The ink is barely dry on the Big Three automakers’ generous new union contracts, but it’s already clear that the companies are in financial trouble.
In recent weeks, General Motors and Stellantis have announced layoffs, while Ford has scaled back hiring plans at a forthcoming battery factory. The threat of more job losses will likely spur politicians to throw money at the companies, but taxpayers deserve to know that job losses will likely continue no matter what promises the companies and politicians make.
Taxpayer subsidies for the Big Three are all but guaranteed. In August, before the United Auto Workers strike, the Biden administration announced $15.5 billion in funding and loans to help car manufacturers redesign their factories for electric vehicle production.
The administration says the giveaways will "expand and retain high-paying auto manufacturing jobs," and the Big Three will likely get the lion’s share of the cash. Yet painful experience shows that layoffs still happen even after the companies pocket the money.
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Consider General Motors, which announced on Dec. 14 that more than 1,300 Michigan factory workers will be let go in January. The layoffs are mostly at GM’s Orion Assembly plant; the announcement follows an October decision to delay production of two electric pickup trucks.
Yet in January 2022, Michigan Gov. Gretchen Whitmer announced a $120 million "investment" in GM’s Orion operations. The money was supposed to "create 4,000 and retain 1,000 jobs." The company will still collect the taxpayer cash, regardless of the job losses.
The story is the same at Ford’s BlueOval Battery Park. When the project was unveiled in February, Ford promised to create "2,500 good-paying jobs." In return, Whitmer offered Ford $210 million in taxpayer money, plus extra tax breaks, taxpayer-purchased land and other favors.
Nine months later, in November, Ford declared it would still create 1,700 jobs—800 fewer than promised. The facility is still two years away from opening, so Ford may do more of what it calls "right-sizing," Yet the company will still collect the taxpayer support.
Ditto Stellantis, which announced potential layoffs for about 2,500 at its Detroit Mack plant on Dec. 7. Tens of millions of taxpayer dollars will still flow into its coffers.
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Whether it’s the Big Three or any other corporate recipient of state funding, companies offer a heads-I-win, tails-you-lose approach to subsidies. They’ll collect support on new investments yet generally keep them regardless of later layoffs. While the state could demand some or all of the money back, that almost never happens.
Michigan officials show more willingness to go in the other direction, repeatedly moving the goalposts when promised job creation doesn’t materialize. They’re also decreased transparency over which companies get cash and how much. Apparently, private companies have a right to public money, while the public itself has no right to know how its money is spent.
The deeper problem is that corporate handouts ensure short-term political gain, not long-term economic growth. Decades of research decisively prove that taxpayer subsidies harm, not help, growth and almost always fail to drive the promised job creation. Yet politicians continue to announce new giveaways, knowing that announcing the "creation" or "rescuing" of future jobs gets bigger headlines than the subsequent walk-back.
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In five years as governor, Whitmer has worked with the state legislature to allocate $6.3 billion in taxpayer funding for private companies, with more on the way. Much of it has gone to automakers, yet Michigan has 12,000 fewer automaking jobs than when she took office.
Now the Big Three are downsizing further, but the taxpayer support is surely going to rise. Michigan’s political class will continue to shower these companies with favors and funding. As for the Biden administration, that $15.5 billion announcement from August is likely the first of many taxpayer "investments" in automakers.
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Whether they come from Lansing or Washington, each new taxpayer subsidy, incentive and loan will be heralded for creating or keeping jobs. Don’t believe the promises. They may help politicians keep their jobs, but they won’t save jobs in Detroit.
The only way to do that is real reform – the kind that makes automakers more competitive, productive and responsive to customer demands. No amount of taxpayer funding will do that.
