Saturday, October 23, 2021

Kemp: Democrats’ Budget Provision ‘Discriminatory’ to Foreign Auto Makers in Georgia

Gov. Brian Kemp is urging Georgia’s congressional delegation to reject a provision in House Democrats’ budget reconciliation bill that could harm foreign auto makers that have spent billions setting up plants the Southeast U.S. in the last decade and beyond.  

As written, the bill includes a $4,500 tax credit reserved for buyers purchasing electric vehicles made from factories staffed by unionized labor. The amount supplements the existing $7,500 credit available to all EV buyers and a $500 credit for cars with U.S.-made batteries also added in the bill.

Allowing the supplemental incentive to apply to sales for only to unionized factories is tantamount to a “discriminatory” action “that would significantly damage the automotive manufacturing industry in our state and endanger 55,000 Georgia jobs,” Mr. Kemp said in a news release.  

In a message to members of Congress dated Oct. 8, the governor said he wanted to “echo the recent concerns” sent to House Speaker Nancy Pelosi in a separate letter by Autos Drive America, a coalition of 12 foreign-owned automakers including Kia, Georgia’s sole and flagship assembly plant.  

Foreign plants have set up shop in the Southeast U.S. in part thanks to their status as “right-to-work” states with low levels of labor organization, among other logistical advantages and tax benefits.  

Beyond Kia, which opened in 2009 and has made more than 3 million vehicles in West Point since, the state has a thriving automotive manufacturing scene, with 78 expansions in the last five years creating thousands of new jobs, the governor wrote. Many of those companies are German, Japanese and Korean firms; very few, if any, have voted to organize.  

In their letter, companies like Kia, Hyundai, Toyota, Honda, Nissan, BMW, Mercedes, Mazda, Subaru, Volkswagen and Volvo — almost all of which have factories in the South — said favoring unionized labor would put plants that make more than half the electric vehicles in the U.S. at a disadvantage. Tesla also opposes the measure, which is favored by American producers and Stellantis, the European conglomerate that owns Chrysler/Jeep. 

“You are aware that Georgia prides itself on being a state where our quality workforce and below-national average unionization rates are key reasons why companies in the automotive industry choose Georgia,” Mr. Kemp wrote in agreement. “With the transition to electrification that number will continue to rise — unless Congress unwisely creates a barriers to job growth in our state.”  

That last part is particularly relevant as the Georgia Department of Economic Development grows a new alliance aimed at growing the state’s electric-vehicle ecosystem, building on progress from the state’s largest-ever foreign investment: Korean-owned SK Battery’s $2.6 billion plant EV battery facility in Commerce.  

John Gornall, an attorney at Arnall Golden Gregory LLP who has helped plants land in the U.S., said that unionized plants in the South are all but nonexistent, and labor flexibility is key in the stiff competition among states to win these major investments.  

“If you’re not a right-to-work state, it’s going to be a hard sled. It’s a major factor,” Mr. Gornall said. 

Kia Motors and Hyundai have announced a $7.4 billion plan for electric and hydrogen fuel-cell vehicle production in the U.S., though they have not announced whether this capacity will be absorbed by new plants or existing facilities in Georgia and Alabama, respectively.  

Mr. Gornall says such a credit is unlikely to cause auto makers to move production, but it could be part of the consideration as to where they choose to locate new plants or certain production lines.  

The move also could carry political ramifications for Democrats pushing it in the South, where auto makers have generally been welcomed for providing much-needed industrial revitalization in towns hit hard by the decline of textiles and other sectors, Mr. Gornall said.  

“If you want to give conservative Republicans a cudgel to beat you up with in the next election in the South, this is a pretty good one,” he said. “You’re just going to energize a hell of a lot of people.”  

In their letter to Speaker Pelosi, the foreign auto makers said the credit could also run counter to the administration’s environmental goals.

“Limiting the tax credit to union-built, U.S.-assembled vehicles and applying these proposed limitations to the current EV market, only two of over 50 vehicles would qualify for the full tax credit” the letter reads, later continuing: “Proposals that dramatically limit consumer choice threaten our nation’s ability to meet the President’s goal to make half of all new vehicles sold zero-emission by 2030.”  

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