DETROIT _ Michigan is amending General Motors' MEGA tax credit package and GM has agreed to increase the required wages of certain Michigan employees to qualify for that credit.
GM also agreed to invest in future manufacturing in Michigan.
The Michigan Strategic Fund board approved the amendment Wednesday to GM's Michigan Economic Growth Authority (MEGA) tax credit. The new deal will cut the cost to the state by $325 million over 10 years.
The amendment now requires GM's weekly average wage to rise to $1,300 from $650 to ensure good-paying jobs stay in Michigan, said Josh Hundt, executive vice president of business development at the Michigan Economic Development Corp. The $650 was set in 2009 when the board first approved a MEGA tax credit for GM.
GM said it will meet the amended MEGA requirements.
"The approved MEGA amendment sets the stage for us to continue our significant commitment and investments in Michigan," said GM spokesman Dan Flores. "Over the past decade, the Michigan MEGA has helped enable GM to invest more than $10 billion in its Michigan facilities."
Hundt said the amendment brings a $3.5 billion commitment in investment in the state as well as "additional job creation and reduction and transparency in state financial liability, all make this amendment a major win for Michigan."
GM applied to amend its original 2009 MEGA agreement to gain more flexibility in the facilities where it counts tax credit-subsidized jobs among its 48,000 statewide workforce.
Former Gov. Jennifer Granholm's administration awarded MEGA tax credits to GM, Ford Motor Co. and the former Chrysler Group LLC in 2009 to keep the auto industry in Michigan after GM and Chrysler went through bankruptcies. But the Legislature has debated the tax credits over the past decade.
GM's tax credits were last valued at $2.1 billion in 2014, Crain's Detroit Business reported. But the value of those tax credits has been kept secret by the Michigan Economic Development Corp. until now because GM has said the information is proprietary.
But the majority of GM's statewide workforce will meet the wage threshold of the amended MEGA, said Flores. That's because the average annual total compensation for GM's hourly employees is nearly $90,000 a year and for skilled trades about $120,000 per year, Flores said. Those figures include profit sharing and overtime, he said.
Also as part of the deal, GM has agreed to reduce the remaining value of its MEGA credits from $2.6 billion to $2.27 billion through the end of 2029. But it is required to maintain a Michigan workforce of at least 34,750 and invest $3.5 billion in Michigan facilities by 2029.
If the number of eligible GM employees falls below 34,750, but above 27,875 workers, the company's tax credits will be cut to 75% of the value, according to the amended deal for that tax year.
If GM's workforce falls between 21,000 and 27,874, it would get 50% of the credit. GM loses MEGA tax credits completely if its workforce falls below 21,000 for that tax year, MEDC said.
This amendment removes any cap on the amount of jobs that can be counted toward the tax credits at GM's Detroit headquarters and its Warren Technical Center. The value of the tax credits are based on the withholdings of each employee's 4.25% state income tax.
Meanwhile, the amendment requires GM to make $3.5 billion in new investment.
Last fall, GM agreed to invest $3 billion to retool the Detroit-Hamtramck Assembly Plant to build electric pickups and SUVs. GM said it will created some 2,000 jobs. GM's investment in the plant was part of its 2019 contract with the UAW that was ratified in October.
"But if any one facility receives more than $2 billion in investment, the company is committed to invest $1.5 billion elsewhere in the state," said Hundt.
As part of the amended MEGA deal, GM will forfeit $4.1 million in additional tax credits that its subsidiary, GM Subsystems LLC, was awarded in 2009 to retain 290 jobs at its Brownstown Township plant where it assembles battery packs.
But the Brownstown Township facility workers will be eligible to be counted under GM's 34,750-employee retention MEGA credits, said the MEDC's briefing memo.
MEDC's Hundt said the state values the deal it's struck with GM and looks forward "to working together to further increase investment, create new jobs and expand the state economy for all Michigan residents."
