork it over, Ohio recently told GM.

Thanks to digging by ProPublica, we know that the state sent GM a letter in March demanding repayment of more than $60 million in subsidies. The agreement reached between the automaker and state contained sizable tax breaks in exchange for GM operating the Lordstown plant until at least 2027.

Amid a company-wide streamlining effort, GM sold the plant to the fledgling Lordstown Motors last year for a rock-bottom price. The automaker had ceased production of the Cruze earlier in 2019 after it was deemed unsustainable to continue operating the plant on a single shift. The car ended production last March, joining a crop of discontinued Chevrolet, Buick, and Cadillac nameplates.

Greg LeRoy, executive director of Good Jobs First, a nonprofit that seeks accountability in economic development matters, told ProPublica, “If the state were to claw back $60 million, that would be one of the biggest clawback events in U.S. history.”

He added, “This is very significant, very interesting that it would come from a Rust Belt state from a very pro-business administration.”

This is different than past public loans that, in many cases, were never paid back, with the jurisdiction forgetting that money ever changed hands.

From ProPublica:

The state Development Services Agency, which oversees economic incentive programs, notified GM in March that it would recommend that the state’s tax authority terminate the company’s tax agreements and collect a full refund. Spokesman Todd Walker said the authority would consider the matter at an upcoming meeting, though he declined to specify a date. The authority’s next session is July 27, according to its website. Provisions in GM’s tax agreements allow for state regulators to consider market conditions and whether the company continues to maintain “other operations in the state” before issuing a final determination.

Documents show GM pushed back in April, explaining that the bottom fell out of the compact car market during the time frame outlined in the agreement, and appealing for leniency during the ongoing coronavirus pandemic. This could come across as a bit rich to many, given GM’s stable financial footing. New lines of credit padded the automaker during the recent shutdown, and production is again underway at the automaker’s North American factories.

If GM does sink into the red in the second quarter of 2020, few expect it to be a long-term phenomenon. And Ohio, like most other states, could use the $60 million. Especially now.

“Cash preservation is critically important to General Motors to support a vigorous emergence from the economic and global health crisis,” Troy D. Kennedy, the company’s U.S. property tax manager, wrote in response to Ohio’s letter. “We respectfully request your assistance to help us drive towards a full recovery by choosing not to require repayment of all, or a significant portion of, the tax credits.”

In a statement sent to ProPublica, GM spokesman Dan Flores said, “We are respectfully asking the state to consider our belief that a repayment of the tax credits would be inconsistent with our significant manufacturing presence in Ohio and the Mahoning Valley.”

By that, Flores means the joint battery plant that, once operational, will fuel the automaker’s electric vehicle push. The $2.3 billion venture with LG Chem would see the creation of 1,100  jobs.

[Image: General Motors]

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21 Comments on “Calling Collect: Ohio Wants Its Money Back From GM...”

  • avatar

    They failed to complete the agreement as signed, intentionally closed the plant, fire saled it, and now want leniency.

    Pay the money back, all of it.

    • 0 avatar

      Agreed 100%.

    • 0 avatar

      The local authority is not too concerned about GM paying up as they just gave GM’s new battery facility 75% tax abatement for 15 years.

      “…GM also underscored its plans to build a $2.3 billion electric-vehicle battery plant in Lordstown, next to the shuttered auto facility. The automaker is partnering with Korea-based LG Chem as part of a new joint venture named Ultium…Eager for the new battery plant, its village council approved new tax breaks for the joint venture in February. The project will receive a 75% abatement on property levies for 15 years….” prorepublic

  • avatar

    As I have always told my kids: “find a reason to do the right thing, not an excuse to do the wrong thing”. I don’t want anything to do with people/companies who can’t keep their word.

  • avatar
    cimarron typeR

    I have a feeling that GM would move the battery plant if it doesn’t get at least a partial discount. That’s how it goes…

  • avatar

    This is the main problem with any government agency trying to help create a business. Government Motors as I refer to them is about as sorry a company as any I know. I have no respect for Chevrolet and the other divisions of GM. I hate it for Ohio but it is about the same as everyone in the USA that gets to default on their loans and get by with it by filing for bankruptcy. How is it fair for people, some of my in-laws included, to file bankruptcy when they make three times what I make, get out of paying for their credit card charges and other bills but still get to keep their home and still be able to buy a new car after turning the one they didn’t pay for back in?

    • 0 avatar

      The rationales behind post-bankruptcy financing and government loan programs have one thing in common: risk.

      For the government, the calculus is simple: do you loan the money out, or do you risk watching hundreds of thousands of jobs go down the toilet during a severe recession? What’s the greater risk – forking over the money, or having to pay out God only knows how much in entitlements to the former workers (and the workers at the supplier comapnies), PLUS lose their tax revenue…and on and on. Personally, I think the bailouts were a no-brainer.

      Post-BK financing for things like cars and homes is somewhat less of a no-brainer, but risk is the main factor here too – they “price” in the risk with things like higher rates and larger down payments.

      On an emotional level, though, is it frustrating to see bad actors “rewarded” while you try to do “do the right thing”? Yep.

      • 0 avatar

        Unfortunately, bailouts lead to riskier behavior, and companies have to take larger risks to be competitive. They also have a financial incentive to get cities indebted for them, that way when they really blow it they have the public piggy bank to borrow from, or the politicians take the blame for the company laying off employees.

        • 0 avatar

          Agreed, but I think of what the government was doing in 2008 as economic triage on a critically ill patient. In a situation like that, you don’t ask whether the patient came in by being irresponsible, or question whether the patient’s going to repeat the same irresponsibility and come back next month – you save the patient.

          I think the “let ’em die” folks were free-market true believers – nothing wrong with that, per se, as long as you’re living in the real world.

          • 0 avatar

            …but what do you do when you give the patient a heart bypass surgery and they immediately go back out eating BBQ and bacon because “the doctor fixed me”?

            It was meant to be economic triage, but more companies should have died. The thought that you can ‘save jobs’ by using government funds to bail out a mismanaged company ignores the economic truth that if the market is there, the jobs are there. If the market is not there, you’re engaging in socialism.

  • avatar

    In my youth, Ohio was packed with GM plants, most all of which are gone now.

    I can remember two Fisher Body plants in Cleveland and another in Mansfield. Terex earthmovers in Hudson; Packard Electric in Warren, Frigidaire appliances, Inland Manufacturing, Delco Moraine, and Delco Products in Dayton, New Departure Bearing in Sandusky, Lordstown and Cincinnati (Norwood) assembly plants.

    What’s left…some stamping stuff in Cleveland(Parma), castings in Defiance, and transmissions in Toledo?

    If you totaled up the lost jobs it would be a pretty huge company.

  • avatar

    GM does it everywhere. Australia granted them a break of $275 mil to keep the Holden plant open through 2022. The closed it 3 years ago.

  • avatar

    So if I had financed a car thru GM,I wouldn’t have to pay the balance due because “Cash preservation is critically important to” me “to support a vigorous emergence from the economic and global health crisis,”?
    Just asking.

    • 0 avatar
      Art Vandelay

      Came here to say this. Just reword it slightly to:

      “Cash preservation is critically important to Art Vandelay to support a vigorous emergence from the economic and global health crisis. We respectfully request your assistance to help me drive towards a full recovery by choosing not to require repayment of all, or a significant portion of an auto loan on a C8 Corvette”

      GTFOH GM. The easy way to avoid not paying back these things is to not take them. You did. Pay up.

    • 0 avatar

      All animals are created equal, but some are created more equal than others.

      • 0 avatar
        Art Vandelay

        The fact that GM is asking implies they know they are on the hook. Their only course of action is a veiled threat they could shut down more plants. I’d call their bluff as it sure seems like any US GM plant is on shaky ground anyway.

  • avatar

    GM will run the clock on this stuff until BK 2.0 and the obligations will get rolled up with all the other debt and dumped off to Old New GM.

  • avatar

    They’re weasels. I wouldn’t expect anything less.

  • avatar

    The problem with govt v business is that the players in govt rotate in and out. Business can work govt till it gets what it wants…and later, govt is stuck with a deal “they ” didn’t make. Business can and will bankrupt out of responsibility….and government is perpetual, and cannot.

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