Michigan secures Ford investment

By Steve Schifferes
Economics reporter, BBC News, Ford's transmission plant, Livonia

Michigan was spooked by a threat to move the factories

US state Michigan has agreed to give Ford Motor $300m (£155m) to keep open six of its factories in the state.

The move, which amounts to subsidies of about $23,000 per worker, could help safeguard 13,000 jobs in the state.

In return, Ford has vowed to invest $866m to upgrade the ancient equipment in the plants.

The firm had threatened to go to other neighbouring states, such as Minnesota and Indiana, which had also been prepared to offer subsidies.

Ford's investment will pay for the retooling of its Wayne assembly plant to produce the new 2008 Ford Focus small car and a $200m investment to produce Ford F150 trucks on the old River Rouge site.

No new jobs

Half of the $300m will come from the state government, which will borrow $150m against an already-swollen budget deficit.

Ford's Mr Fields made workers in Michigan happy

The other half will come in the form of property tax abatements, where the plants' home towns will forego additional taxes that Ford would have normally had to pay on its investments.

Ford cannot guarantee that it will create any new jobs, nor offer a guarantee that it will continue to employ all of its existing workforce.

This is in contrast to similar deals where states offer car companies incentives to build car factories specifically to create new jobs.

Major concessions

At the launch of the scheme at the huge Livonia Transmission Plant on Tuesday, the assembled Ford workers cheered loudly as Ford's US chief Mark Fields told them that this was a sign of the company's renewed commitment to the state of Michigan and a sign that Ford was "absolutely serious" about investing in new production and infrastructure.

Mr Fields was joined on the platform by key United Auto Workers (UAW) union officials, including the head of the Ford division, Bob King, who praised the state's recently elected Democratic governor, Jennifer Granholm, for backing the deal.

Ms Granholm issued a statement saying the state was "pleased to partner with one of our major auto manufacturers to provide the leadership and creativity that will retain jobs in Michigan".

The move comes as Ford plans to close 16 plants in North America and cut nearly 45,000 jobs in order to turn around its American operations, which lost $7bn in the first nine months of 2006.

Ford borrowed $23bn in December to fund its restructuring and says it expects a $17bn cash drain during the next three years before returning to profitability.

It is also facing a crucial year, in which its 3-year contract with the UAW comes up for renewal.

The company is believed to be seeking further major concessions from the unions, which would reduce benefits and cuts its overheads.

If the reaction of the workers at this plant is anything to go by, their fear of losing their jobs may well prove a powerful incentive that could lead them to back such a deal.

It appeared from a plant tour conducted by Ford for journalists that the company had not made any major capital investment in one of its two assembly lines at the sprawling factory complex for many years.