16 Jun Sizing up the GM plant proposal: When does `big' become `too big'?
MADISON – Wisconsin’s bid to persuade General Motors to put a new small-car manufacturing line in Janesville will be big. But how big is too big?
It’s hard to calculate the full value of putting 1,500 people back to work in Janesville, where unemployment is hovering around 13 percent. However, a back-of-the-envelope estimate suggests 1,500 workers paid at an industry average (about $52,000 per year) would worth about $78 million per year in gross pay alone. That buys a lot of houses, groceries, electricity, health care, gasoline and all the other things that make a local economy click.
But how much is a reopened and retooled GM plant worth to the taxpayers of Wisconsin? That question may be even harder to answer.
State officials in Wisconsin were expected to present a detailed proposal to GM early this week, responding to 12 specific categories the company wants competing states to address. Also in the hunt are Spring Hill, Tenn., and Orion, Mich. While no one in Wisconsin will attach a dollar figure to GM’s total request, the governor of Tennessee is on record as saying that hundreds of millions of dollars would be “the low end of the range.”
If hundreds of millions of dollars is truly the “low end,” it’s reasonable to assume $500 million may be the mid-point.
For an investment of $500 million – some of which is cash, some of which is other public and private incentives – the state could land a state-of-the-art auto manufacturing plant that might produce vehicles for decades to come. Those vehicles would produce jobs at the factory, and also with suppliers before assembly and in dealerships after they roll off the line.
Or the state might be buying a significant stake in the next risky chapter of “Government Motors,” which has entered bankruptcy and is losing market share like a `57 Chevy Bel Air leaked oil.
None of this is lost on state officials, Gov. Jim Doyle included, who have spent time piecing together the GM package. If the state and its taxpayers are asked to invest hundreds of millions of dollars, the return on investment must match or exceed the public investment over time. Not overnight, of course, but over a reasonable number of years.
The equation must also weigh choices in how the state invests its economic development dollars. There might be more effective ways to invest $500 million, or even a portion of that, in the Wisconsin economy. Two recent news stories illustrate the point.
In early June, GE Healthcare announced it will open a new digital mammography production facility in New York. The 230,000-square-foot facility will add 150 manufacturing jobs with an annual payroll of $10 million. Investment in the facility totals more than $165 million, including a capital grant of $10 million from New York state, according to the company.
In mid-May, Medtronic – the Minnesota-based medical device giant – announced it will open its Diabetes Therapy Management and Education Center in San Antonio, Texas. That will create 1,400 jobs. According to Site Selection magazine, Medtronic’s incentive package totaled $14 million in state, local and private aid.
Would Wisconsin do better to invest hundreds of millions of dollars to attract a mix of New Economy manufacturing and technology jobs than spending the same amount to lure a single auto assembly plant? If the state invests hundreds of millions of dollars in a GM plant, will it have enough dry powder to invest $10 million here or $10 million there the next time GE Healthcare or Medtronic want to expand?
State officials understand those dynamics, so don’t be surprised if they refuse to overbid on the GM plant just for the sake of declaring victory. Putting together a big proposal is one thing; offering a package that is too big for the likely return is another matter.
Recent articles by Tom Still
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- Tom Still: Statewide business plan contest ‘winners’ often emerge later
- Tom Still: Milwaukee has the makings of a water industry cluster, but it can’t afford leaks
- Tom Still: Wisconsin’s challenge: Filling the job loss gap once the recession ends
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