States face big price to nab GM small car factory

States face big price to nab GM small car factory

 

By KATHY BARKS HOFFMAN
Associated Press Writer

All three of the states competing to produce General Motors’ new small car have put together deals to lure the automaker, but budget deficits are raising questions over how much they can sweeten the pot.

Tennessee Gov. Phil Bredesen expressed doubt Thursday about whether his state can afford the hundreds of millions of dollars General Motors Corp. apparently wants to bring production to a plant in Spring Hill, Tenn.

"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 told reporters. "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."

Tennessee still hopes to land the plant, and GM’s requirements haven’t scared off Wisconsin or Michigan, even though both states are struggling with budget deficits.

Michigan is facing a potential $1.8 billion deficit in the budget year starting Oct. 1 that it can only partially fill with federal recovery money, and Wisconsin has proposed $2 billion in tax and fee increases and other measures to deal with the shortfall in its next budget year.

Both states also are laying off state workers, requiring furlough days and making spending cuts as they struggle to fix the shortfall.

Yet the ongoing budget woes have made Michigan Gov. Jennifer Granholm even more determined to land the GM jobs producing up to 160,000 small cars a year.

"We want to have that work in Michigan, and we’re going to be aggressive about going after it," she told reporters recently.

The states are eager to grab the roughly 1,200 jobs that could come with building the new vehicle. GM already has closed its factory in Janesville, Wis., and the factories in Orion Township, Mich., and Spring Hill, Tenn., will go on standby later this year, costing each state thousands of jobs if they don’t nab GM’s small car.

All three states are struggling to keep their economies going in the recession. None wants to give up those good-paying jobs – especially Michigan, where the unemployment rate is 12.9 percent and six other GM factories face being closed or idled by the end of 2010.

Granholm spokeswoman Liz Boyd wouldn’t give details of what Michigan is proposing, but said the governor, congressional delegation, local officials and economic development teams are doing everything they can to win the jobs, no matter what GM is asking.

"Our economic problems make this project all that more important," Boyd said Friday. "We cannot afford to be penny-wise and pound foolish."

Wisconsin Gov. Jim Doyle said his state has made "a pretty unique offer" to the automaker that goes "along the lines of some of the production transformations they were going to have to make." He, too, promises a "very, very aggressive" set of incentives for GM and has named a team of Janesville and union officials to press the case.

But while the money GM is looking for upfront would help the automaker rebuild after bankruptcy, the real cost savings it wants could come in the contract covering the United Auto Workers members who will be building the new subcompact car.

GM has been trying for years to move its plants toward more efficiency through work rule changes that would allow more flexibility for workers and suppliers and drive down costs.

It hasn’t entirely succeeded.

But the sharp downsizing the company announced as it headed into bankruptcy protection last week gave GM some leverage with the UAW, which wants to build the subcompact in the U.S. rather than China to preserve union jobs.

To get that deal, the UAW agreed that whichever plant builds the new vehicle will work under the new rules GM wants.

"The international (union) has leveled the playing field, because they’re the ones that said whoever gets this product is going to be 100 percent" under the cooperative operating agreement, said Pat Sweeney, president of UAW Local 5960, which represents workers at the Orion Township plant. "We’re going to do what’s needed."

GM CEO Fritz Henderson met with Michigan congressional officials Thursday about building the new subcompact, and Troy Clarke, president of GM’s North American operations, met with lawmakers from all three states Wednesday.

Henderson was asked Friday about the funding request to Tennessee but declined to provide any details.

"I’m not going to get into the specifics by location," Henderson said in Washington following a House hearing on shuttered car dealerships.

Michigan lawmakers said they expect GM will announce a decision by the end of June or early July.

Associated Press writers Bill Poovey in Chattanooga, Tenn., Erik Schelzig in Nashville, Tenn., Ryan J. Foley in Madison, Wis., and Ken Thomas in Washington, D.C., contributed to this report.

© 2009 TheState.com and wire service sources. All Rights Reserved. http://www.thestate.com

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