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New FCA plant likely to rely on tax breaks

Fiat Chrysler Automobiles NV's plan to convert its mothballed Mack Engine II site in Detroit into a second Jeep Grand Cherokee assembly plant likely will rely on a package of public incentives patterned after recent industrial investments in the city and state. 

The idled Mack Avenue Engine II plant in Detroit will be renovated to produce a new three-row Jeep SUV.

In an interview with The Detroit News on Friday, Gov. Rick Snyder refused to confirm the prospective FCA project that would create at least 400 new jobs in the city. But he pointed to recent incentive packages that Michigan offered to a high-tech manufacturer, Silicon Valley-based KLA-Tencor Corp., to move to Ann Arbor, as well as Pfizer Inc.'s investment in Kalamazoo. Each created roughly 500 jobs.

"Detroit has more upside," the governor said, referencing the opening of manufacturing sites by Sakthi Automotive Group and Flex-n-Gate. "There are other places in the city that you'll see continuing development. Detroit is being viewed as a favorable place to build things."

The FCA plant project, likely to be announced as early as next week, would be the latest large-scale investment lured to Detroit by aggressive incentives, a growing economy and City Hall's hunger to attract for-profit businesses — be they an FCA assembly plant, Ford Motor Co.'s next-generation mobility development at a renovated Michigan Central Depot, mortgage mogul Dan Gilbert's project on the old Hudson's site or the Ilitch family's District Detroit.

“This is a huge commitment by FCA,” said Kurt Brauer, a Southfield-based attorney for Warner Norcross who consults clients on economic development, real estate and incentives packages. “In order to win it, Michigan and the city would have to put forward its best deal. After the Amazon HQ2 loss, I think the state and local officials have figured out a better way to do business, and I think you’ll see that evident here.”

A reconfigured Mack II plant would be the first new auto assembly line to open in Detroit in 27 years, offsetting General Motors Co.'s plans to stop production of four sedans at its Detroit-Hamtramck plant by June 1. It would come as automakers are under increasing pressure from President Donald Trump to boost production of cars, trucks and SUVs in the United States at the same time his administration wages costly trade wars on three continents that are raising steel prices and threatening tariffs on imported vehicles.

Still, Michigan has new tools to attract would-be investment. Last year, the state enacted a "Good Jobs for Michigan" incentive program "designed to create tax incentives to bring large-scale projects to the state," according to an analysis of the program by PWC US.

The Good Jobs program is available to businesses operating in Michigan and those new to the state. Businesses that apply for the incentives can get payments of a "percentage of employee withholding tax capture revenues resulting from newly created jobs."

The amount and duration of the payments are dictated by how many new jobs companies add, and the average annual wages of those jobs. Businesses can receive either 100 percent of withholding tax capture revenues over 10 years for creating 3,000 or more jobs paying the average regional wage; 50 percent over five years for creating 500 jobs paying the average regional wage; or 100 percent for up to 10 years for creating 250 jobs paying 125 percent of the average regional wage.

The state in October granted Silicon Valley-based technology company KLA-Tencor Corp. a $1.5-million Michigan Business Development Program Performance-based grant to help fund its new research and development center in Ann Arbor, expected to bring 500 jobs to the state over five years.

Pfizer, the pharmaceutical giant, received a $1 million grant from the same fund in July to help fund its new facility in Kalamazoo County, which is expected to add up to 450 new jobs over "several years."

The News reported Thursday that the new Fiat Chrysler plant building next-generation Jeep Grand Cherokees would add up to 400 new jobs in Detroit. However, sources told The News, an assembly line of its expected size would need around 1,000 employees to run it.

The City of Detroit has offered multiple companies millions to locate new manufacturing and research facilities in Detroit.  Illinois-based automotive supplier Flex-N-Gate recently opened a $160-million manufacturing facility in Detroit that could hire up to 750 people. Flex-N-Gate received a $5.9 million property tax abatement from the city, $2.6 million from the federal government and $3.5 million from the Michigan Strategic Fund.

Ford Motor Co. is seeking $107 million worth of incentives from the city, which already has pledged $27 million over 12 years in Commercial Rehabilitation Act and Obsolete Property Rehabilitation Act tax abatements for its renovation of Michigan Central Station in Detroit's "Corktown" neighborhood.

The $740 million project to revive the moribund landmark, vacant for 30 years, is expected to bring around 5,000 next-generation auto technology jobs to the city where Henry Ford started the Blue Oval 115 years ago. The state is giving Ford $207 million in tax breaks over 30 years for the project.