Racolta recently spoke with Bridge Business editor Paula Gardner. Here are excerpts from the conversation:
Your message to business groups and others is very direct: Michigan needs to make money on expanding the electric car sector, and we need to make changes to achieve that. What is your result now?
We have to admit that the future of Michigan is on horseback.
What is important to know about this?
Michigan today is the automotive capital of the world. We produce more cars and trucks in Michigan than anywhere else. We are the center of all important elements of business: sales, marketing, product development, research, testing, engineering.
If you think about the production part, we have (the largest) concentration of transmission plants and engines that are built and operated by car companies. … In electric cars you no longer need transmission and engine plants. For this takes over the battery in the electric motor.
Where are all these (new) battery factories and all these EV assembly plants going? This is the future, the electric car. And if you look at the statistics, they don’t arrive in Michigan in any significant amount.
You have a broad view of the situation because of Walbridge.
My company is building large manufacturing plants. This has been done for 100 years. And over the last few decades, we’ve expanded our role beyond just being a contractor.
We have a division that helps companies evaluate locations (worldwide) for new production facilities. We also design factories, help build factories, support the plant. If the plant can no longer continue to work, we buy the plant from the customer and give it away for scrap metal.
This gives us a unique view of what is happening long before the public sees (the finished building) … We really understand what the main criteria are for their placement.
People may not be aware of how many other potential power plants are still looking for sites after news of plans from Lansing for General Motors’ plans to build a battery plant there.
Yes, General Motors is going to produce something on (Factory Zero in) Hamtramck and Lake Orion (Assembly). Ford has a an operation is being launched at the Rouge plantabout 800,000 square feet of building for the F-150 Lightning. Announced by General Motors the only battery factory near Lansing.
However, now there are 18 battery plants that are either under construction or will be built in the next two or three years.
(In addition to battery factories) we have identified 70 projects over the next number of years that will support the battery electric car industry.
And I’m sad that very few of them are even considering Michigan, let alone Michigan winning.
Is Michigan close to the competition?
So when you go through site selection, you choose the criteria and start with the fact that each state wants them, so you’ll have 15 to 20 states (on the original list). You will then start to reduce this to the first cut, the second cut and the final competition.
Michigan is lucky to be included in any form or form in more than about 10 percent of them.
You begin to see that momentum is moving away from Michigan. And now the question is why? And so you have to ask yourself, based on the site’s five criteria, how competitive is Michigan?
One of them is the site itself.
I reported on the size of the land required by these deals. One mega-plot of Michigan occupies about 1,600 acres in the Marshall.
Previously, 400 or 500 acres was enough, which is about one square mile. But this is no longer the standard. Now they want 2,000 acres, 3,000 acres, 4,000 acres.
If you don’t have a website, you can’t compete because these car companies want to get to the ground in at least six months or a year, and that process (acquisition and zoning) takes years.
Other problems are high electricity tariffs, infrastructure, especially (bad) roads.
Then culture is a big problem. … This includes whether you think you are right. This is the mentality of the people. Culture is a work ethic, what is the work ethic of the people in the state? … Plant culture is a part-time bet. It is a combination of a person’s individual commitment to the company as well as the contractual terms on which they work. How many days off, how many personal weekends? How many sick days? All of these things add up.
Putting all these things together, Michigan was essentially uncompetitive.
Then there are the incentives.
Governor Gretchen Whitmer and the legislature recently created Fr. $ 1 billion incentive fund. Are they changing the money that can be used to increase access to utilities or to purchase land?
Incentives won’t get you to the table. Usually it’s the icing on the cake at the end. Michigan doesn’t get to the table. (Incentive Accounts) allowed (the state) to compete on these two General Motors projects. But this is only the first step. If we are going to be competitive, we will have to expand these incentives … to get more than one or two battery factories.
You worked with companies that didn’t choose Michigan. What is an example of their reasons?
(One CEO told me about 15 years ago) that the answer was “cohesion”. He understood that Democrats and Republicans could fight in election year, but more importantly at other times, they did not come together and create a competitive landscape.
He said Michigan causes splits when it comes to racing. He then talked about work and business and how toxic the relationship was. … And how there was no cooperation with local authorities (both between Detroit and its suburbs).
This is how someone other than the michigander looked at our state. And he said there are no incentives that can overcome that. That’s what I mean about culture. That was in 2008. And today we are really no different.
Do you think these big battery factories are a lost cause if companies aren’t looking at us yet?
We will probably land a couple of them.
What would you say to people who talk about manufacturing and say it’s time for Michigan to stop looking for jobs?
This is wrong. These machines are changing fast. The car has 1800 chips.
When you go to the factory, there are no longer 6,000 and 7,000 people. That’s a third of that, 2000. But they’re still important. They are highly educated jobs. You must have mathematical skills. You need to have critical thinking skills. You need to have strong communication skills. All this is very high-tech.
What are the risks of reducing the number of jobs in EV production?
This is already happening because there are so many software updates that many, many high-tech companies say, “We need to have our research and development centers next to our manufacturing operations.”
What prevents them? Nothing. … (What if) in 15 years technology centers will start migrating to where production is located?
We need to bring leaders together to recognize a problem and sit down, ready to have an open mind and a creative mind to figure out what solutions. What’s best for Michigan.
What reaction do you get from people when you call for unity of purpose? Do you think the people you spoke to understand this?
Yes, they get it. The first reaction is that they are starting to defend themselves. This is a normal reaction when you stand up for your position, whether you are a worker, a leader, a politician or someone else. And so we have to go through this catharsis, allowing all these groups to defend themselves and defend themselves.