GM closed the Lordstown auto plant. Now Ohio can force a $60 million refund. —ProPublica
The State of Ohio has warned General Motors that it could be forced to repay more than $60 million in government subsidies following the automaker’s closure of its massive assembly plant last year in Lordstown.
The state collection effort, originally described in a letter to GM in March, has not been previously reported, and the automaker itself has not disclosed potential liability to shareholders in its filings. business.
State officials say the Lordstown shuttering, which made national headlines and angered President Donald Trump, violated the terms of two economic development agreements GM made more than a decade ago , according to documents obtained by The Business Journal and ProPublica through public information. records requests. In return for tens of millions of dollars in tax breaks, the company had pledged to maintain operations at the Lordstown site until at least 2027.
“If the state were to recover $60 million, it would be one of the largest recovery events in US history,” said Greg LeRoy, executive director of Good Jobs First, a national nonprofit organization. nonprofit that advocates for accountability in economic development. “It’s very significant, very interesting that this comes from a Rust Belt state from a very pro-business administration.”
The State Development Services Agency, which oversees economic incentive programs, told GM in March that it would recommend that the state tax authority terminate the company’s tax agreements and receive a full refund. Spokesman Todd Walker said the authority would consider the matter at an upcoming meeting, although he declined to specify a date. The authority’s next session will be on July 27, according to its website. Provisions in GM’s tax agreements allow state regulators to review market conditions and determine whether the company continues to maintain “other operations in the state” before making a final decision.
And GM makes its point. In a letter in April, the company urged the state to consider the collapse of the small car market – the hallmark of the Lordstown plant – and the economic downturn precipitated by the coronavirus pandemic. GM reported net income of $294 million for the quarter that ended March 31, compared with $2.1 billion in the same period last year, according to filings.
“Cash preservation is critically important to General Motors to sustain a vigorous emergence from the global economic and health crisis,” Troy D. Kennedy, the company’s U.S. property tax manager, wrote at Ohio Development. Services Agency. “We respectfully ask for your assistance in helping us move towards a full recovery by choosing not to demand a refund of all or a significant portion of the tax credits.”
GM also highlighted its six manufacturing and distribution facilities in Ohio, as well as a planned joint venture that would manufacture battery cells for electric vehicles near the Lordstown plant. On Monday, spokesman Dan Flores said in a statement, “We respectfully ask the state to consider our belief that a refund of tax credits would be inconsistent with our significant manufacturing presence in Ohio and the Valley of Mahoning.”
The fight against GM’s corporate tax credits has played out quietly over the past few months and underscores the political nexus facing leaders in Ohio and elsewhere as they struggle to revive their economies. while balancing their budgets. Last month, Governor Mike DeWine ordered $775 million in budget cuts to fill a gaping hole in this year’s spending plan, and state officials are already estimates a deficit of 2.4 billion dollars for the fiscal year beginning July 1.
Taking over one of the nation’s largest automakers would represent a game changer for a state and region that has relied heavily on economic incentives to attract new employers and retain its beleaguered manufacturing base. As The Business Journal and ProPublica reported last month, local governments like Youngstown offered businesses free land, tax breaks, development grants, low-interest loans and other incentives to spur investment in the Mahoning Valley, Ohio.
General Motors was one of the biggest beneficiaries.
In 2009, with petrol prices soaring, the state offered the company massive tax breaks to help it expand and re-equip the Lordstown plant to produce a new fuel-efficient model, the Chevy Cruze. Under the terms of the deal, GM got a 75% cut in its income taxes over 15 years – worth $14.2 million – in return for agreeing to add 200 jobs and maintain operations at the site until 2039. A separate agreement granted the company an additional amount. $46.1 million in tax relief on the condition of retaining 3,700 employees over 15 years and maintaining operations at the site through 2027.
But eight years after those pacts were signed, the market for small cars softened and GM began cutting jobs at the plant. In January 2017, he knocked out the so-called third team at Lordstown. A second shift was scrapped in June 2018, the same day the automaker announced it would build its new Chevrolet Blazer in Mexico. Together, the cuts resulted in the loss of more than 2,700 jobs, according to an economic impact report from Cleveland State University.
In November 2018, the automaker announced it would end production of the Lordstown-built Cruze and place the plant on “unallocated” status, meaning no new products had been selected for factory. Trump, who had pledged to resuscitate manufacturing in Ohio and across the Rust Belt, lashed out. “USA saved General Motors, and this is the THANK YOU we get! We are now considering removing all @GM subsidies,” he wrote on Twitter.
The president did not act on the threat, and the last vehicle rolled off the assembly line on March 6, 2019. The shutdown eliminated the remaining 1,500 jobs, while hundreds of other related auto supplier positions at the factory were also lost.
Officials were outraged. U.S. Senator Sherrod Brown, D-Ohiosaid at the time that GM’s decision was “corporate greed at its worst”.
Community groups held prayer vigils across the region to attract a new vehicle, while children whose parents worked at the plant wrote letters to GM CEO Mary Barra pleading to keep it open. Even a college choir produce a video singing “We love GM!” to the tune of “Under the Sea” from Disney’s animated film “The Little Mermaid”.
It did nothing. In October, after settling a 40-day strike with the United Auto Workers union, GM announced that it would officially close Lordstown and not assign new product to the plant. In a five-page letter to Ohio regulators in April, GM chief Kennedy called it an “extremely difficult decision.”
“We hoped to maintain operations in Lordstown,” he wrote, noting that GM had exceeded its job creation and retention goals through 2016. “However, we continued to maintain significant operations in the Ohio and make significant new investments in the Mahoning Valley.
The company highlighted its sale of the Lordstown plant to start-up carmaker Lordstown Motors, which plans to introduce its first electric pickup truck, the Endurance, next week and start production in the first quarter of next year. . The Business Journal reports by December, GM had provided $40 million in financing to the company so it could purchase the facility and retool the operation.
GM also highlighted plans to build a $2.3 billion electric vehicle battery plant in Lordstown next to the closed automotive facility. The automaker is teaming up with Korean company LG Chem in a new joint venture called Ultium. The new battery plant would employ about 1,100 workers earning between $10 and $17 an hour, less than those working in auto assembly.
“GM’s plans for the Mahoning Valley position Lordstown as a crucial manufacturing site for the electric vehicle supply chain,” Kennedy said in the letter.
In the meantime, Lordstown faces the loss of GM as one of its biggest revenue generators. Eager for the new battery factory, its village council approved new tax breaks for the joint venture in February. The project will benefit from a 75% reduction on property taxes for 15 years.
“What we had to do and what we had to do for General Motors, we did it,” Mayor Arno Hill said. said after the vote.