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Assualt and BATTERY on the Taxpayers

October 9, 2012

Here is another company touted by the Obama Administration as a job creator, he was even there for the grand opening. The company, Compact Power is in Holland, Michigan. It’s parent company is LG Chem of South Korea, they are one of the largest producers of lithium ion batteries in the world.

The 650,000 square foot manufacturing facility had it’s ground breaking ceremony in 2010, it was attended by President Obama. He hailed Michigan as the “North American Battery Capitol” and continued to say to the crowd.

“The workers at this plant are already slated to produce batteries for the new Chevy Volt, learned the other day that they’re also going to be supplying batteries for the new electric Ford Focus as soon as this operation gears up. And that means, by 2012, the batteries that will be manufactured here in Holland, Michigan. So when you buy one of these vehicles, the battery could be stamped —  made in America.”

This plant cost $300,000,000 to build, of that total $150,000,000 of that was a grant from the Department of Energy. So we the tax payers gave them half the cost of the facility for free, grants are not paid back. On top of that the state and local government gave them property tax breaks equaling almost $50,000,000 over the next 15 years, and $2,500,000 in yearly business taxes.

This plant has created 200 jobs so far, so it has cost the taxpayers just to build it $750,000 per job created. On a continuing basis (yearly operations) it will cost the federal, Michigan state and local governments a loss in tax revenue of $5,833,000 for each of the next 15 years. That loss equals $29,167 per year for each job created at the plant. When you consider what each worker will pay in federal, state and local taxes, it’s still a lose, lose for the taxpayer.

Now we come to the most important piece of information on this story so far.

They have not produced a single battery yet!

At this point they (the employees) are on furlough one week a month. And they will be eligible for unemployment benefits. If you are wondering like I was, what have the employees been doing for the past 2 years? Spokesman Randy Boileau for LG Chem in Holland, MI says ” the facility has spent the past two years building infrastructure and conducting pre-production test runs.”

This is where I get confused, the cells are to be manufactured in Korea. They were only to be assembled in the US plant as finished battery packs and modules. How many pre-production test runs do they need to do?

The obvious question that comes to mind for me is this; If you are going to produce battery packs for the Chevy Volt (with no sales history yet), and you have the manufacturing capacity at your Korean facility to gauge the demand, wouldn’t you do that first strictly from a business point of view?

I would think the company would not want to obligate large sums of company funds to a project like this. I say this because the Volt sales are disappointing at best, and the Ford Focus (electric model) was not to be released until December 2011. I also do not understand why the Obama Administration would grant that much in funds for the same reason.

Obama makes it more and more obvious over time that he does not understand business.

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One Comment leave one →
  1. October 11, 2012 11:05 am

    A roundabout way to pay back foreign donors?

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