GM’s total $7 billion investment in Michigan — the single largest in company history with most of it going to EVs — also is a major bet for the automaker because EVs still represent just 3% of total sales in the United States. But the move, and others like it, are essential for GM to meet its stated EV commitments amid quickening competition from legacy rivals and EV startups.
Both bets were made possible by multilateral collaboration between the automaker, DTE Energy Co. and bipartisan political leadership in Lansing that should give Michigan a chance at more auto and tech investment in the future — and give GM the capacity to build more EVs to compete with the others also spending billions to make the electric transition.
GM is investing $6.6 billion to update the Lake Orion assembly plant to build electric Chevrolet Silverado and GMC Sierra pickups and to build a battery cell manufacturing plant in the Lansing area. The automaker also is investing $510 million in the production of gas-powered vehicles at two Lansing plants. The projects are expected to create 4,000 new jobs and retain 1,000.
“This is definitely the kind of investment that the state's extraordinary power to subsidize major breakthroughs was designed for,” said Patrick Anderson, CEO of East Lansing-based Anderson Economic Group. “If in fact, electric vehicle technology becomes the dominant propulsion technology in vehicles, we’ll look back and say that both Ford and GM’s investments and the support that states like Tennessee and Kentucky and Michigan gave were completely worth it.
“However, it still is a bet with considerable risks. Electric vehicles are still only 3% of the U.S. market. In order for this bet to pay off, they have to grow to 30% or more,” he added. Battery electric vehicle sales are expected to hit 15% by 2024 and 34% by 2035, according to IHS Markit’s latest forecast.
‘A non-partisan matter’
Gov. Gretchen Whitmer partnered with Republican lawmakers to create a $1 billion economic development program that could spur such investment as GM announced Tuesday. The two sides worked together following Michigan’s loss last September of an $11.4 billion investment by Ford Motor Co. for EV projects in Tennessee and Kentucky.
“The economic well-being of our state isn’t a partisan matter,” Senate Majority Leader Mike Shirkey, R-Clarklake, said on stage at GM’s investment event in Lansing. “High-quality jobs don’t have a party affiliation. And I’m proud to have on this stage with me some lawmakers who played an important role in making this day happen.”
GM’s investment came after the Michigan Strategic Fund board meeting on Tuesday when members unanimously approved the $824.1 million in state incentives for GM to invest $7 billion into four projects.
The MSF board, the governing body of the Michigan Economic Development Corp., approved a $600 million Critical Industry Program performance-based grant and a $66.1 million Strategic Site Readiness Program grant for GM’s investments.
The grant programs were recently created by Whitmer in collaboration with the Republican-led state Legislature to spur economic development. The GM proposal would use two-thirds of the $1 billion initially in the initiative. Lawmakers have to sign off on allocating the money, which they are expected to do soon.
At GM’s event, Whitmer touted the collaboration: “When we work together, we win and I’m confident that we can and will continue winning huge projects and making big investments in Michigan.”
The opportunity has the potential to generate $28.8 billion of new personal income over the next 20 years for Michigan residents, said Joshua Hundt, MEDC executive vice president.
“As the automotive industry is in a full-fledged transition to electrification investments of this type,” Hundt said at the MEDC meeting, “Michigan must ensure that we continue to be the home of the North American automotive industry for generations to come.”
GM CEO Mary Barra said “these important investments could not have been made possible without the strong support” of state and local officials.
Jeff Donofrio, CEO of Business Leaders for Michigan, last week emphasized the importance of bipartisan collaboration on future economic development like the $1 billion incentives programs the state passed in December. According to the organization’s annual benchmarking, the state is underperforming for battery plants with just two secured of 12 announced in North America. The state has roughly a quarter of U.S. internal combustion engine-related jobs, which could be at risk in the transformation.
“It shows that Michigan can compete for the next generation of vehicle manufacturing,” said Erik Gordon, professor at the University of Michigan’s Ross Business School, in an email of GM’s investment. “But unlike the good old days, it is going to have to compete for it.”
There’s potential for more with locations for another six battery plants still pending, according to Business Leaders for Michigan. To attract those investments as well as accomplish improvements needed in infrastructure and talent retention, development and attraction, Michigan needs strong leaders with clear lines of communication who can bring multiple stakeholders together to get the steps needed done — even during an election year.
“Sometimes you do need a proverbial wakeup call,” said Glenn Stevens, executive director of MICHauto, the automotive and mobility arm of the Detroit Regional Chamber. “It happened. It did enable people to get over their differences to find a common interest or goal. There were some who didn’t agree with it. I know that. A majority felt it was worth it to invest in it. It should only be the beginning.”
Beyond the state incentives, experts say GM’s investment in Michigan makes sense given its existing footprint in the state, which includes five assembly plants, two of which are slated for EV production. And, though risky, GM has not backed down on its EV acceleration during the pandemic. The automaker will spend more than $30 billion on development for EVs through 2025 so it can get 1 million of the battery-powered vehicles on the road globally in that same time frame.
GM has some catching up to do to EV leader Tesla Inc. The automaker is doing that by transitioning multiple North American assembly plants for future EV production at once and, at the same time, building battery cell plants with partner LG Energy Solution to power those EVs now in three states: Ohio, Tennessee and Michigan. The northeast Ohio battery cell plant will come online later this year.
The two companies, through their Ultium Cells joint venture, are investing $2.6 billion to build the third U.S. battery plant they have planned in the Lansing area. The move will create more than 1,700 new jobs when the plant is fully operational. Work on the project will start this summer and battery cell production is scheduled to begin in late 2024. The plant will supply cells to the products made at Orion Assembly and other plants.
The Michigan investment news “is another aggressive move that shows GM is not just talking the talk but walking the walk on its EV vision,” said Dan Ives, senior equity analyst for Wedbush Securities. “Mary and the team recognize that GM has scale and resources as its strength and must flex its muscles to build an EV army of factories over the coming years. It’s an EV arms race in Detroit with Ford and GM trying to establish a major foothold in this green tidal wave.”
GM’s EV play
GM will invest $4 billion at Orion to transition it for electric pickup production with site work slated to start immediately and electric truck production starting there in 2024. Orion Assembly, like Factory Zero at Detroit-Hamtramck Assembly Center, will build the Silverado EV and electric Sierra, giving GM the capacity to build 600,000 electric pickup trucks when both plants are fully running.
“We’ll have over a million units of battery electric vehicle capacity in the United States by 2025, and that 600,000 is a major part of that,” GM President Mark Reuss said on a call with media Tuesday. “As we see the transition happening, we know the adoption rate has really increased over the last year or two. We’ve done that research and we see the acceptance of the newly introduced Silverado as very, very positive, and high as well.”
Orion will receive new body and paint shops and new general assembly and battery pack assembly areas. Production of the Chevrolet Bolt EV and EUV will continue during the plant’s conversion, GM said. Bolt production has been down for months and will remain down through February as GM prioritizes new batteries for Bolts recalled for battery fire risk.
GM’s expanded electric truck capacity comes after Ford earlier this month said it was nearly doubling production of its all-electric F-150 Lightning pickup truck in Dearborn for the second time. The increase means Ford will assemble 150,000 vehicles annually after nearly 200,000 people opted to reserve the pickup. The company in September said it was investing an additional $250 million into the Rouge Electric Vehicle Center and two components facilities to increase annual production to 80,000 vehicles.
GM revealed its electric Silverado at the Consumer Electronics Show in January. The truck will arrive in 2023, a year after Ford delivers its electric F-150 Lightning.
“Clearly, the manufacturers think that the demand is going to be there,” said Sam Abeulsamid, principal analyst for Guidehouse Insights. “I am fairly confident that once those plants are up and running, we’ll see production at the existing truck plants shift to other products.”
The transition to electric vehicles is also a bet on jobs since there’s much uncertainty around how many workers will be needed to build vehicles that have fewer parts. But GM leaders have consistently said the company is “bringing along” its employees in the transition.
Some workers remain concerned about the growing number of lower-paid subsidiary employees they’ve noticed inside some plants. Meanwhile, the joint-venture battery plants are not covered by the United Auto Workers/GM national contract, and it will be up to the workforce at those plants to decide if they want a union, though UAW officials have previously expressed confidence in organizing those facilities.
In a statement, United Auto Workers President Ray Curry and Terry Dittes, UAW vice president and director of the union’s GM Department, hailed the $7 billion Michigan investment, saying it “creates a strong future for UAW members, their families and communities.”
“General Motors is investing in Michigan because of the skills and quality work of our members, and we are all proud of this investment in our industry’s future for decades to come,” the two UAW leaders said.
President Joe Biden, who is seeking incentives of up to $12,500 for union-made, U.S.-produced EVs as part of his Build Back Better Agenda, said GM’s investment in Michigan “is the latest sign that my economic strategy is helping power an historic American manufacturing comeback.”
In a statement released by the White House, Biden added: “From day one, my Administration has been laser focused on making sure that America leads the manufacturing future of electric vehicles. This announcement is just the latest in over $100 billion of investment this past year in American auto manufacturing to build electric vehicles and batteries.”
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