Gov. Grandholm & Ford

Aug. 16, 2006

Governor Jennifer Granholm has offered Ford Motor Company a tax break of $151 million if it agrees to invest $1 billion in Michigan facilities.
If the company agrees, the investment will mean keeping about 56,200 jobs in Michigan, including up to 13,740 jobs directly by Ford, Granholm’s press release said.
The investment would allow Ford to more quickly retool its manufacturing line to produce new car models and to do more research and development.
The release comes at a time when Republican legislators, who hold the majority in both the house and senate, have blamed Granholm for the state’s high unemployment rate, largely due to auto lay-offs and, of course, the domino effect on businesses that depend on the Big Three.
Both Granholm and Mark Fields, Ford Motor executive vice president, were at the Grand Traverse Resort in Acme last week speaking to the Center for Automotive Research Management Briefing Seminar.
Fields said that Ford was considering the deal, but hadn’t made a decision. He said to expect an announcement in September when Ford details how it will restructure by cutting costs and introducing new models.
Granholm is going all out to make the state more amenable to the auto industry. On the governor’s website, she outlines ways to keep Michigan the “epicenter of the automotive industry.”
Her strategy: making air quality permits easier and quicker to get (for all businesses), offering engineering and technology students zero percent student loans, beefing up the state’s international presence by setting up overseas offices, and connecting the
intellectual property of universities to the auto industry. Whether that’s enough to keep automotive jobs in the state is anyone’s guess.
As the election heats up, there’s likely going to be a lot more political largesse shown to the state’s businesses in the form of tax abatements, but the Mackinac Center for Public Policy urges caution. For nine years, the Center has studied whether jobs created by these tax breaks really stick, said Mike LaFaive, the Mackinac Center’s director of fiscal policy.
The answer: “Only a little more than one-third of the companies actually produced the number of jobs that were expected, and most of them produced them late, and some eliminated the jobs after the fact,” LaFaive said.
The tax credits are called MEGA grants (Michigan Economic Growth Authority) and typically give a business a reprieve on the single business tax. The Mackinac Center recommends that rather than giving a tax credit to a specific company, give a uniform tax cut for all businesses.
“We say MEGA for all. We want all businesses to enjoy tax breaks. Right now a small group of Lansing political appointees meet and decide each month which applicants are worthy and which are not.”

Made in Michigan, I mean China, I mean...

In a recent press release, Senator Jason Allen said he was pleased that the governor’s plan to offer low-cost computers to the state’s poor and unemployed was deep-sixed in early August.
In a press release titled, “Made in China, Not Michigan,” Allen said the MiPC program—pronounced My PC—had too many problems.
The thinking behind the program was that selected computer vendors would offer computers on a massive scale at a bargain price, and that the state would promote their availability, said Teri Takai, director of the state Department of Information Technology that designed the program.
The program was prompted by a survey showing that 85 percent of all new jobs require computer skills, yet 28 percent or more than 1 million families in the state either don’t own a computer or aren’t on the Internet.
The program quietly died because computer manufacturers were unwilling to sell to residents for any less than they would through other venues, according to a Mitechnews.com article.
Allen’s press release said he had several concerns, such as the program might upset the free market. He also questioned whether it was even legal for the state to run this type of program, and that pricing wasn’t even raised in the 87-page request for bids.
“It’s positive to enter the discussion to get more computers into homes, that’s a great goal,” said Joe Agostinelli, Allen’s point man on this issue. “Unfortunately, this program didn’t come anywhere near accomplishing that goal.”
Allen’s major concern, though, was that the bid was designed so that Michigan computer vendors were unable to participate. Bids came from such national players as Dell, Lenovo (formerly IBM) and Comp USA. Both Lenovo and Dell manufacture computers overseas, while Comp USA is owned by a Mexican holding company.
“Shouldn’t we be buying computers made in Michigan? What kind of a signal are we sending when we endorse a company that not only isn’t located in Michigan, but has its product manufactured outside of the United States?” Allen asked.
Takai said the bid process wasn’t meant to exclude Michigan computer manufacturers.“But it was written that vendors had to be large enough to handle the volume. We didn’t have a response from any Michigan vendor.”
But wait a minute. Is there even a Michigan company that makes personal computers, at least of any significance?
“That was kind of a bit of our question,” Takai said. “But Senator Allen made a reference that he knew of one.”
Agostinelli said he meant computer stores across the state like TC Computer Sales, a retailer that custom-builds computers and might have four or five standard models on hand. One of its main parts suppliers is Ingram Micro, which gets its parts from... China.