News Story

State Corporate Welfare Didn't Work For Greenville

Centerpiece of previous governor’s economic policy, has also been favored by current candidates

As Michigan’s gubernatorial election approaches, corporate welfare may be among the campaign issues. Both major party candidates have past voting records supporting the practice.

A 2013 video by former Gov. Jennifer Granholm sheds some light on how large a role business subsidies played in her administration’s economic policy. And the example Granholm cited in that video shows how ineffective state corporate welfare policy was for the city of Greenville, in what turned out to be a major test of the approach.

In the video, Granholm discussed state efforts to rescue Greenville when refrigerator manufacturer Electrolux announced it would transfer production to Mexico. The video was part of a presentation the former governor delivered in California, in which she talked about her "obsession" with creating jobs.

Granholm described getting a call from the head of the state’s economic development agency in 2003. “He said, ‘Gov, we have a really big problem,’” Granholm tells viewers.

The problem, Granholm said, was that a city with 8,000 residents was about to lose an employer that provided 2,700 jobs. With that many jobs in Greenville, Electrolux was the anchor company in the county.

While those had grabbed the attention of the state’s highest public official, at the same moment, hundreds of thousands of Michigan jobs were lost and gained with little notice by the government or media.

Compared to that ongoing statewide “job churn” –  Michigan jobs that are created or disappear each year – Greenville’s 2,700 jobs were but a tiny sliver, less than 1 percent.

In 2005, the year before the Electrolux plant closed, 1,011,118 private sector jobs disappeared in the state. In the same year, 994,229 new jobs were created. The total number of jobs in all sectors was about 4.3 million then.

Granholm said in the video that she, along with city and community leaders from education, business and labor, all met with Electrolux managers in an effort to convince them not to leave Michigan.

“We took out our chips, created a pile of incentives, and we slid our pile of chips across the table to the management of Electrolux,” Granholm said in the video.

She said the incentives included zero taxes for 20 years and government help in building a new factory.

Granholm said Electrolux turned down the offer.

In 2006, Granholm tried to bring a new industry into Greenville. Again, the effort involved narrowly targeting a specific firm or industry with economic incentives from state, county and city governments. The result was a $45 million tax incentive package for United Solar Ovonic, which would make thin-film solar cells in Greenville.

Granholm toured the company facility in Greenville in March 2008. According to the Detroit Free Press, it employed 185 people at the time. In 2009, MSNBC did a national segment on the solar panel company, saying it was resurrecting jobs in Greenville.

With its lucrative government incentives, United Solar Ovonic was projected to create 700 direct jobs and another 3,062 indirect jobs.

That never happened.

The company idled its plants in 2012 and filed for bankruptcy later that year.

When Electrolux left Greenville in 2006, Granholm described the consequences as catastrophic.

“In fact, it was like a nuclear bomb went off in that little community of Greenville,” Granholm said in the video.

But Montcalm County, where Greenville is located, has largely recovered.

The year Electrolux closed its plant, the personal income of Montcalm County residents was 75 percent of the state average. It fell to 68 percent in 2007 but has, since then has reached 72 percent.

In 2005, before Electrolux left, 26,895 Montcalm county residents were employed. That number dropped to 22,289 in 2009, but it was back up to 26,753 in 2017, according to the U.S. Bureau of Labor Statistics. Statewide, Michigan employment has gone from 4.389 million in 2005 to 3.863 million in 2010 and back up to 4.181 million in 2017.