To lure Mercedes-Benz USA from its long-time headquarters in New Jersey to a new location in Atlanta, the State of Georgia reportedly came up with an investment package of more than $23 million, or nearly $25,000 for each of the 900 jobs relocating to the center of the New South.
The deal was a relative bargain, however, compared to the $1.25 billion that Nevada gambled late last year to win the Gigafactory that Tesla Motors promises will become the world’s largest lithium-ion battery plant by the end of the decade.
In a country struggling to cope with middle class stagnation despite a boom on Wall Street, the push for jobs has led more and more states to cough up cash incentives hoping to attract high-profile and often high-paying automotive jobs.
The payouts come in a variety of forms: tax incentives, free or subsidized land purchases, worker-training programs, even free utilities.
“Mercedes-Benz will find in Georgia a state that will help its bottom line, and a people who will welcome its team and their families with open arms,” Gov. Nathan Deal said in a news release announcing the maker’s decision to move to the Peach State earlier this month.
Texas spent more to win over the North American headquarters of Toyota, which is in the process of relocating from Southern California. But the $40 million in handouts also covered 4,000 jobs, so the incentive package came to around $10,000 per worker. Nonetheless, it was still more than the Lone Star State reportedly spent on a per-job basis than the Texas Enterprise Fund came up with for Chevron and Apple to set up new Texas operations.
Things can get costly when a high-profile manufacturer puts itself up for bid, as happened when Tesla announced plans to build the world’s largest lithium-ion battery plant. At the time, the battery carmaker’s founder and CEO Elon Musk estimated it would take a $500 million incentive package to win the Gigafactory project.
But facing competition from California, Texas, and several other finalists, Nevada went far beyond Musk’s wildest expectations, cobbling together a $1.25 billion package that includes free electricity and the likelihood that Tesla will operate virtually tax free for more than a decade.
“It doesn’t get any bigger than this,” said Governor Brian Sandoval, as he signed into law a series of measures unanimously approved by the state legislature he had called into special session. “This is some of the most important legislation that’s hit this state in perhaps our history.”
Nevada’s aggressive push can be put into perspective considering the serious problems it faced in the most recent recession, with unemployment peaking at 14.5%, noted state economic development chief Steve Hill. “It wasn’t that long ago we were suffering through one of the worst recessions in Nevada history,” he noted last night.
Texas has had a much healthier economy but is nonetheless looking to shore up its economic base by diversifying beyond the oil business. As for Georgia, it has become a financial center but has watched key manufacturing jobs – especially in the auto industry – go to nearby states, notably Mississippi and Alabama, which have offered hefty incentives of their own.
(Mercedes joins moving parade with relocation to Atlanta. For more, Click Here.)
Such lavish giveaways aren’t without their critics – and often, the price of attracting auto jobs is paid by other industries. Despite the unanimous vote by the Nevada legislature, there were some loud voices opposing the Tesla package. For one thing, it required taking away incentives that had been used to draw a number of insurance companies to the state, as well as subsidies for the movie industry.
Lavish incentive packages have helped the South attract a broad range of automotive operations, from Toyota’s headquarters to the expanded Mercedes-Benz plant in Tuscaloosa, Alabama. But other factors have proved appealing, as well – notably, the fact that the South has been traditionally resistant to the unions that dominate older automotive operations up North.
(Click Here for details about Toyota’s move to Texas.)
That said, Dixieland isn’t unique in coming up with cash to court automotive manufacturers. General Motors has received extensive assistance for the various plant expansions it has announced since emerging from bankruptcy in 2009.
So has Chrysler. Now the U.S. half of FCA US LLC, the maker is currently negotiating with Ohio government officials over the fate of the Jeep Wrangler plant in Toledo. Last year, CEO Sergio Marchionne warned that the next generation SUV might have to be moved to another factory.
(To see more about Tesla’s $1.25 billion incentive package from Nevada, Click Here.)
That’s still a possibility, though during a news conference at last week’s Detroit Auto Show, Marchionne said that “something” will likely continue to be built in Toledo, even if the Wrangler does move elsewhere. Unspoken but understood was the likelihood that the plant will stay open only with some financial assistance from the Buckeye State.
I’m not so sure that paying an employee at a car factory in the South $15/hr. when they should be receiving $25/hr. plus benefits, is such a good deal for the state or the employees. Basically tax payers are the ones paying the incentives. It’s a dirty business.
Race to the bottom
I’ve seen many people decry welfare and unemployment benefits as socialistic programs, designed to keep people on the public dole, but when was the last time any corporation came into an area without demanding the same sort of thing from the locality involved? They demand incentives such as tax abatements, and they demand infrastructure improvements such as sewers, roads, and communications. Is this not welfare? In TN, at Chattanooga, VW received $400 million. In Indiana, at Greensburg, Honda received $200 million, and was allowed to restrict its hiring area to just 22 of Indiana’s 92 counties. How much good does VW in Chattanooga do the taxpayers of Memphis, several hundred miles away? Corporate welfare?