Print 24 comment(s) - last by Ammohunt.. on Dec 30 at 2:37 PM

Michigan wants to build batteries for hybrid cars in the state

The U.S. auto industry is one of the nation’s hardest hit industries in the current economic climate. Several of the nation's largest automakers were facing the very real possibility of bankruptcy. Dwindling sales and minimum cash reserves led the automakers to seek help from the U.S. government.

The emergency loans were granted to GM and Chrysler recently totaling $13.4 billion. Governmental officials in Michigan aren't content to rely on these loans to power the major employers in the state and are looking to the future to lure new business into the sate that will bring jobs and bolster the economy.

Lawmakers and Gov. Jennifer Granholm from Michigan are offering up big tax incentives to battery firms to lure them away from Asia and into the U.S., specifically into Michigan where the battery technology can be used by automakers directly.

With hybrid vehicles and plug-in hybrids like the Chevy Volt at the core of the plan GM and other automakers have to save their companies, it makes sense for the state to want to bring the making of all key components to Michigan. The lithium-ion batteries are perhaps the most important component of any hybrid vehicle.

Sen. John Pappageorge told the Detroit News, "It is imperative that Michigan possess this technology to keep Michigan the center of car manufacturing."

Lawmakers from the state say that not only is Michigan lacking in battery technology companies, but the entire U.S. is lacking as well. Granholm said, "They [GM] are going to produce the Volt. ... The battery that is going to power the Volt -- we intend that to be made in Michigan."

Michigan is offering battery companies refundable tax credits to lure them to the state. Refundable credits go a step further than tax breaks; they are like a rebate for production expenses and can require the state to write checks to businesses if the credits exceed their tax liability. The tax measure was approved by the Senate 31-3 and was approved by the House 94-0.

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By Ammohunt on 12/29/2008 1:49:11 PM , Rating: 5
Michigan should conctrate on keeping the Unions out of any new inductry that chooses to setup shop there. The unions have made Michigan a wasteland with overpriced labor.

By TomZ on 12/29/2008 2:03:25 PM , Rating: 5
That's a myth/misconception. Here's a map showing auto plant locations - notice that they are not all located in Michigan:

BTW, what is your experience with/in Michigan? I think your opinion is far from well-informed.

By jnn4v on 12/29/2008 2:29:07 PM , Rating: 5
Unfortunately, the map you linked to has a lot of overlapping stars in Michgan, so it's hard to see the full depth of the number of plants residing there. Here's another map that makes it easier to see each individual plant.

Notice two things:
1. There are far more plants in Michigan than anywhere else on the map.
2. Nearly all of the plants opened after 1990 were opened outside of Michigan.

Do you honestly think that the high cost of labor in Michigan isn't a factor?

By Ammohunt on 12/30/2008 2:37:34 PM , Rating: 2
Hence the reason the new Chevy impala i bought in 2000 was manufactured in Canada. Can you say NAFTA? Hell of a thing when its cheaper to manufacture GM vehicles in a Socialist country like Canada then in Michigan. Michigan should adopt the employment at will statutes that Colorado(one of the stronger low-union state economies) has.

By bobsmith1492 on 12/29/2008 2:35:15 PM , Rating: 5
I live in Michigan and have heard many horror stories about operation with the union.

A coworker used to work at a union plant. He saw something wrong with a test fixture and was going to fix it (just a minor adjustment) but was "caught" by a union worker and told that was union-only work.

He also brought home torque wrenches and other expensive equipment; the union workers just threw them out after one use because it was too much hassle checking tools in and out of the union tool shop.

By CurtOien on 12/29/2008 6:36:11 PM , Rating: 4
"He also brought home torque wrenches and other expensive equipment"

I don't know this guy but it sounds to me like he stole some tools and then said "they were throwing them out"

By xstylus on 12/29/2008 11:41:39 PM , Rating: 5
> A coworker used to work at a union plant. He saw something
> wrong with a test fixture and was going to fix it (just a
> minor adjustment) but was "caught" by a union worker and
> told that was union-only work.

That mirrors several horror stories I've personally experienced regarding unions in the hotel industry, event venues, and on movie sets. They nitpick about trivial things, and get astonishingly huffy if I, a non-union member, so much as move a microphone stand ten feet. If I see a problem, I'm not allowed to correct it. Such a breathtaking waste of time and resources this causes!

Unions drive up the cost of labor in exchange for less work. F--k them with an icepick. The unions were useful in the early 1900s when employers abused their workers and expected 12 hour shifts, but nowadays they've long outlived their usefulness.

And just for the record, I'm a true blue Democrat.

By Ringold on 12/30/2008 5:48:25 AM , Rating: 2
[Lots of anti-union experience and sentiment]

And just for the record, I'm a true blue Democrat.

My world view is failing me. :P

By ToeCutter on 12/29/08, Rating: -1
By Alexvrb on 12/29/2008 7:24:15 PM , Rating: 3
Talk about the pot calling the kettle black...

Few think that the UAW is the sole cause of the trouble the Big Three find themselves in. But if you think that the UAW has nothing to do with their current predicament, you're just as foolish.

Do a little research on the UAW, look at the overall cost of employing a UAW worker vs a non-union worker, doing the same job. Look at retirement benefits, extra idle workers. Look at all the money the UAW takes in and see what they spend it on. Political contributions, golf courses, whatever suits their fancy. There are other issues too that are less obvious.

By Ringold on 12/29/2008 7:31:38 PM , Rating: 2
It's an intellectual dead zone, bereft of reason.

The real issue not with the posters, but that "reason" to an extreme left-wing ideologue is only more left wing ideology. Therefore, it's impossible to "reason" with you from any position that you do not already share.

Such ideological extremism is probably a step on the slippery slope to genocide and/or civil strife, but we American's are too lazy to shoot at each other Civil War style these days.

Notice there was no mention of unionized labor in the article, but the knotheads here immediately jumped on the right-wing express?

Your ideology again blinds you to any attempt at insightful analysis. Michigan's economy is in the tank. Why? One might look for differences between Michigan and other state economies that are in better shape. One difference is the prominence of unionized labor in Michigan (both in the work place and its influence in government) versus, say, Alabama or Texas. Is this mere correlation and not causation? Impossible to tell, you've already deemed any discussion as a "right wing express" and apparently refuse to ponder it.

DT also employs idiots like Asher, who flail their ridiculous opinions like bricks.

I guess you didn't read Jason Mick's recent attempt to pass off opinion being placed directly in an article as adhering to standards of journalistic integrity. But Jason shares your ideology, so of course you didn't mention that, you only mentioned Asher who does not.

I've lived in Michigan my entire life

Thats probably part of your problem, no experience with any other system.

All, without ever having paid a penny to a union.

I've never paid a penny to a teachers union. Does that mean teachers unions are great and never interfere with measures that might harm teachers interests but work in the interests of students? Not everybody has to be a union member for unions to be a problem.

C-Level folks screwed the Big Three, not unionized labor. They simply assembled whatever came down the line.

It has been both. If not for the unions, the Little Three could shed labor and close or move plants without having to genuflect before the UAW. Auto analysts who have spent time in both "foreign" US auto facilities and "domestic" ones note that, beyond labor costs, union rules about what can be done and changes that can take place on a factory floor means the "foreign" firms can make changes much more quickly and painlessly than the Little Three.

In fact, I'd say Wagoner has done a half-ass but acceptable job, given the challenges he has faced. If you look at GM when he took over and GM now in terms of plants open and employees on the payroll, he's shed quite a bit already. He's been too easy on the UAW in my opinion, but don't know how you can really blame GM's problem on "C-level" (C as in corporate, as in management?) when they're just operating within their UAW imposed limits. (Ford and Chrysler's management I don't know enough about to allocate blame)

Later knuckle-draggers...

The knuckle-draggers in Texas seem to have a far stronger economy than your own home state, which presumably has no knuckle-draggers? Ah well. I suggest forums of discussion that don't discuss multiple sides of an issue, that'd fit you much better.

By TomZ on 12/29/2008 9:50:01 PM , Rating: 2
It is not correct to blame Michigan's economic problems entirely on the UAW. Yes, there is an impact, but in addition to that, there are a lot of white-collar jobs being lost in Michigan. So really the problem is the concentration of auto industry jobs in Michigan, and when the industry cycles down, so does Michigan's economy. Simple as that.

By Ringold on 12/30/2008 6:06:43 AM , Rating: 2
and when the industry cycles down, so does Michigan's economy.

That is true. Unemployment records for the state show Michigan almost completely missed the last economic expansion, and didn't seem to get a lot out of the last one either in terms of new jobs to sustain them the way some of the rest of the rust belt managed to diversify to some degree over the last 10-20 years. That's not all the unions fault. The union is a part of it, but a symptom of deeper problems with the states (and the controlling partys) entire approach to economic issues. As for the companies themselves, I do think they play a larger role than you do, but they're still not the only thing that's killed the domestic automakers. If nothing else, it takes two to tango; a government and corporate management that allows the union and the culture the union creates to go unchallenged. Economies can't hide from capitalism; disregard its edicts and the consequence is what Michigan is experiencing.

I was more attacking ToeCutters apparent refusal to consider any role the unions might play at all.

By reredrum on 12/30/2008 4:23:33 AM , Rating: 2
labor unions = communism! communism = death! death = bad!

nuff said

Not going to happen
By whiskerwill on 12/29/2008 2:35:13 PM , Rating: 2
Besides the union laws in Michigan, there's all the crippling enviro regulations. Assembling a car out of prebuilt parts is one thing, but the chances of actual manufacturing taking place in Michigan is nonexistent.

RE: Not going to happen
By TomZ on 12/29/2008 9:51:06 PM , Rating: 2
What "union laws" are there in Michigan, compared to any other state?

RE: Not going to happen
By wjcott on 12/29/2008 10:09:29 PM , Rating: 2
As is the case in about half of the states, Michigan does not have a right to work law. Employment in a unionized workplace is conditional upon membership in the union and the payment of dues.

Moral hazard
By Ringold on 12/29/2008 7:10:21 PM , Rating: 2
This exemplifies why the auto bailout is a bad idea.

Michigan is getting whacked, for the last decade in particular it has paid the price for its failed industrial policy. In the face of this, the Governor refuses to acknowledge the faults of the domestic automakers, going on national TV and making herself look like an amazing idiot by saying things like Toyota has a cost advantage because foreign governments have socialized medicine. Sorry, the South failed at its attempt to become a separate nation and no Southern state has socialized medicine. Instead of asking itself penetrating questions, like what about their method of running the state has contributed to their woes, they now attempt to augment their old policies with a new favored-son pick-a-winner industry, batteries. In other words, central planning failed them so far, so their response is more central planning and micromanagement. Even if it goes no where, they can afford to continue to meander about in its response, because the warm embrace of Obama will take hold soon and the federal money spigots will bust open.

Compare this to Ireland. Facing economic collapse and malaise, and no one willing to provide a massive bailout, they asked those sorts of tough questions and had a deathbed conversion to capitalism. They got a little help from the EU, but not enough to of made a difference had they not made significant structural changes. Ireland went from being the poor man of Europe to one of the wealthiest countries in the EU and possessing one of the freest economies, referred to as the "Irish Miracle."

Spare the rod, spoil the child?

If Michigan had learned anything from what is happening to them, they'd be cutting taxes across the board for business and reforming labor laws, not this targeted nonsense. Why not declare the entire state a FEZ, or Free Economic Zone, similar to some tax-free areas of South America and Asia? It works for them..

RE: Moral hazard
By wjcott on 12/29/2008 10:23:58 PM , Rating: 2
Without going into your points and suggestions, which I think are good, I just wanted to clarify the purpose of the emergency loans (which I consider a pseudo-bailout). The purpose of the loans is not to limit or minimize the hardships felt in Michigan as much as it is an attempt to minimize the impact felt throughout the country.

A failure of these companies will result in the government (aka the citizenry) covering a significant number of pensions (65% of what the Big 3 would pay). Also, many of the other pension funds in the country have significant funds tied up in these companies. On top of these two points, it is anticipated that the creation of the VEBA will return competitiveness to these companies in the not-to-distant future.

RE: Moral hazard
By Ringold on 12/30/2008 6:35:29 AM , Rating: 2
I'm not familiar with the status of GM's pension fund, but if it's either empty or a set of funds that would be given to bond holders then you're right about that, the government would be on the hook. As for other pension funds being invested in GM, their only possible excuse is perhaps indirect exposure via index funds. If that is the case, as far as equity exposure goes whats the difference between the -94% 10 year performance it has had and a total loss? Nothing really. Existing bond holders, last I heard, will be getting their principal wrote down to 30 cents on the dollar, which is already pseudo-bankruptcy. If Pelosi and the UAW get their way, it may be written down to 20 cents or less. Bottom line, the money that would be lost has largely already been annihilated.

As for a return to competitiveness, perhaps. Congress can't mandate cultural change inside these firms. They could help; something like prepackaged bankruptcy with debtor-in-possession financing would be good in many ways. Knocking the UAW down a notch and getting concessions from older workers would help. Giving the Big Three the political green light to close any facility they feel they need to would help. Obama has a decent set of economic advisors, but it will be Congress, I think, that'll be the huge problem. With Pelosi and the ideology she has espoused over the years running the show, I just have no confidence the hard calls will be made. Of course, I hope I'm surprised and my skepticism is misplaced, but we'll see. ;)

Government picking winners and losers
By Hoser McMoose on 12/29/2008 8:35:10 PM , Rating: 2
I know most people in Michigan are likely to think this is a smart policy and certainly it's VERY popular politically, but it's unlikely to be effective.

Every time a government has ever tried to pick individual companies or industries to 'succeed' they've tended to do a very poor job of things. Batteries may be a total dead-end technology. Sure it seems like a safe bet today, but no one knows what tomorrow will bring, least of all governments.

At the very least the law might be too specific and force investment in the wrong area. It seems to require that the main use of these batteries are for plug-in hybrids, making batteries for hybrids without an electrical plug doesn't seem to count. Also it specifically states 'batteries', which may not end up being the energy storage mechanism of choice. For example EEStor has a rather promising technology for automotive use that is technically an ultra-capacitor and not a battery. It's unclear if that technology would count for these tax credits.

In the end though, just as a general rule, governments trying to select what business gets tax breaks and what business does not is a BAD idea. Free markets work best when they are free markets, not kinda-sorta-almost free markets.

By wjcott on 12/29/2008 10:29:28 PM , Rating: 2
As is usually the case, legislators have passed technology-related legislation without understanding the outcome. As you stated, this legislation could deny benefits to companies most likely to succeed based upon assumptions regarding the course of technological development. Perhaps it would be better to provide tax benefits based upon the ends, rather than the means.

By gregpet on 12/30/2008 2:37:09 PM , Rating: 1
I seem to remember reading something about the govt investing in the semiconductor industry back in the 80's. It seemed to work out pretty well for Intel, AMD, TI, etc (not withstanding their current stock price!). I'm a Republican but it does seem that a little govt involvement (if done right) can be healthy for the country's economy...

To Any Company Considering Michigan
By ebakke on 12/29/08, Rating: -1
"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA
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