Tennessee loses GM plant

Tennessee politicians, led by Senators Lamar Alexander and Bob Corker have complained that General Motors used inappropriate measures to locate an existing factory in Orion, Michigan, to build a new small car, rather than using Spring Hill, Tennessee.

Bob Corker became well known in automotive circles when he repeatedly criticized General Motors, Chrysler, and Ford, insisting they made cars nobody wanted (GM’s market share was around 20% in 2008), and could not run factories well (except, Corker later amended, for the Tennessee factory). Corker opposed any Federal loans or other aid to the domestic automakers, which provide competition to the Japanese and European automakers who produce cars largely in the Southeastern United States.

The Orion plant is close to GM’s headquarters, and to many UAW employees whose home factories are closing, providing GM with a large reserve of experienced labor. GM cited community impact and carbon footprint as being part of the reason for choosing Orion.

The Republicans complained that neither issue was appropriate for a business decision.

Orion has a 12% unemployment rate, similar to that of Janesville, Wisconsin, another candidate. Spring Hill, while it has a newer paint shop (which might not be appropriate for the new cars), did not have the same ready access to experienced workers.

GM said politics had no place in the decision. Salaries would be the same in each plant, and Michigan offered $779 million in tax credits over 20 years; $130 million in federal funds and $102 million in local incentives were also provided, sweetening the deal. Management of the plant will be less costly with executives being able to reach it by car rather than by plane.

GM had originally intended to import compact cars from China, but Congress and the White House demanded that GM build them within North America. GM sought and received over $50 billion in loans and assistance.

The Orion plant should be producing new cars in calendar-year 2011, using 1,400 workers with base pay of $14-$16 per hour.  GM has assumed that gas prices would rise as the economy gets back into gear.

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