MEDC CEO on Michigan's EV investment race: 'The alarm should be sounded'May 31, 2022
May 31, 2022
Michigan Economic Development Corp. CEO Quentin Messer’s Mackinac Policy Conference is shaping up to be a doozy.
Credit the hyper-competitive battery-plant sweepstakes. The state-vs.-state race to land the global auto industry’s first wave of investment in plants to build batteries powering the pivot to electrification and symbolizing the future is threatening to leave Michigan behind.
The state’s batting average stinks — and the billions-of-dollars question is why. Uncompetitive utility rates? Partially, until powerhouses DTE Energy Co. and Consumers Energy start cutting deals. Lack of suitably large and flexible sites? Apparently. Workforce concerns exacerbated by absenteeism, comparatively low labor participation rates and political complacency steeped in rank partisanship?
Yes, all of it, if frustrated whispers by people involved in the process are any indication. The self-proclaimed heart of the North American auto industry is losing far more tied-to-the-future investments than it’s winning. Not just from foreign-owned, non-unionized automakers operating down south, but from too many projects tied to hometown automakers.
Walbridge Co., the Detroit-based commercial construction firm that builds auto plants and other facilities around the world, identified 70 electric vehicle and battery-related projects across the United States. Of those just nine are considering Michigan, with only projects in Delta Township near Lansing and Lake Orion confirmed.
Facts are stubborn things: Stellantis NV last week detailed plans to invest $2.5 billion and create 1,400 jobs building batteries in Indiana, making Michigan 0-for-2 in bids to land the transatlantic automaker’s next-generation battery plants. Rival Ford Motor Co. is planning to build batteries on sites in Tennessee and Kentucky, and only one of General Motors Co.’s three announced battery plants will be in the state.
And even if the Blue Oval delivers this week on its reported plan to retool southeast Michigan plants for both electric and internal combustion vehicles — privately billed as creating 3,000 jobs at regional Ford facilities — the sting of the state’s relative lack of competitiveness will linger. The reason: Reshaping perceptions of would-be investors and mustering effective economic development tools are neither easy nor free.
Raise ‘alarm bells’
That’s why one of the biggest unofficial talking points at the Detroit Regional Chamber’s Mackinac Policy Conference convening Tuesday on Mackinac Island will be Michigan’s woeful efforts to secure “its fair share” of hometown investment in what will power next-generation electric vehicles.
“There is a punishment for being No. 2,” Messer told The Detroit News in an interview. “The punishment is you lost. At the end of the day, yes, the alarm should be sounded. Absolutely.”
He added: “I want to raise the alarm bells. We want to put fear into other states. There are bites at the apple we wouldn’t have gotten eight months ago. The unions are not the challenge. A lot of these deals are not single decision-makers; they are joint ventures” — and those JVs are likely to pose organizing and contractual challenges for United Auto Workers leaders unsure what an electrifying future means for their members.
At stake, Messer estimates, are 30,000 potential jobs and more than $115 billion in capital investment. The potentially transformative economic development bonanza has governors and legislatures scrambling to woo decision-makers — but Michigan, the self-styled “epicenter” of the business, keeps coming up short.
“The bottom line is Michigan can count on getting zero new plants,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “The assumption should be we are entitled to zero. We are not entitled to anything except to compete.”
And yet the competitive efforts, measured by quantifiable results, more closely resemble another Detroit Lions losing season: halfway through, the front office realizes it has no offense, needs a quarterback, edge rushers and can’t figure out why it’s getting beaten by the likes of the Cleveland Browns and Atlanta Falcons.
Reversing the tide
The global auto industry is changing with astonishing speed. Looming revolutions in mobility, electrification and the technologies tying them together are forming an inflection point for a state historically resistant to change. And new emerging models for engineering and manufacturing threaten to disperse high-paying tech jobs to new operations in states beyond their traditional home in Michigan.
One example: a GM statement, posted on LinkedIn last January, echoed CEO Mary Barra and said the Detroit automaker would be filling 8,000 tech jobs. Could Michigan supply the skills needed? Where would they come from? Under GM’s “Work Appropriately” hybrid model, where would they work? What percentage of the new hires would come from Michigan, or be based in the state instead of facilities elsewhere?
“Strategic investments made in electrification, software-enabled services and autonomous driving mean that we no longer need to imagine this future — we’re building it,” the statement said. “As we aggressively move on our growth strategy, we’re expanding the teams that develop vehicle software, engineer fuel cells to electrify industries beyond automotive, and advance electric battery design to actualize an all-electric future.”
If Michigan does not create, attract and retain tech talent, warned Glenn Stevens, executive director of the chamber’s MICHauto unit, it will not be able to supply that talent to Michigan-based automakers. Without that pipeline, automakers will redeploy to where the “crown jewels” of research and development talent is.
What does that world look like? Not today’s Michigan, with its crumbling infrastructure, low labor participation, underachieving K-12 education, uncompetitive educational attainment compared to other states, and poisonous political culture that makes any semblance of unity and welcoming spirit virtually impossible.
“This is not something you fund and walk away,” Stevens added. “You’re either unified and welcoming or you’re not. Some critical strides have been made to get us out of dead last. Is there the political will, the government economic development will, to stay with it?”
We’re about to find out, starting with this week’s Mackinac Conference and its bully pulpit to tout investment wins amid so many losses. This being an election year, a Democratic governor seeking a second term and Republican lawmakers eager to retain control of the Legislature likely are not keen to diagnose economic development weaknesses they’re empowered to improve.
That’s a strategic mistake because their reticence makes them no less responsible for the meager results. By their decisions, automakers are rendering judgment on Michigan’s competitiveness for next-generation battery and EV investments and the ability of the state to generate the talent the industry needs. The verdict so far: not good enough.
“We have to build a moat around Michigan business,” Messer said. “We are going to reverse this tide. When you get punched in the mouth, you need to be able to punch back.”
Daniel Howes is senior editor/business & columnist for The Detroit News.