Tenn. gov.: GM seeks big payment for new car plant

chicagotribune.com

Tenn. gov.: GM seeks big payment for new car plant

By ERIK SCHELZIG

Associated Press Writer

5:13 PM CDT, June 11, 2009

NASHVILLE, Tenn.


 

Gov. Phil Bredesen on Thursday expressed doubt about whether Tennessee can afford the financial demands from General Motors Corp. to select its Spring Hill plant to build a new small car.

The Democratic governor said it became clear in meetings with GM officials this week that the bankrupt automaker wants a large cash payment from Tennessee to pick Spring Hill over Orion, Mich., or Janesville, Wis.

Tennessee’s incentive packages are usually heavy on long-term tax credits, training and infrastructure improvements. Bredesen said the state doesn’t have "a lot of spare money available to make large upfront payments."

The governor wouldn’t specify how much money GM was asking for, but said that hundreds of millions of dollars would be "the low end of the range."

"Frankly, the numbers they are talking about are well outside what I think we can do today in terms of the budget situation we have," Bredesen said.

Bredesen’s early impression from GM officials had been that the company would make its decision based on the merits of each existing plant without igniting a bidding war.

"I was wrong," Bredesen said. "It certainly was a new look for me at how they are approaching this thing, which is absolutely ‘Tell me how big of a check you’re going to write,"’ Bredesen said.

"The only one they want to know is how much cash are you going to put in up front — we don’t care about tax credits, we don’t care about any of those other things," he said. "They’re just asking us to help them build the plant."

Bredesen said Tennessee won’t take itself out of the running for the new car, but that he is conferring with Economic and Community Development Commissioner Matt Kisber about how best to respond to Troy Clarke, president of GM’s North American operations.

GM originally planned to build the new small car in China but later decided it would build it in the U.S. as a union concession. The company has been operating under Chapter 11 bankruptcy protection since last week.

The Spring Hill plant produced more than 3.7 million Saturns between 1990 and 2007 before the plant was retooled and upgraded to build the Chevrolet Traverse crossover.

The overhaul, which cost more than $600 million, occurred only after Bredesen persuaded lawmakers to approve new tax breaks to help encourage the upgrades.

The expanded incentives made reinvestments in existing plants eligible for tax credits rather than just for new plants coming to Tennessee. Under that measure, businesses qualify for a 7 percent tax credit on industrial machinery upgrades of at least $500 million.

The Bredesen administration has landed other high-profile automotive deals through its aggressive corporate tax incentives, including a new $1 billion Volkswagen AG plant in Chattanooga and the relocation of Nissan Motor Corp.’s North American headquarters from California to suburban Nashville in 2006.

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