As 1,300 leaders travel to Mackinac Island for the Detroit Regional Chamber Policy Conference on Tuesday to discuss the issues, nothing is more pressing for its long-term prospects than figuring out how to make Michigan more competitive in the race for growing opportunities for electric vehicles.
That assessment comes from John Rakolta Jr., chairman of Walbridge and former US ambassador to the United Arab Emirates, who waves the flag as he sees major opportunities ahead and Michigan misses out if things don’t change — and fast.
The subject of the state being more competitive will be discussed in conference sessions and in more private settings with influential leaders on the island. Stellantis’ announcement on Tuesday that it was bypassing Michigan and set up its new electric vehicle battery manufacturing plant in Kokomo, Indiana, only added more fuel to this long simmering fire.
Rakolta, who has held leadership positions in nearly every major business organization in the state and whose company builds auto plants and facilities around the world, has a suggestion for how to make a difference in Michigan. : create a working group to examine the situation .
It would be made up of leaders from business, government, political parties and trade unions and would be tasked with brainstorming ideas and practical solutions. The group would meet for six months and come up with ideas, but refrain from publishing them until January, once the dust settles after the 2022 election, to mitigate the accusations that often come up about who is responsible for the problems.
“With things changing and new electric vehicle factories being announced quickly, we have to move,” Rakolta told me. “We’re already in the third set of a nine-set game. We can’t waste any more time.”
There’s a lot of deciding where to locate these billion-dollar factories or facilities.
“It’s about much more than offering incentives,” he said. There are utility costs, land costs, talent requirements, and the ease of working seamlessly with each other – things that have hampered state efforts.
This has been played out in broad daylight for years, even before the electric revolution took hold.
Who could forget the beauty contest in the 1980s between states, including Michigan, for GM’s Saturn plant – some governors appearing on the “Phil Donahue” show – to impress the executives making the decision (she went in Spring Hill, Tennessee).
Rakolta’s Detroit-based company built factories and he spoke to executives involved in those site selections and heard more than one ear about why they bypassed Michigan. He too will attend the chamber conference.
I asked a few questions. His answers have been edited for length.
QUESTION: Why are you proposing a working group?
ANSWER: My suggestion is that the governor, with the leadership of the House and Senate, create a bipartisan commission of 12 to 15 people in conjunction with the MEDC to study the problem, develop far-reaching solutions, and be prepared to present to the governor and Legislature the first week of January (2023). This will avoid being singled out during the election cycle. Economic development is a bipartisan issue, and the states that excel at attracting new factories are those that present a bipartisan face to new projects.
Q: You were involved when VW was looking to set up a factory in the US in 2008. What happened?
A: Michigan has been shortlisted by VW for a new assembly complex, along with Tennessee and Georgia. Governor (Jennifer) Granholm took the prospect seriously and offered a winning incentive package. In fact, the best of the three. VW chose Tennessee. Walbridge built much of this new facility and on a trip to Wolfsburg, Germany I had the opportunity to learn why Tennessee instead of Michigan. Their answer was simply one word: cohesion. Tennessee had it, Michigan didn’t. Michigan lacked the level of cohesion required to make a $3 billion investment and feel confident that it could stay competitive (with labor costs and regulatory issues). Although the incentive was attractive, it was not enough to compensate for the lack of cohesion.
Q: When did you first notice this problem?
A: It all really started when Japanese automakers decided to stop importing cars to America and build factories here. Since the 1980s, three new automakers (Tesla, Lucid, Rivian) and 12 foreign automakers (Toyota, Honda, Nissan, BMW, Mercedes, and others) have built a total of 24 major assembly complexes in the United States. By comparison, the Big Three have a total of 25. … Not a single new or foreign automaker has set up a production or assembly plant in Michigan. The writing has been on the wall for a very long time. This also does not count component factories, including powertrain, which are at increased risk due to the electric vehicle and battery revolution currently underway. More than 25 battery factories have been set up elsewhere in the United States, including only two in Michigan. Within a decade, up to 50% of all new car sales will be electric vehicles. Our state is currently investing heavily in ICE-related factories. Eventually, most of these factories will be obsolete.
Q: How do unions fit into this conversation?
A: Let me start with this, I respect unions. They are not the problem. They are part of the solution to the talent shortage. The apprentice schools are excellent and should be expanded. Just visit the new school for apprentice carpenters and millwrights in Detroit. It’s an amazing place that can produce hundreds of skilled workers a year. Good union work can compete with anyone and anywhere. By the way, the Big Three have unions in Indiana, Kentucky and Tennessee and they still get a lot of investment in new BEV plants. Re “Right to work“…remember when people said adopting it here was going to change the business climate in Michigan. Well, it’s not.
Q: Who do you blame for the situation that has evolved in Michigan?
A: Blame? I am not going. There’s enough for everyone, including me. We must learn from the lessons and mistakes of the past, recognize that the world is incredibly complex and that a new paradigm has emerged. We need to look for solutions that work for Michigan. So far we have collectively failed.
Q: If Michigan does nothing, what are we waiting for?
A: As the industry moves from ICEs (internal combustion engines) to BEVs (battery electric vehicles), the need for powertrain installations is also changing. Motors and transmission are replaced by batteries and electric motors. Michigan currently has 13 powertrain plants employing thousands of workers. It is estimated that 170,000 workers currently depend on it. This includes teachers, doctors, truckers, retail and a host of support industries. If we don’t fix that, it will be 2008 again – in fact, it may be worse. This is the most fundamental transformation of the automotive industry since Henry Ford. If we don’t get our share of new electric vehicle projects, we will lose our status as a car state. And we are going to lose a significant number of the highest paying jobs in the world. Our best and brightest will leave the state. Our families will be broken up. Our future will be compromised. This is a moment of crisis for our state.
Contact Carol Cain: 313-222-6732 or [email protected] She’s the lead producer/host of “Michigan Matters,” which airs at 8 a.m. Sundays on CBS 62. See John Rakolta Jr., David Fischer, Glenn Stevens and Rob Davidek on this Sunday’s show.