Ford could cut 8,000 salaried jobs — and still get $100M incentive from Michigan
Ford Motor Co. could slash thousands of jobs across Michigan and not jeopardize more than $100 million in recently approved taxpayer-funded incentives, according to a Free Press review of economic development documents and state law along with expert interviews.
The automaker still needs to invest more than $1 billion and create at least 3,030 hourly jobs at certain Michigan work sites by June 2024 to avoid losing out on the state money. But a document outlining the terms of the agreement provided by the Michigan Economic Development Corporation shows the company could cut thousands of salaried positions at its Dearborn headquarters or other locations and still qualify for public reimbursements in accordance with a bipartisan deal that made headlines in June.
Representatives from Gov. Gretchen Whitmer's office and the Michigan Economic Development Corporation repeatedly refused to say whether the deal prevented Ford from laying off salaried employees. T.R. Reid, a Ford spokesman, declined to comment on “speculation.”
But experts who reviewed the state document for the Free Press say economic development deals sometimes do not prevent downsizing at sites not specifically mentioned in the incentive plan.
"Many incentive deals are specific to a certain location (like the five sites that fall under this deal) and have no mention of the firm’s economic activity in the other part of the state. So, Ford wouldn’t be violating the contract by laying off workers in its other Michigan locations," said Cailin Slattery, professor of economics at the University of California, Berkeley Haas School of Business.
It's a crucial detail in light of a Bloomberg report last week, which indicated Ford plans to lay off as many as 8,000 people in an effort to better fund its new focus on electric vehicles.
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The report indicated details of the plan were not final, and Ford has declined to provide specific information on how many Michigan jobs could be cut. But CEO Jim Farley acknowledged and did not deny reports of massive job cuts in a video emailed to employees the day after Bloomberg's article posted.
The Free Press reached out to Whitmer's office and the MEDC for details on the plan's job creation requirements after the news of possible layoffs broke last week.
A spokesperson for the governor referred comment to the MEDC. Otie McKinley, a spokesperson for the head of the MEDC, called the Bloomberg report "speculation."
"We remain optimistic about the company’s continued investments in the state and their efforts to help Michigan retain its position as the global epicenter of the automotive industry," he said in a statement.
McKinley never confirmed whether the deal precludes Ford from laying off any staff. But a Free Press analysis of the document he provided, along with the language of the underlying law and experts also reviewing these records, show there's a path to the automaker creating jobs in part of the state while nixing posts in other areas and still getting $100.8 million in public money.
Terms of the deal
In late June, Michigan lawmakers overwhelmingly approved the $100.8 million deal for Ford. Although a handful of Republican lawmakers in the House and Senate opposed the deal, it passed with widespread bipartisan support.
"The process is working as it should," Messer told lawmakers at the time, thanking them for agreeing to allocate the money.
The money is provided through the Critical Industry Program, an initiative created in December 2021 in part to help the "creation or retention of qualified jobs as a result of a technological shift in product or production at the project location and within this state," according to the law implementing the arrangement.
Documents provided by the Michigan Department of Economic Development show Ford can be reimbursed for more than $100 million in expenses as long as it invests $1.16 billion and creates 3,030 qualifying jobs at five specific Michigan sites by June 2024. Here's a breakdown of the promised investment and jobs planned for each spot:
- $450 million and 1,508 jobs at the Rouge Electric Vehicle Center in Dearborn;
- $475 million and 382 jobs at the Michigan Assembly Plant in Wayne;
- $35 million and 650 jobs at the Monroe Packaging Center in Monroe Township;
- $160 million and 250 jobs at the Rawsonville Plant in Ypsilanti Township;
- $40 million and 240 jobs at the Livonia Transmission Plant in Livonia.
The documents do not specify that the new jobs must be hourly or salary, but it does note the 3,030 jobs must be "above a statewide base of 22,190 hourly employees."
By relying on the base of hourly employees, the deal specifically leaves out potentially sweeping cuts to Ford's salaried workforce. In March, Farley said the company planned to shift $3 billion from its gas-powered sector to electric vehicle development over the course of two to three years.
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The deal does require Ford to create jobs at the five sites in addition to those currently in place at the locations. This would prevent the company from hiring employees at a site only to lay off others at any one of these locations; the base number of jobs for each site in the deal includes salaried and hourly jobs for all five locations.
In addition to creating the 3,030 overall jobs, Ford must also establish at least 90% of the promised positions at each of the five individual sites.
Although Ford technically has until June 2025 to create the jobs, the deal indicates a job only qualifies if it's in place for at least 12 months before the deadline.
Failing to meet either the investment or job creation requirements will result in Ford paying back at least a portion of any money received from the state as part of the deal, according to state documents. The deal includes formulas to determine how much money the company would owe the state, based on how far it fell short of its promises.
The hourly jobs outlined in the deal will start at $17 an hour, increasing to an average of $21 an hour within three years and the chance to increase to $29.71 per hour within eight years, according to the documents. That's in addition to health care benefits, a 401K, paid time off and other perks common to many jobs.
Do these deals work?
The incentive package comes amid scrutiny of other economic development deals. The Michigan Supreme Court recently forced the state to reveal General Motors reached a deal to receive up to $3.8 billion in tax credits in a 2015 renegotiation of its agreement with the state. And last-minute opposition to a proposed $60 million tax abatement for a potentially massive, Dan Gilbert-funded project in Detroit prompted the city council to repeatedly delay voting on the local incentive before ultimately approving a deal.
At the same time, there's pressure on elected leaders to ensure any Detroit automaker expansion happens in Michigan. That only increased after Ford announced an $11 billion plan last year to expand in Tennessee and Kentucky, while Chrysler parent company Stellantis revealed in May a $2.5 billion investment in Indiana.
Josh Goodman, a senior officer of state fiscal health with the Pew Charitable Trusts, has examined economic development deals across the country. While he said he could not rule out some specific Michigan law or regulation that may otherwise cover job creation in the Ford incentive package, comparable situations have arisen in other states.
"There are job creation requirements that allow companies to reduce other jobs in the state, and that has resulted at times in programs not achieving their intended goals of boosting employment," Goodman said.
He pointed to a highly scrutinized deal in Illinois, where companies could get a tax incentive to add jobs in one part of the state but fire workers elsewhere.
A 2015 Chicago Tribune investigation highlighted this and other problems with the program. The report noted one division of medical giant Abbott Laboratories was awarded $14.5 million in tax credits to create 50 jobs and invest $36 million. But at its headquarters just 25 miles away, Abbott instituted numerous rounds of layoffs that affected more than 1,000 jobs.
"What some of these kinds of problems illustrate is the details of incentive programs really matter, in terms of their results. Things like how do you calculate jobs can be really important to determining whether programs achieved their intended goals," Goodman said.
Slattery also extensively studied the impact of tax incentives at the state and local level. She wrote with a colleague in a 2020 paper published in the Journal of Economic Perspectives that found in part, "we do not find strong evidence that firm-specific tax incentives increase broader economic growth at the state and local level."
Slattery noted companies seeking incentives generally rely on very specific tactics when trying to negotiate the terms of a deal.
"Of course, the Legislature could have offered different terms," Slattery told the Free Press.
"It is hard to know what the ‘but for’ is. Without the subsidy would Ford have laid off workers in all Michigan sites and/or expanded elsewhere? That is often what firms are communicating to the state when they negotiate."
In a statement, Senate Majority Leader Mike Shirkey, R-Clarklake, noted there could be problems for Michigan or Ford if either does not follow through on the terms of the incentive package.
“Michigan made a commitment to Ford and Ford made a commitment to Michigan. There are very specific ramifications if either party fails to live up to their obligations," Shirkey said.
To be clear, Ford would not appear to violate the agreement by cutting jobs not covered in the deal. Several other legislative leaders did not reply to emails seeking comment.
But the news of possibly expansive job cuts prompted new criticism of the governor from the Michigan Republican Party.
“The latest announcement from one of the largest employers in the state makes it clear this governor continues to be in over her head when it comes to attracting new jobs to our state and providing new opportunities for Michiganders," spokesman Gustavo Portela said recently in a statement.
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A 'big win for Michigan'
In June, Whitmer joined state legislative leaders and Ford officials on Mackinac Island to announce a new $3.7 billion investment by the auto company aimed at spurring its expanding EV business.
The plan included roughly $2 billion and 3,200 new jobs in Michigan. More than half of that investment and nearly all of the jobs are tied to a roughly $100 million incentive program.
At the time, Whitmer and Michigan Economic Development Corporation CEO Quentin Messer did not discuss the specific details of the related incentive package but underscored the need for the state to make it worth Ford's while to remain in Michigan.
"Ford is investing, they are making strategic decisions about the future of mobility and they’re leading the way. We’ve got to compete with the rest of the world to earn their investment here in Michigan, and we won," Whitmer said in June.
"This is a big win for Michigan. Ford is going to continue to make these investments, and when they invest in Michigan, it’s good for every one of us."
Since that announcement, Whitmer has touted the number of auto jobs added under her administration. The number of new jobs she has cited has included positions promised but not actually created yet, leading to pushback from some critics.
At the Mackinac announcement, Messer declined to discuss taxpayer incentives but echoed Whitmer's comments.
"We need to make sure that we have shown our commitment to Ford, as they have shown their commitment to Michigan for over 115 years," he said.
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Contact Dave Boucher: email@example.com or 313-938-4591. Follow him on Twitter @Dave_Boucher1.