Bill to Help Auto Industry Called Flawed

Dayton Daily News - December 6, 2005

Policy group says action ill-advised
by John Nolan

Dayton Daily News

DAYTON | Legislation that Ohio House Speaker Jon Husted is promoting as a means to encourage Delphi Corp. and auto industry employers to invest in their plants and keep jobs in Ohio may be ill-advised, a policy research organization says.

The proposed legislation would drain state tax revenue and could even subsidize automakers or auto parts suppliers that reduce their Ohio work forces, according to Policy Matters Ohio, a Cleveland-based research organization.

The bill also could be taken advantage of by healthy auto industry companies without requiring additional commitments beyond factory improvements they had already planned to make, the organization said.

“We believe this is a flawed bill that should not move forward in its current form,” Zach Schiller, the organization’s research director, wrote to members of the state House Economic Development and Environment Committee, where the legislation awaits its first hearing on Wednesday in Columbus.

“There are numerous flaws in the bill as written, which would make five companies in the state General Motors, Ford Motor, DaimlerChrysler, Honda and Delphi eligible for credits based on their employment of at least 7,500 workers,” he said.

The legislation would rework Ohio’s job retention tax credit by lowering the investment required of auto industry employers to qualify for an exemption of up to 75 percent of a company’s corporate franchise or income tax liability.

Republican leaders say it is needed to reduce the tax burden on employers in the financially strapped auto industry, a key Ohio employer.

Schiller said, however, that the state could better support auto jobs and auto industry workers by expanding economic initiatives to support product development at struggling factories, or providing assistance for other companies that could hire laid-off auto workers at good pay and benefits.

Delphi filed for bankruptcy reorganization in October.

The auto parts maker employs 50,000 people in the United States, including 5,700 at five Dayton-area plants.

Delphi has 13,000 employees statewide.

House Republicans, including Husted of Kettering and Rep. Randy Law of Warren, who introduced the bill on Nov. 15, said it is needed because the auto industry is a key employer in Ohio and faces economic challenges.

“We hope it’s a difference-maker for us in Ohio, in competition with other states,” said Law, a member of the committee which has the legislation.

“We’re working to keep jobs in Ohio,” said Karen Tabor, spokeswoman for Husted. “As with any proposal, there are folks on both sides of the issue. If there are concerns, we need to work those out.”

Labor union leaders and regional politicians turned out to show their support for the legislation when Husted revealed it at a Nov. 3 news conference in Dayton.

Wes Wells, the AFL-CIO’s Dayton regional director, said he supports the legislation.

“I just hope it isn’t too little, too late,” Wells said.

Husted hopes the bill will be passed by the House and Senate next year and sent on to Gov. Bob Taft for signing, Tabor said.

The governor has said he supports the legislation.

Delphi appreciates the legislation, but is unable to say whether it would affect the company’s long-term plans until a plan of reorganization is crafted to help Delphi emerge from bankruptcy in 2007, spokesman Brad Jackson said.

Richard Stock, director of the University of Dayton’s business research group, said the legislation is likely to have little effect on Delphi’s decisions on which plants to keep open.

The key is Delphi’s negotiations with its major unions to try and fashion new, cost-cutting labor agreements, Stock said.

Policy Matters Ohio has raised valid criticisms of the legislation, he said.

“You’re foregoing some extra income that you could have here,” Stock said.

To receive the tax credit under existing law, a company must invest $200 million in a single work site, or $100 million if the current wage rate for the jobs to be retained is at least 400 percent of the federal minimum wage, which is $5.15 per hour.

Under the proposed legislation, auto and parts manufacturers with at least 7,500 employees statewide could qualify for the tax break by investing at least $125 million at various sites across the state, as long as the wage rate at those sites would exceed 300 percent of the federal minimum wage.

Such a job would pay at least $32,000 a year, Husted said.

To be eligible to receive the full tax credit, a company would be required to keep 90 percent to 100 percent of its employees.

Those keeping fewer workers would receive a tax credit based on a sliding scale.

If Delphi received the full tax credit, it would cost Ohio $20 million in tax revenue, Tabor said.

If all the eligible companies received the maximum tax break, the state’s cost would be more than $100 million, she said.

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