FORD, MICHIGAN CUT $750M IN PLANNED PUBLIC SUPPORT FOR MARSHALL SITE, OTHER EV PROJECTS

Ford Motor Co. and Michigan economic development officials are drastically scaling back public money for two electric vehicle-related projects, reducing proposed taxpayer support by at least $750 million.

The company and state blame a turbulent EV market for the change. But sweeping reductions to projects ballyhooed by Gov. Gretchen Whitmer and many others create new questions for the future of the state's auto industry and the business subsidies program designed to spur growth.

"We want people to trust us, we need people to trust us. We try to bring all the information we can forward to the (Michigan Strategic Fund) board," Christin Armstrong, a senior vice president with the Michigan Economic Development Corp., said in an interview on Monday.

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"We come with good intentions … what we are presenting to the board is the best project we can put together based on on the info and circumstances and conditions in that moment."  

The state and Ford agreed Tuesday to substantially cut a proposed $825 million in tax credits for an immense new EV battery factory planned for outside Marshall, reducing that to just shy of $225 million. They're also slashing $69 million from a public grant for the project.

Both mirror moves Ford announced last year to shrink its own investment and jobs at the site. However, Ford said Tuesday the facility is "more than 20% complete" and the company is still on pace to begin production in 2026.

The jobs at the Ford Marshall site also are expected to pay higher wages than initially proposed with an increase to $25 from $20 an hour for the starting wage and an increase from $21.70 to $25.50 for the average wage.

On a separate Ford project, the state and company are nixing the entire $100.8 million grant, intended to help create more than 3,000 jobs and spur up to $2 billion in investment in Michigan at several Ford sites.

“We are nimbly adjusting our manufacturing operations to match evolving customer demand and the Michigan Strategic Fund board is revising its incentive offers accordingly," Tony Reinhart, Ford's director of state and local government affairs, said in a statement.

More: Forget the soundbites: Here's what's really happening with all the EV delays

Officials with the Michigan Economic Development Corp., the quasi-public agency that oversees corporate subsidies for the state, told the Free Press on Monday the moves reflect the changing nature of the EV market.

Josh Hundt, senior project marketing adviser with MEDC, stressed that these situations highlight why the state has protections for public subsidies. Ford never received any of the $100 million promised for one project, and the largest chunk of public money at the Marshall site came via a tax rebate that could only be realized once the plant is operational.

"These projects are still growth opportunities for Ford," he told the Free Press.

It's unclear how much public money those opportunities will ultimately require.

The Mackinac deal that never happened

In June 2022, Whitmer joined Ford executives and Michigan state lawmakers to announce more than 3,000 jobs and a $1.1 billion investment at five existing Ford factories. At the time, the governor and Ford leaders presented the project as a done deal.

"Ford is investing, they are making strategic decisions about the future of mobility, they're leading the way. We've got to compete with the rest of the world to earn their investment here in Michigan. And we won," Whitmer said at the Mackinac Policy Conference on Mackinac Island. "This is a big win for Michigan. Ford is going to continue to make these investments and when they invest in Michigan, it's good for every one of us." 

Whitmer previously took credit for these announced jobs, labeling them as new auto jobs created since she took office. But as Tuesday's adjustments show, companies can reduce the number of jobs promised at any moment. 

As part of the original proposal, Ford agreed to invest specific dollar amounts and create a certain number of jobs at each site. Rouge Electric Vehicle Center in Dearborn was promised the most jobs, more than 1,500, and $450 million invested.

However, earlier this year Ford announced it would shift most of the 2,100 employees at the plant. The plan required moving 700 employees from the location that builds the highly touted Ford F-150 Lightning to the Michigan Assembly Plant. Another 700 would either go to other sites or take a retirement buyout.

Ford was supposed to invest all of the money by June 30, 2024, and create the jobs by June 2025, according to the MEDC project memo created at the time. The deal never really got off the ground though, state and Ford officials now say.

Before Tuesday, the Free Press asked Ford and MEDC repeatedly whether the company met its investment deadline. Late last week, an MEDC spokesman acknowledged Ford had not received any public funding through the project, but did not say how much money Ford invested or jobs the company created.

In a memo to the Michigan Strategic Fund board, the state indicates Ford invested all the money and created all the jobs it promised. However, the company did not create the promised number of jobs at each specific site, the memo states.

It's unclear why Ford would forgo the entire $100 million if it created the number of jobs and invested the amount of money it argued necessitated the public subsidy in the first place.

Ford spokeswoman Jessica Enoch noted the company will still receive separate tax incentives.

"The revised offer is proportionate to our revised investment and footprint," Enoch said.

She also noted recent company sales numbers showing Ford's EV sales are up 72% for the year.

Resizing in Marshall

Ford previously acknowledged in late November it would scale back its commitment in Marshall, a site called the BlueOval Battery Michigan site. At the time, the company said it would invest $1 billion less in Marshall, with a corresponding cut in 800 promised jobs and the plant's production capacity by roughly 40%.

State economic development officials said they would trim public funding accordingly, but did not reveal the extent of those cuts until a meeting Tuesday of the Michigan Strategic Fund.

Under the new terms, Ford could receive a $141 million grant if it invests $2.5 billion and creates 1,700 "qualified jobs." The company, however, could still receive additional funding for more jobs: up to $166 million for 2,100 jobs and a $3 billion investment by the company.

In either case, it’s a significant cut to the initially promised $210 million grant for 2,500 jobs and a $3.5 billion investment. 

The project remains controversial in the local community. While the local economic development agency is a steadfast supporter — and continues to serve as a pass-through for public funding — some residents oppose the new factory. Their reasons vary, from desires to keep the area pastoral to political conspiracies, but this opposition continues to prompt legal fights in the community.

Those fights have not stalled work at the site. Crews continue to develop the basic structure necessary for the large facility, while working on a separate but related component designed for other related businesses.

“BlueOval Battery Park Michigan will play an important role in our plan to help make electric vehicles more accessible and affordable by producing low-cost LFP batteries in the U.S. and not relying on imports,” said Lisa Drake, Ford’s vice president of electric vehicle programs and energy supply chain, in a statement.

Ford deals highlight shifting politics of economic development

The EV projects scaled back by Ford were initially unveiled at events featuring Michigan political leaders headlined by Whitmer, who has celebrated the jobs promised by the automaker as part of a broader manufacturing renaissance in the state.

But the projects have also underscored the evolving politics of economic development in Michigan and the shifting coalition for Whitmer's broader strategy.

When Ford announced several EV investments in southeast Michigan in 2022, legislative leaders from both political parties joined Whitmer to celebrate. Democratic and Republican lawmakers had just come together to quickly shepherd a new massive corporate subsidy program after Ford chose Kentucky and Tennessee over Michigan to locate new EV-related plants. When Ford subsequently announced the new EV jobs coming to Michigan, lawmakers from both parties swiftly approved the subsidy for Ford.

But Ford's BlueOval project encountered resistance in Lansing.

Republicans largely opposed public funding for the project with Minority Leader Matt Hall, R-Richland Township, describing it as a bad deal for Michigan given the public costs associated with it. He has also routinely said the jobs Michigan has subsidized aren't good-paying jobs, in contrast to Whitmer.

On the Democratic side, state Rep. Dylan Wegela, D-Garden City — a vocal opponent of corporate subsidies — emerged as the lone Democratic vote against the deal, opposing a spending bill allocating nearly $630 million to support the project. But behind closed doors, other Democrats also expressed discomfort with the spending.

Shortly after taking power in Lansing following an era of GOP control, Democrats vowed to make changes to Michigan's economic development policies.

The latest plan from Democrats would extend funding for Michigan's largest corporate subsidy program — set to expire next year — for another decade while adding new transit, housing and community investments to the mix.

The bills were put on the voting agenda before lawmakers left for their summer break. They never took it up amid opposition from some Democratic and GOP lawmakers that thwarted its chances. Lawmakers could still amend the legislation or broker deals to garner enough support for the package to send it to Whitmer’s desk later this year.

This article originally appeared on Detroit Free Press: Ford, Michigan cut $750M in planned public support for Marshall site, other EV projects

2024-07-09T13:59:19Z dg43tfdfdgfd