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State board OKs giving GM $824 million to lure $7 billion in EV investments

General Motors Co. and battery maker LG Energy Solution won tax incentives exceeding $824 million for up to $7 billion in new capital investment expanding GM’s EV and battery production in Michigan.

The incentives include a first-of-its-kind $600 million direct taxpayer grant from the state of Michigan for GM and its partner that will subsidize the construction of a battery plant west of Lansing and expanded EV production in Orion Township.

The Michigan Strategic Fund board approved the incentives package Tuesday morning ahead of a formal announcement in Lansing by GM CEO Mary Barra, Gov. Gretchen Whitmer and other state political leaders.

“The $7 billion investment is the largest in GM’s history and it’s so appropriate that its in Michigan,” Barra said.

The Detroit-based automaker said it will spend $4 billion adding 3 million square feet of manufacturing space to its Orion Assembly plant over the next three to five years for the assembly of full-size EV pickups.

The existing 4.3 million-square-foot plant in Orion Township, which is currently equipped to assemble the Chevrolet Bolt EV, will be partly retooled for assembly of EV trucks, according to a Michigan Economic Development Corp. memo to MSF board members.

GM and South Korea-based LG, through a joint-partnership called Ultium Cells LLC, plan to invest $1.5 billion to $2.5 billion in the construction of a proprietary Ultium battery manufacturing plant in Eaton County’s Delta Township, next to GM’s existing Delta Township Assembly Plant west of Lansing.

The Lansing-area battery manufacturing plant will be GM’s third in the Ultium partnership with LG, along with battery plants under construction in Lordstown, Ohio, and Spring Hill, Tenn.

Separately, GM has committed to investing another $500 million in the Delta Township plant and the company’s nearby Grand River Assembly Plant in Lansing.

Through both projects, GM will add up to 4,000 new jobs to its existing Michigan-based workforce of 50,000 employees and retain its current 1,000 employees at Orion Assembly, according to the MEDC.

GM said it will add up to 2,300 of the new jobs at Orion Assembly and 1,700 jobs in Delta Township.

“GM is doubling down on their commitment to make (vehicles) in Michigan,” Whitmer said. “These investments will build on GM’s enormous presence in Michigan.”

In Orion Township, GM said the new assembly plant jobs would pay an average wage of $27 an hour, or $56,160 annually. In Eaton County, west of Lansing, the battery plant jobs will pay an average hourly wage of $22.50, or $46,800 annually, according to the MEDC.

“It is anticipated the influx of jobs will result in spin-off investments and redevelopment opportunities,” the MEDC memo to MSF board members said. “Over $28.8 billion in new personal income is expected to be generated by the direct, indirect and induced jobs that this opportunity will create over 20 years.”

The state’s incentives package calls for GM and Ultium Cells to split the $600 million cash grant, which the Republican-controlled Legislature funded last month through the creation of a new $1 billion fund aimed at matching southern states that offer automakers cash incentives.

“But we knew other states were very aggressive in presenting packages to GM that were comparable to this,” MEDC CEO Quentin Messer Jr. told Crain’s. “So we wanted to make sure that we were in the ballpark, that we were not going to be in a position where we were so reliant on hope and prayer.

“GM didn’t get everything they wanted,” Messer added.

Lawmakers funded $1 billion in new taxpayer incentives — known as the Strategic Outreach and Attraction Reserve, or SOAR, fund — using a portion of Michigan’s roughly $8 billion in discretionary federal COVID-19 pandemic stimulus funds.

The fund was created in response to shock among the state’s political and business leaders after Ford Motor Co. announced $7 billion in EV battery and vehicle assembly investments in Kentucky and Tennessee — the single largest investment in the 119-year history of GM’s crosstown rival.

Michigan’s incentives for GM rival the $884 million incentives package that Ford and battery supplier SK Innovation got from Tennessee for the “Blue Oval City” 3,600-acre industrial park near Memphis that Detroit-based construction giant Walbridge Group is building for Ford.

“We had to make sure that we could provide funding that would be prudent and be responsible and in line with what other OEMs have received in the recent past,” Messer told Crain’s.

About $666.1 million of GM and Ultium’s total incentives will come from the new $1 billion fund.

“You definitely got our attention as we were engaged in a multi-state site selection for these projects,” Candace Butler, global manager of economic development at GM, told Michigan Strategic Fund board members Tuesday.

The remaining $158 million in tax incentives will come from a Renaissance Zone designation exempting the Delta Township battery plant from most property taxes over 18 years. Lansing’s City Council approved that tax break in December.

As part of the deal, the MSF board approved $66.1 million in infrastructure grants that the Lansing Economic Area Partnership requested on GM’s behalf for electrical, water, sewer and wastewater upgrades at the Delta Township plant site, which will be annexed into the city of Lansing for tax purposes.

Bob Trezise, CEO of the Lansing-area economic development organization, said the new battery plant will require up to 120 megawatts in electricity, nearly five times the electricity usage of a typical vehicle assembly plant.

The battery plant will require Delta Township to supply 1.7 million gallons of water per day, Trezise said.

“That’s like adding two whole cities of Grand Ledge to Delta Township’s system,” Trezise told the MSF board. “There is no margin of error when providing this level of demand. We have to have the appropriate infrastructure.”

Messer said the state’s bipartisan efforts in the past month to create the incentives program are a “significant step in making sure the state maintains its foothold as being the principal place in North American for passenger vehicle mobility.”

“There’s an internal competition within GM for future projects and where future vehicle production will occur,” Messer said. “And so Michigan has to be competitive in that.”

GM’s new EV investments will help Michigan’s auto supplier base remain viable as the industry transitions away from the internal combustion engine, Messer said.

“There’s a reason why other states crave and desire to get these battery plants, because they know what we’ve already known for generations — the incredibly rich and valuable supply chain of opportunities that are created,” said Messer, who became the MEDC’s new CEO in July.

Posted By: Crain’s Detroit Business on January 25, 2022.  For more information, please click here to read the source article.

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