Did Obama Pick The New GM's New Small-Car Plant?

July 6, 2009

General Motors is building new small cars in the United States--a boon for the plant in Lake Orion Township, Michigan, that was chosen last week to retool for the new range of subcompacts that will be added to GM's lineup in about two years.

Did GM choose Michigan over other plants in Tennessee and Wisconsin for purely economic reasons, or did President Obama's task force lay out guidelines that gave Michigan a political edge?

The Wall Street Journal reports today that leaders from the other auto-producing states in the running for the new small-car project are crying foul. The Michigan plant beat out the former Saturn plant in Spring Hill, Tennessee, and a former GM truck plant in Janesville, Wisconsin, and both face uncertain futures as GM plans an exit from bankruptcy as early as this week.

By the book, both plants may have offered unique cost savings over the Michigan factory--and that's what has Tennessee Governor Phil Bredeson and anti-bailout Senator Bob Corker questioning the guidelines used to choose the winner in the job-savings sweepstakes. Instead of taking the Saturn plant's new paint shop into account, and Janesville's lower wages, the politicians says the Obama task force instead placed "community impact" and "carbon footprint" as top factors in deciding which plant would remain a part of General Motors, the "new GM" that will remain in business via government-backed loans.

The Orion plant, in contrast, will require more expensive retooling to build new cars. However, it's much closer to GM headquarters in Detroit--and it's in an electoral-vote-rich state that's seen unemployment rise to more than 12 percent.

GM officials say the plant selection process will remain guarded, but explain the Orion plant's selection as the best fit for its new business plan.

What will be built in the plant remains guarded, too. GM had planned to build a new subcompact, the 2011 Chevrolet Spark, abroad and import it from a low-cost country like China. That plan may have been scuttled when GM accepted federal loans to stay in business last fall. The plant also may build a successor to the 2009 Chevrolet Aveo; the new 2011 Chevrolet Viva would be slightly larger than the Spark, but smaller than the 2011 Chevrolet Cruze and its companion extended-range electric vehicle, the 2011 Chevrolet Volt--both of which will also be built in Michigan.

GM expects to spend more than $800 million to refit the Orion plant to build its next vehicle. The state of Michigan, according to the Journal, has promised to invest $779 million in tax credits and $102 million in local incentives over the next two decades, while the Federal government has committed another $130 million for training.

[Wall Street Journal, subscription required]

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