Officials for both the state and the city of Detroit gave their final approvals on Tuesday for Fiat-Chrysler Automotive’s long-planned, $4.5 billion expansion in Southeast Michigan.
In February, the Auburn Hills-based automaker announced its plans — including $2.5 billion investment into two Detroit facilities — that the company says will result in about 6,400 new jobs in metro Detroit.
The FCA project is the largest deal the Michigan Strategic Fund (MSF) has ever participated in, according to Jeff Mason, CEO of the Michigan Economic Development Corp. (MEDC), which administers the state’s economic development fund.
In total, the state plans to support the project with about $261 million, which includes a mix of tax breaks and money the company will keep as opposed to paying it in taxes. The state is also supplying performance-based grants, help with environmental clean-up and skilled trades training. The city of Detroit has contributed $50.6 million toward land assembly for the project.
Gov. Gretchen Whitmer has previously said that the incentives would be “incredibly conservative.”
The investment includes an all-new assembly plant in Detroit that will help meet demand for trucks and sport utility vehicles (SUVs), as well as expanding five existing facilities around southeast Michigan, including facilities in Macomb County and Dundee.
“This is not just about one particular location,” Whitmer told reporters following the MSF board approval. “This is a great investment in all of [FCA’s] operations and many of their operations across the state of Michigan. So this isn’t about one part of our state or another. This is a bet on Michigan… retaining our edge on mobility.”
Earlier on Tuesday, the Detroit City Council made its final own approvals for the FCA deal, which includes a series of land swaps in the city and a $35 million community benefits agreement (CBA).
As part of that agreement, Detroiters are given the first opportunities to apply for the new jobs that will be created, and FCA is developing training programs for its new hires.
“I’d like to thank our partners on City Council and members of the Neighborhood Advisory Council for this project for their diligence throughout this process,” Detroit Mayor Mike Duggan said in a statement.
“I’d also like to thank [FCA CEO] Mike Manley and FCA for their vote of confidence in our city’s workforce and their commitment to give Detroit residents the opportunity to be considered first in the application process for the life of this new assembly plant.”
Mark Stewart, chief operating officer of FCA’s North American operations, told reporters that work could begin on the expansions immediately, and that cars made at the new assembly plant could be ready for sale by the end of next year.
Whitmer touted that the jobs created by FCA in Southeast Michigan could result in a multiplying factor of eight new jobs within the automotive supply chain for every one created directly by the deal. That number is largely in line with the findings of a recent study by the labor-backed Economic Policy Institute.
While state leaders praise FCA’s planned investment, there’s no shortage of skeptics about the usefulness of its accompanying hundreds of millions of dollars worth of incentives.
Research published last year by Tim Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, found that in at least 75 percent of cases companies receiving incentives would have made a similar decision about their expansions and locations without them.
The state’s incentives include a $10 million performance-based grant and up to $99 million withholding in tax capture from the Good Jobs for Michigan program, which allows employers to keep some of the taxes its employees would otherwise pay.
The fact that the state is handing over public money to a company like FCA, which says it made $8 billion in profit last year, isn’t necessarily cause for celebration to John Mozena. Mozena is president of the Center for Economic Accountability, which tracks economic development projects around the country.
“Most of the time businesses were going to do it anyway, and so we’re just giving them free money to do what they were going to do,” Mozena told the Advance Tuesday morning. “That’s the core fallacy at the heart of all of these deals.”
Whitmer and other officials defended the large incentive package.
“[There are] a lot of different states that were hoping to be announcing what we’re announcing today,” Whitmer told reporters. “The ability for us to put together the footprint that they needed, working with Mayor Duggan and City Council with regard to the community benefits and ensuring that all of the different pieces came together was something that’s really important.”
While there may be consternation over incentives, economic developers in Detroit say the support will result in long-term dividends.
“A project the size of FCA involves incredible complexities – not just in land assembly and incentives – but in identifying the benefits that a project like this brings to the City of Detroit as well as FCA,” Kenyetta Bridges, executive vice president of the Detroit Economic Growth Corp., said in a statement.
“We were able to identify what was needed for Detroit to be successful and then demonstrate to FCA that we had the capacity and strategy to execute everything needed, within a very compressed timeline.”