General Motors to invest $3.5 billion in Michigan under revised tax credit deal

General Motors

Michigan last week agreed to modify decade-long tax breaks for General Motors in exchange for the company’s promise to invest at least $3.5 billion more over 10 years, which will include building of electric pickup trucks in Detroit.

According to the deal — the seventh amendment to the home state automaker’s incentives since 2009 — the value of the automaker’s maximum tax credit will be slashed by $325 million, to approximately $2.28 billion through 2029, and will be capped yearly at an unspecified amount. The company will still have to retain no less than 34,750 jobs in Michigan — it has about 45,000 now — but will get flexibility to count more jobs at its headquarters located in Detroit and its research, development and engineering campus in the suburb of Warren.

“Overall, this will solidify the company’s continued commitment to growing in our state as well as Michigan’s uncontested leadership in automotive design and manufacturing,” stated Jeff Mason, CEO of the Michigan Economic Development.

GM’s Detroit-Hamtramck plant now hires about 800 people. Production of the Chevrolet Impala will stop at the end of February, at which point renovations will start to produce electric vehicles. The plant will have 2,000 workers once it is at full capacity.

The strategy for the factory was first discussed in October as part of the new labor pact between General Motors and the United Auto Workers union after a strike.

GM spokesman Dan Flores stated the amendment to the tax credit “sets the stage for us to continue our major commitment and investments in Michigan”. He stated the Michigan Economic Growth Authority, or MEGA, program has helped GM invest over $10 billion in its Michigan centers.

“We appreciate our long-standing, productive collaboration with the state of Michigan and look forward to building on this important relationship,” Flores added.

An MEDC memo stated the modifications will be helpful for GM’s footprint in Michigan and let all its in-state facilities compete for future work and spendings.

The last time the state and the automaker amended the credit was 2015, when they capped the state’s liability but did not mention the amount, citing taxpayer confidentiality. GM agreed to reveal the outstanding credit value, $2.28 billion, this time.

To completely qualify for the annual credit, the company will have to retain 34,750 Michigan jobs that pay on average $1,300 a week — increasing from $650 under the original 2009 agreement.

As of 2015, Ford was qualified for up to $2.3 billion in tax breaks and Fiat Chrysler was qualified for up to $1.9 billion.

The state stopped awarding new business tax credits starting in 2012 — to support direct cash incentives and loans — but the old credits continue to have a budget impact. The large incentives were released during the recession, mainly for promises by Detroit’s major automakers to keep jobs in the state.

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