Fiat-Chrysler Automotive has been awarded more than $100 million in Michigan grants and tax exemptions for several investments the company is making in the state.
The incentives were received positively by the governor and the car company, but the subsidy package was criticized by the Mackinac Center for Public Policy, a free-market think tank in Michigan.
The grants and tax subsidies are meant to assist the auto company with its $4.5 billion investment in the state, which it says will generate 6,443 new jobs.
The investments include a new assembly plant in Detroit, which will bring in the bulk of the jobs: 3,850. The company will also invest $900 million in the Jefferson North assembly plant, which will provide 1,100 new jobs. Facilities in Warren, Sterling Heights and Dundee will receive a total of $2 billion worth of investments and create 1,483 jobs, according to the company.
“Thanks to the strong support of Governor [Gretchen] Whitmer, the Michigan Economic Development Corporation and city of Detroit, I am pleased to confirm that plans to invest in our Jefferson North Assembly Plant and build a new state-of-the-art assembly plant in Detroit have been given the green light,” Mark Stewart, chief operating officer of FCA North America, said in a statement.
“At FCA, we are continuing to build a secure future, not only for our Company but also for the communities in which we operate,” he said. “This investment enables us to deliver on this promise in the state and city we call home.”
In Detroit, a $10 million grant will go to the Mack Engine Plant and the Jefferson North Assembly Plant, which also will receive a series of tax exemptions that will save the company more than $100 million over the next 15 years.
Nearly $28 million worth of exemptions will go to the Warren plants and about $181,000 worth of exemptions will go to the the Sterling Stamping Plant.
“FCA’s investment in five existing plants, as well as plans to build an all-new assembly plant here in Michigan, sends an irrefutable signal that Michigan remains the automotive capital of the world,” Whitmer said in a news release. “Today’s announcement highlights the strong bet FCA is making on Michigan’s talent, our manufacturing prowess and our leadership in new automotive technology, including electric and autonomous vehicles.”
Despite optimism from the governor, Michael LaFaive, senior director of the Morey Fiscal Policy Initiative at the Mackinac Center, said there is a lot of studies that suggests granting subsidies is an ineffective way to grow the economy.
“I am encouraged by FCA’s new investment but remain skeptical about the value of state and local financial incentives,” LaFaive said. “Even if they truly did matter to a site location decision, the incentives remain fundamentally unfair. Taking money from lots of people and giving it to a multinational conglomerate makes many of us wonder just who we’re working for.”
LaFaive said it is not possible to know whether FCA would have chosen to invest in Michigan without the taxpayer incentives, but there are a number of reasons why it would still be likely: FCA is based in the state, there is a lot of auto-related talent and there is a good business climate. He also said that it is unclear this will be a useful investment, and that allowing the state to decide what companies succeed or fail can sometimes misplace funds that would be better spent elsewhere.
“The auto industry was neither born nor grown here because Henry Ford and others had access to state incentive programs,” LaFaive said.
The Michigan Strategic Fund board approved the incentives unanimously.