EV battery maker lays off quarter of staff
Our Next Energy ‘on track’ to build facility after $237M welfare package
Gov. Gretchen Whitmer was all smiles at Our Next Energy’s ribbon-cutting event in October 2022. After state officials arranged $237 million in corporate welfare, the $1.6 billion project broke ground in Wayne County, with promises to hire 2,112 workers. ONE, an electric vehicle battery maker aiming to solve the problem of range limitation that has troubled EV engineers since the days of Thomas Edison, would position Michigan as a leader in the next generation of the auto industry, Whitmer claimed.
Thirteen months later, ONE is laying off one-quarter of its staff, firing 128 of its 512 employees. The Detroit News reports that 82 of the jobs cut are in Michigan. The layoffs come, the company said, “in response to market conditions and to focus on core priorities.”
The company explained the firings as necessary as part of its transition from research and development to production, and it added that the move would not compromise the plant in Van Buren Township.
“ONE expects the plant to be operating at full capacity, building enough cells to assemble the equivalent of 200,000 EV battery packs annually, by the end of 2027,” Kalea Hall reports.
State officials insist that there is no cause for concern, that plans for the factory are unchanged, and that ONE remains on track.
When the project was announced last year, the company aligned itself with Whitmer’s energy policy.
“A significant factor in ONE’s decision to build its very first Gigafactory here in Michigan was in part due to the Governor’s MI Healthy Climate Plan, which outlines a path to carbon neutrality by 2050 and a specific focus on supporting increased electric vehicle infrastructure access and affordability,” read the state’s press release.
The MI Healthy Climate Plan says Michigan should build the infrastructure for 2 million electric vehicles by 2030.
The company’s alignment with Whitmer doesn’t end there.
On Oct. 4, 2022, ONE CEO Mujeeb Ijaz donated $6,150 to Gov. Gretchen Whitmer’s reelection campaign, records show. The very next day, the state announced the $237 million incentive package.
Ijaz donated a total of $7,150 to Whitmer during that election cycle, when she secured a second term as governor.
Ijaz’s wife donated an identical $7,150 to Whitmer during the 2022 cycle.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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Selective subsidies are a losing strategy for Michigan
Corporate welfare does not fuel high-growth states and is not the answer for Michigan
Michigan is falling behind. Jobs nationwide are up 3.0% from pre-pandemic levels; Michigan has yet to recover all the jobs it lost in the pandemic. Its 0.7% decline is seventh-worst among states. The response from lawmakers was to spend billions on selective business subsidies. It won’t work.
The states that have been growing the most are not the ones writing the biggest checks to the biggest companies. They are Idaho and Utah, the states that spend the least on selective business subsidies.
Handing out favors is no way to get ahead. The states leading the pack do the least of it.
In contrast, Utah and Idaho score highly on what matters: economic freedom. The Fraser Institute measures and ranks states based on their economic freedom, and it puts the two states in the top 10.
Utah and Idaho protect property rights, only have regulations where they protect the public, and keep taxes low. The formula works.
It works because basic rules affect everyone, while favoritism is only granted to the few.
Most job creation happens without politicians getting involved. Michigan businesses added 214,600 jobs in the first three months of 2023 and lost 187,400 jobs over that period. Businesses created one job for every 18 that were in the state and lost one out of every 20 jobs.
The state’s economic development agency issued press releases that it had awarded 18 businesses $293 million in taxpayer money to create 4,200 jobs during the same period.
Job announcements are not the same thing as jobs — Ford Motor Co. already said it’s scaling back a project that was part of the state’s releases — and the state’s record of turning announcements into employment is pretty bad.
Still, even if things went according to plan, administrators would not be able to replace 2% of the jobs lost in the economy.
Michigan is a leader in handing out special deals, but not at the scope necessary to make a dent in the state’s job picture. Economic fundamentals matter, as demonstrated in the states growing the most.
Favors exist because politicians love job announcements. It makes it seem like they are doing something to create jobs.
Gov. Gretchen Whitmer adds a quote to all the press releases.
“Michigan is on the move, and we have an extraordinary opportunity right now to create thousands of good-paying manufacturing jobs and bring supply chains home,” Whitmer said in one.
It makes it sound like handing out money to companies will help grow the economy.
But there is a difference between appearance and performance. In the ways that matter, Michigan continues to fall behind.
Corporate welfare has three basic problems.
First, it’s an ineffective way to create jobs. Second, it’s unfair to the businesses that don’t get handouts. Third, it is expensive to taxpayers.
There are several possible reasons why selective favors are ineffective. Many companies that get cash could have done the same thing without deals from the state. And there are real costs to the handouts, money that could be put to productive uses elsewhere.
Time and again, economists find that handing out favors is no way to drive the economic growth that politicians say they deliver with their deals. Michigan won’t be “on the move” because Whitmer hands out subsidies to the right companies.
Businesses only ask for favors when they think they can get politicians to approve them. They’re happy to play states off each other to get more from cash and tax breaks.
Instead of offering hundreds of millions to the next big company that asks for favors, lawmakers should be working across state borders to agree to stop handing out favors. They can agree to an interstate compact to drop their favoritism, and such things have been introduced in the past, and there is a bill to do so in Michigan at present.
Michigan should trash its selective subsidy programs. It’s a huge expense for a failing strategy.
James M. Hohman is director of fiscal policy at the Mackinac Center. Email him at hohman@mackinac.org.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.