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Reviewing the Arguments Against the Goodyear Giveaway

By Rob Schofield

As state lawmakers reconvene in Raleigh today to consider the Governor’s veto of the bill to provide $40 million to tire giant Goodyear (and a possible compromise bill) today’s edition of the Weekly Briefing offers a brief review of some of the key reasons to uphold the Governor’s action and commence a comprehensive review of the state’s incentives policies.

From The Progressive Pulse blog:

“Before state legislators take the plunge on Monday into the brave new world of paying giant multi-national corporations to, maybe, stick around a little longer, it would be great if they considered some of the numbers that appear below. 

$4 million – The amount the state would pay Goodyear annually to retain some of its current North Carolina workforce

$11.7 million – The amount of compensation paid in 2006 to Goodyear’s CEO, Robert Keegan.

$20.3 billion – Goodyear’s sales in 2006

$17 billion – Total company assets

600% – growth in Goodyear’s market capitalization (i.e. the value of the company) from February ’03 to February ‘07

60+ – Number of Goodyear manufacturing plants

26 – Number of countries in which those plants are located  

7% — Increase in revenue per tire sold in 2006

6% — Average annual growth this decade in the U.S. demand for replacement tires

$300 million per year – Amount of savings Goodyear will realize as the result of recent union concessions  

$2,000 per job, per year – Amount state would pay Goodyear under House Bill 1761 if the company retains the minimum number of employees specified.

$0 – Amount of North Carolina corporate income tax that Goodyear paid

$18.1 million – Estimated annual cost of operating Goodyear’s "fleet" of North American blimps

The Bottom Line: Goodyear is an enormous and growing multi-national corporation that operates on every continent on the planet. Its annual sales are roughly equivalent to the state of North Carolina’s annual budget. In the big picture, whether North Carolina approves or rejects the proposed ten-year, $40 million subsidy will make no measurable difference to the company or its future. The attempt to extract a little extra cash out of the Cumberland County plant is clearly a no lose, hardball maneuver by mid-level executives looking to get a slight bump in revenues for their next annual performance review. It is, by any fair estimate, chump change to a corporation that spends more on flying blimps over sporting events in three months than the proposed annual subsidy will provide in a year. If lawmakers go along with the plan, they will reveal themselves to be just the latest in a long line of well-intended public officials to fall for the hardball tactics of a ravenous and amoral corporation that’s pushing a lot of hot air.”   

Elaine Mejia – N.C. Budget and Tax Center

“The General Assembly should let the governor’s veto stand and look for smarter, more accountable ways for state government to partner with businesses that want to upgrade their facilities. Simply stated, responding to “cash on the barrelhead” demands by one large corporation that probably pays no state corporate income tax and plans to lay off workers is not good economic development policy by the state.

HB 1761 has numerous flaws, such as:

  • It is available to one corporation, Goodyear Tire and Rubber.
  • It allows that corporation to reduce its workforce and replace permanent employees with contract employees.
  • The amount of the subsidy, in all likelihood, exceeds Goodyear’s tax liability and any increase in taxes that would be paid as a result of upgrading the facility.
  • It does not include any requirement that the corporation pay livable wages to its employees.

If North Carolina is going to subsidize businesses that want to invest in retooling their manufacturing facilities, state lawmakers must make sure that such a program is accountable to and affordable for state taxpayers.”

The Charlotte Observer

“Gov. Easley thought the $40 million in grants over 10 years amounted to paying a company to abolish as many as 750 jobs. The company could contract for some of the jobs it would have to maintain, putting taxpayers in the position of possibly financing more outsourcing of existing jobs. That just doesn’t smell right.

The governor’s solution — which he should have pushed months ago — would condition the deal on more performance measures, including retaining existing jobs with benefits and paying at least 140 percent of the current wage.

Any solution ought to hinge on the creation of more jobs. Otherwise, it’s just a giveaway. But the goal here isn’t to win a political debate. It’s to save jobs in an area that desperately needs them. The governor and the legislature need to get to work on that.”

Bill Schweke – Economic development expert at CFED

“The hard reality is that it’s a losing proposition to start investing large sums of public money in direct transfers to giant multi-national corporations like Goodyear to try and get them to stick around. The company is either profitable or it isn’t. We can’t affect that by giving them four-million dollars a year. All we might do is, at best, buy a little time.

Frankly, if we determine that Goodyear is serious about leaving, we would be much better served to take the forty-million dollars in question and invest it in the Cumberland County community – the workers themselves, their severance and retraining packages, the local infrastructure, all the things that would pre-position the community to endure such a blow and to move forward. As hard as that would be to accept, it is a reality we can’t deny. That’s what I mean when I say “focus on creating rather than just coping.”     

[The Governor’s plan] does a better job of establishing general criteria for providing incentives to existing businesses in many counties, but in the long-run, it promises to cost a tremendous amount of money with, at best, uncertain results. The other danger, even if a well-structured program is created, is that another administration and legislature in the throes of negotiating with another business will “lower the bar” to get them to stay. And I worry that if no new jobs are created and we’re just paying them to stay put, that it will be harder for North Carolina to get its money back.

The best outcome for now is that lawmakers accept the Governor’s veto without rushing to pass any alternatives. Ideally, that will allow the state time to have an open, honest and comprehensive discussion in the coming months so that whoever is elected Governor next year will have a chance to pursue a fresh start.”

About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
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