Why GE, GM are building in Michigan

Michigan Governor Jennifer Granholm applaudes Jeff Immelt, Chairman and CEO of General Electric, as he announces that GE will open an advanced manufacturing technology and software center in Michigan during a press conference in Birmingham, Mich.

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KAI RYSSDAL: There was some economic acceleration in and around Motor City today. General Electric is going to build a brand spanking new research center in the suburbs of Detroit. It's going to work on software for renewable energy, and jet engines, and gas turbines and that kind of thing.

But more to the point, it means 1,100 new jobs in a state that's lost well over a 100,000 of them in the past year alone. Also General Motors has decided to build its new subcompact, the Chevy Spark, in Orion, Mich. But from the Marketplace desk of no free lunch, there is a lot of money being laid on to grease the wheels of these big corporate decisions.

Mitchell Hartman reports on the creative use of tax incentives.


Mitchell Hartman: GE will get $60 million in state and local tax breaks over 12 years -- fully 60 percent of what it'll invest in the facility. In GM's case, three states fought over the company's new car plant.

Greg LeRoy is the director of the policy group Good Jobs First. He says states are bending over backward these days -- especially in the stricken Rust Belt.

Greg LeRoy: The incentives have sort of taken on a logic of their own. It's like there's never a bad day for a tax break.

But it's not just tax breaks that are attracting those rare companies that are actually expanding these days.

Management consultant Ron Holifield helps local governments evaluate how to lure companies in.

Ron Holifield: Much more significant is the quality of life in the community, quality of schools, quality of governance, medical facilities.

And, whether skilled labor is abundant and affordable to the employer.

Holifield says state and local governments need to be careful when opening up the community chest to companies looking to relocate.

Holifield: What do you do to recover incentives when a company does not live up to its obligations? If a decision is being made purely on an incentive basis it may not be viable and it may not last in the long term anyway.

GE is moving into the little town of Van Buren, 40 miles from Detroit. Town supervisor Paul White says he's not worried about any of those issues right now.

Paul White: We are looking primarily at the jobs. And in Michigan today it's all about the jobs. We need jobs.

Which is something GE and GM still have to dole out for a price.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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