News Story

Driverless Car Company Gets Big Subsidy From Michigan Taxpayers

Waymo’s parent company reported $12.7 billion in profits and received $8 million from Michigan taxpayers

Michigan officials last week authorized an $8 million corporate subsidy for Waymo, an autonomous vehicle company that originated as a self-driving car project by Google. Waymo’s parent company is Alphabet, Inc., which was started by Google’s founders Larry Page and Sergey Brin who still serve as the company’s top executives. Alphabet, Inc. reported profits of $12.7 billion in 2017, according to recent a Security Exchange Commission filing.

Although state economic development officials claim that giving the company the taxpayer-funded subsidy will reap economic benefits in the form of increased state employment, research on similar deals suggests it may not.

“Today’s projects will fuel new economic activity across Michigan, strengthen communities, and create good-paying jobs for our residents,” Democratic Gov. Gretchen Whitmer said in a press release.

Under the proposed arrangement, Waymo will locate “vehicle integration” operations in the state. A light-manufacturing facility space will be built at a Southeast Michigan location yet to be determined. Officials from the state and Waymo say the factory will be the first of its kind, dedicating its space to the mass production of level 4 autonomous vehicles. Those vehicles which are supposed to require no driver attention whatsoever, but they operate only within limited and carefully mapped-out areas.

The project is expected to create 100 jobs, “with potential for up to” 400 jobs, and generate total private investment of $13.6 million, according to a press release from the Michigan Economic Development Corporation, a state agency. The grant is said to be performance-based, meaning that to receive the full $8 million, the company must first reach 400 employees. Waymo says it will hire engineers, operations experts and fleet coordinators in the region to assemble the self-driving vehicles.

“Michigan is at the forefront of innovation in automotive design and development, and high-tech auto companies continue to realize the invaluable assets that Michigan has to offer: high-tech engineering resources, top-notch research and design, and a highly skilled workforce,” Whitmer said.

Michael LaFaive, the senior director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, said in an email that these corporate subsidies will not have the intended effects.

“The evidence on corporate handout programs is very clear,” he said. “They are almost always ineffective. The specific program they used to subsidize this effort is a proven failure. We found that for every $500,000 in handouts to corporations, there was a corresponding decline of about 600 jobs in the county hosting Michigan Business Development Program projects. The program just takes money from lots of people and gives it to a lucky few.”

Even when a subsidy program does bring employment, LaFaive said it is done at a “ridiculously high” cost to taxpayers. The government, he argued, should instead create a fair playing field for all businesses and allow the economy to develop spontaneously instead of enabling bureaucrats to decide which businesses are worth funding, giving certain businesses an unfair advantage.

“There were many reasons for Waymo to pick Michigan: talent, location to suppliers, possible winter test grounds and more,” LaFaive said. “The subsidies they received just look like taxpayer icing on their location choice cake.”

LaFaive suggested that the government spend the taxpayer money on something more likely to help all Michiganders, such as road transportation infrastructure.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.