If Maryland was willing to fork out $28.8 million last year to keep Marriott International Inc. from shifting its headquarters across the Potomac, it should be prepared to offer up to 3 1/2 times as much to retain the General Motors Corp. assembly plant in Baltimore, a leading economist said yesterday.
"Considering the economic impact of the General Motors plant on this region, a $50 million to $100 million incentive package to GM would not be particularly irresponsible," said Anirban Basu, director of applied economics for Towson University's Regional Economic Studies Institute.
Calling such state incentives "corporate welfare," Basu said the offer should be made only if the world's largest automaker agrees to produce in Baltimore a new vehicle that would keep the 65-year-old Broening Highway plant viable for many years to come.
GM is the city's largest manufacturing employer. It employs 2,400 workers, but up to 1,200 of them stand to lose their jobs in July when the van plant eliminates its second shift.
GM has said it will continue production of the Chevrolet Astro and GMC Safari vans at the Broening Highway plant until the third quarter of 2003.
After that, the company said, the market for the vans will determine the plant's future. Next year, about 380 assembly plant workers are scheduled to be transferred to GM's new $216 million Allison Transmission plant in White Marsh. The site has sufficient space to allow for the plant and its work force to double in size.
Basu calculates that the assembly plant pumps between $800 million and $900 million into the regional economy each year. The state puts the figure at $1 billion and says the plant creates another 3,500 related jobs. Top state officials are scheduled to meet in Annapolis early next month with GM executives, including G. Richard Wagoner, president, and Thomas J. David, head of GM's Truck Group, to discuss the company's plans for Baltimore.
However, government officials are being tight-lipped about the financial package they will take to the table.
"If I give you a number and GM reads it, it becomes our top line, not our bottom line," said David Iannucci, deputy secretary of the Maryland Department of Business and Economic Development.
While he wouldn't talk dollars, Iannucci expressed confidence that the state's package would be very competitive. He said it would likely contain a variety of tax credits. He said the old plant has been made a part of an enterprise zone, which would provide tax breaks for expansion.
The state has also assembled land adjacent to the current plant if GM wants to expand, and other tracts within a five-minute drive should the automaker desire to build a new factory.
David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation, said state incentives are becoming increasingly important to GM as it works to reduce operating costs.
"It's one of the things they will look at, along with the age and the liability of the work force in Baltimore," he said. Liability deals with a contract provision that says GM must pay the wages of workers too young to retire if they cannot be shifted to another plant.
Cole said GM has a wide variety of new vehicles coming in the years ahead and will be selecting the locations where they will be produced. "Maryland should be making a full-blown effort to land one of them," he said.
Another part of the equation has to do with Sen. Barbara A. Mikulski and the fuel efficiency of cars and light trucks made in this country. Fuel standards, known as Corporate Average Fuel Economy (CAFE), were established in the mid-1970s in response to the OPEC oil embargo. Since 1994, the federal government has been trying to raise the standards for light trucks and sport utility vehicles. But every year Congress has rejected the move.
In the past, Mikulski has voted to keep the CAFE standards unchanged, proclaiming that she stands by GM because GM stands by Baltimore.
A member of the appropriations subcommittee on transportation, Mikulski is a key vote when it comes to standards. Capitol Hill sources say that if the Maryland Democrat changes her vote, she will take other votes with her, perhaps enough to allow for an increase in automotive fuel standards.