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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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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...


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