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GM closed its Lordstown plant. Now, Ohio wants its $60M tax break back

The auto maker had promised the state it would keep the plant open until at least 2028, but closed the plant last year. Citing the pandemic, GM is arguing it should be allowed to keep the more than $60 million it received in tax breaks.
“GM is mindful of the significant impact that the Lordstown facility closure had on the State of Ohio and the local Lordstown community,” said the letter to the state requesting that it not be required to repay the tax credits. “Cash preservation is critically important to General Motors to support a vigorous emergence from the economic and global health crisis and to protect our ongoing investments and workforce in Ohio and the United States.”
It shut down the plant in March of 2019, and has received no tax breaks since 2016. Now the money it did get is at risk.

Under the terms of the program, GM was required to keep the plant open until 2028 to qualify for $46.1 million of the breaks, and until 2037 to receive the remaining $14.2 million.

The decision falls to the Ohio Development Services Agency, which is set to meet on the matter next month.

Ohio hasn’t closed the door entirely on letting GM keep the money, despite its threat to claw back the cash. The state told GM earlier this year that it would consider several factors, including changes in market conditions and the automaker’s other Ohio investments, in making its decision.

That suggests the state may let GM keep the money, according to Greg LeRoy, executive director of Good Jobs First, a national nonprofit that tracks economic development incentives offered by state and local governments and is critical of most such programs.

LeRoy opposes such a move. “The $60 million is a much bigger number to the state of Ohio than it is to General Motors,” he said.

Ohio’s request for the money to be returned was first reported by a joint effort by The Business Journal in nearby Youngstown, Ohio, and ProPublica.

Failure to save the Lordstown plant

GM closed the Lordstown plant after the collapse in demand for the small car, the Cruze, that it built there. It no longer sells the car at US dealerships.

“That was a decision we didn’t like making but it was important because customers weren’t interested in those vehicles any longer,” said GM CEO Mary Barra on recent interview on CNBC.

The United Auto Workers union had argued that GM should shift other products into the Lordstown plant rather than close it. Saving the plant was a major issue in the six-week strike at GM last fall. In the end the union reached a deal and ended the strike without being able to save the plant.

The union has offered no opinion on whether GM should keep or return the $60 million.

GM sold the plant to Lordstown Motors, a new company that plans to start building electric trucks there. GM also plans to build a $2.3 billion battery plant nearby as part of a joint venture with LG Chem. And it has made investments at other plants in the state.

GM received additional tax breaks for many of those Ohio plants, and the joint venture battery plant has applied for tax breaks. But the jobs at the battery plant will not pay as well as what GM workers at Lordstown earned.

“Any time you have to make these kinds of transformations it’s hard,” said Barra. “But we’re proud of the investments we’ve made to support the Lordstown community.”

Deal to end GM strike won't save Lordstown plant

Ohio’s budget strain

GM is in better financial shape than the Ohio state government, which faces in a $2.3 billion budget shortfall. Many states, Ohio included, are in dire financial straits because of a steep drop in tax revenue and increased costs related to the pandemic.
GM has been able to sell bonds and draw down on lines of credit to get the cash it needs to weather this crisis. It posted a $294 million profit in the first quarter despite the impact of the pandemic in China, its largest market, and the start of problems in North America. Barra said the company is pleasantly surprised by return in demand and is cautiously optimistic.

LeRoy of Good Jobs First says he is encouraged by Ohio’s demand for money’s return, though he’s concerned that the state may give into GM’s request.

“This would be the biggest clawback of tax breaks that I can think of,” he said. “I assume there’s a lot of pressure on the state administration to cave. I hope they keep the right course.”

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