Ohio Wants Its Money Back From GM

If you weren’t aware, the sprawling General Motors assembly plant in Lordstown, Ohio is no longer cranking out Chevy Cruzes. No plant is. And there’s now a strange “Lordstown Motors” sign adorning the complex, with some sort of crazy promise about building electric pickups? Wild.

The state of Ohio certainly took notice, recalling the economic development agreement it signed with the plant’s former owner more than a decade ago. Those public perks were dependent on GM continuing operations at the plant until a point many years in the future. Fork it over, Ohio recently told GM.

Thanks to digging by ProPublica, we know that the state sent GM a letter in March demanding repayment of more than $60 million in subsidies. The agreement reached between the automaker and state contained sizable tax breaks in exchange for GM operating the Lordstown plant until at least 2027.

Amid a company-wide streamlining effort, GM sold the plant to the fledgling Lordstown Motors last year for a rock-bottom price. The automaker had ceased production of the Cruze earlier in 2019 after it was deemed unsustainable to continue operating the plant on a single shift. The car ended production last March, joining a crop of discontinued Chevrolet, Buick, and Cadillac nameplates.

Greg LeRoy, executive director of Good Jobs First, a nonprofit that seeks accountability in economic development matters, told ProPublica, “If the state were to claw back $60 million, that would be one of the biggest clawback events in U.S. history.”

He added, “This is very significant, very interesting that it would come from a Rust Belt state from a very pro-business administration.”

This is different than past public loans that, in many cases, were never paid back, with the jurisdiction forgetting that money ever changed hands.

From ProPublica:

The state Development Services Agency, which oversees economic incentive programs, notified GM in March that it would recommend that the state’s tax authority terminate the company’s tax agreements and collect a full refund. Spokesman Todd Walker said the authority would consider the matter at an upcoming meeting, though he declined to specify a date. The authority’s next session is July 27, according to its website. Provisions in GM’s tax agreements allow for state regulators to consider market conditions and whether the company continues to maintain “other operations in the state” before issuing a final determination.

Documents show GM pushed back in April, explaining that the bottom fell out of the compact car market during the time frame outlined in the agreement, and appealing for leniency during the ongoing coronavirus pandemic. This could come across as a bit rich to many, given GM’s stable financial footing. New lines of credit padded the automaker during the recent shutdown, and production is again underway at the automaker’s North American factories.

If GM does sink into the red in the second quarter of 2020, few expect it to be a long-term phenomenon. And Ohio, like most other states, could use the $60 million. Especially now.

“Cash preservation is critically important to General Motors to support a vigorous emergence from the economic and global health crisis,” Troy D. Kennedy, the company’s U.S. property tax manager, wrote in response to Ohio’s letter. “We respectfully request your assistance to help us drive towards a full recovery by choosing not to require repayment of all, or a significant portion of, the tax credits.”

In a statement sent to ProPublica, GM spokesman Dan Flores said, “We are respectfully asking the state to consider our belief that a repayment of the tax credits would be inconsistent with our significant manufacturing presence in Ohio and the Mahoning Valley.”

By that, Flores means the joint battery plant that, once operational, will fuel the automaker’s electric vehicle push. The $2.3 billion venture with LG Chem would see the creation of 1,100  jobs.

a version of this post first appeared on TTAC

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