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Ohio AG to General Motors: Pay back $60 million in tax credits

Credit: DaytonDailyNews

Attorney general wants GM to pay back $60 million in tax credits

Credit: DaytonDailyNews

Attorney general seeks $60 million ‘clawback’ for Lordstown closure

Ohio’s attorney general is seeking to claw back $60 million in economic development incentive tax credits from the nation’s largest automaker.

Ohio Attorney General Dave Yost said in a brief to the Ohio Tax Credit Authority that General Motors (GM) “should have to pay back every last penny of the $60 million the company took in state tax credits after breaking its promise to the state and the Mahoning Valley.”

The Ohio Development Services Agency oversees Ohio economic incentive programs, and the Tax Credit Authority votes on proposed tax credits for projects.

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In January 2009, GM began receiving tax credits from the state for the automaker’s Lordstown plant operations.

In March last year, the last GM-made car produced in Lordstown — a Chevrolet Cruze LS — came off the assembly line in the 6.2-million-square foot plant. Left without jobs were 1,500 still -remaining workers at the time.

“If the state were to claw back $60 million, that would be one of the biggest clawback events in U.S. history,” Greg LeRoy, executive director of Good Jobs First, told ProPublica earlier this month. “This is very significant, very interesting that it would come from a Rust Belt state from a very pro-business administration.”

Yost contended in his brief and an accompanying press release that GM promised it “would maintain operations at its Lordstown plant through 2028 and retain 3,700 jobs through 2040.”

“GM made those promises – under contract – in exchange for $60 million in tax credit certificates from Ohio,” Yost’s statement says. “But it did not fulfill its side of the contract, and closed the Lordstown plant in 2019.”

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The Dayton area has had its own experience with a GM closure, of its SUV assembly plant in Moraine in 2008, putting about 1,000 people out of work. A Chinese auto glass producer, Fuyao Glass America, launched an operation there six years later and today employs about 1,700 people.

GM is the 12th largest American company.

Later in 2019 — even after a 40-day nationwide strike against GM by the United Auto Workers — GM reported a third-quarter pretax profit of $3 billion, down from $3.2 billion a year earlier. After taxes, GM’s income was $2.3 billion, down 8.7% from a year earlier, in that third quarter 2019 report.

In all of 2019, GM made a $6.732 billion profit on over $137 billion in gross revenues. Yost said GM saved $6 billion by closing Lordstown.

“It is important to note that repaying the tax credits will be at a cost to GM of one percent of its 2019 savings from closing the facility,” Yost’s brief reads. “This small charge is [minimal] to GM and could never be construed as punitive.”

In a statement, GM responded Tuesday, saying: “GM has demonstrated its commitment to Ohio through our investments of more than $3.3 billion in Ohio since 2009. Separately, GM and LG Chem are investing more than $2.2 billion to build a new, state-of-the-art, battery cell manufacturing plant in Lordstown that will create more than 1,100 new jobs.

“The new battery cell manufacturing plant will play a critical role in GM’s commitment to an all-electric future. We look forward to continuing our dialog with the state of Ohio on issues that are important to GM and our operations,” the automaker also said.

Yost cited a 2019 study by the Center for Economic Development at Cleveland State University that estimated that the Lordstown closure killed nearly 8,000 jobs and more than $8 billion in economic activity in the Trumbull County-area economy.

Yost’s brief states, “This case will be watched closely. Should the authority accept GM’s argument that its unilateral business decision relieves it of its obligations, it will have no legitimate basis to claw back any other incentive, ever. GM will have carte blanche to walk away from its other Ohio tax-incentivized operations. And so will every other business. The state’s agreements to retain and create jobs will be mere fiction, excused by the slightest inconvenience. Ohio may as well simply give the money away.”