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GM is struggling to maintain a key US tax credit due to plans to close the plant



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Richard Larner, Associated Press

Posted on Sunday, December 9, 2018 09:24 AM EST

WASHINGTON – General Motors is struggling to keep a valuable tax credit for electric vehicles, as the biggest carmaker is trying to tackle the political implications of its plans to shut down several US factories and shed thousands of workers.

Holding the tax incentive for $ 7,500 for buyers is crucial for GM, as the company operates from internal combustion engines in favor of building cars powered by batteries or hydrogen fuel cells. However, layoffs and closure of factories could jeopardize GM's pressure to keep the incentive. It helps make connections such as the Chevy Bolt $ 36,000 more affordable at a time when competition is heated by other electric vehicle manufacturers.

GM faces opposition from President Donald Trump and other Republicans who consider credit for losing taxpayers' money and wanting to eliminate them. Trump, who pledged to produce a revival in the Midwest, reacted angrily to the announcement of GM's "transformation" at the end of last month, saying his administration "is looking at cutting all GM subsidies, including electric cars."

The company is already on the threshold to be removed from the tax credits program, unless Congress changes the law that limits the rest of 200,000 vehicles per manufacturer. Without a boost, the GM could be forced to reduce the cost of its electric cars to keep potential customers from taking their business elsewhere, according to experts in the automotive industry.

As evidence of the importance of a loan for the future of the GM, the car has expanded its lobbying in Washington and even joined forces with two rivals, Tesla and Nissan, to ask for a limit of 200,000 vehicles to be abolished.

To that end, Senator John Barraso, R-Ui, chairman of the Committee on Environment and Public Works in the Senate. Barrasco introduced legislation in October to abolish the tax credit, a move he said would save about $ 20 billion over the next 10 years. He claims that the market for electric vehicles has already been set up and "no further drop in government assistance is needed."

"The idea of ​​subsidies was to be made by trying to ensure that electric vehicles are a viable technology," Barraso said. "Well, that's clear there."

The tax credit came briefly during a private meeting Wednesday between Ohio senators, Republican Rob Portman and Democrat Sherrod Brown and GM CEO Mary Barra, according to an aide to the congress familiar with the conversation. As part of the restructuring, GM said it would stop making Chevy Cruze in its Lordstown, Ohio plant by March and is considering closing the plant for good.

Portman told Barra that it is difficult to help priorities such as a loan to electric vehicles when GM transfers production from Ohio, according to an assistant who was not authorized to publicly talk about a private conversation and speak about an anonymity requirement.

One of the lobbyists working to save GM's loan is Kent Hens, former Chancellor of Texas Tech University who is well connected to GOP circles, according to his online profile. Hens cites his role as fundraising for campaigns by House Speaker Paul Ryan, R-Vis, Senate Majority Leader Mitch McConnell, RK, House Majority Leader Kevin McCarthy, R-California, and others. He knew Rick Perry, energy secretary and former governor of Texas, for nearly 30 years.

GM in early August named former White House official Trump, Everett Eisenstadt, her senior vice president for global public policy, a position that oversees the lobbying of the company. However, Eissenstat has not been registered as a lobbyist, according to disclosure data submitted by the Congress. Prior to joining GM, he was Trump's Assistant for International Economic Affairs.

According to federal law, a $ 7,500 loan for buyers begins to be canceled after the manufacturer sold 200,000 qualified electric vehicles. GM estimates it will reach that threshold by the end of December, just as Bolt will face a new and potentially nasty competition.

Sam Abuelsamid, a senior analyst at Navigant Research, said Hyundai and Kia will sell compact SUVs in the United States early next year, which can travel 240 miles per single charge of batteries, roughly the same as Bolt. Ford will launch more new hybrid models in 2019, including Lincoln Aviation, Explorer and Escape.

"By intensifying the market shift from cars to utility vehicles, all this is expected to be more popular than Bolt," Abuelsamad said. To remain competitive against new entries, "GM is likely to have to lower Bolt's retail price as well as any additional EWs starting next year with a corresponding reduction in tax credits," he said.

Carl Brouwer, an executive publisher of Autotrader and Kelley Blue Book, said the loan was "very important" for electric vehicle manufacturers. Reducing the front price of the vehicle usually plays a significant role in sales, he said, citing polls that show that more consumers will buy electric vehicles if vehicles are priced.

GM has joined forces with Tesla and Nissan as well as several consumer and environmental groups to extend lobbying even further. The EV Drive Coalition, which was launched in November, urged lawmakers in an open letter last week to lay down a provision in the law on public expenditure that must pass the limit of 200,000 cars.

"Eliminating the lid of the manufacturer will equalize the playing field of all manufacturers of EV and will encourage innovation among domestic manufacturers, providing America's leadership in the hyper-competitive global auto market," the coalition said.

Jenin Ginivan, GM's spokeswoman, said the tax credit should be modified, but declined to say whether the manufacturer would support certain legislation that would remove the cover.

"We believe an important part of achieving the future of zero emissions and establishing the United States as the leader in electrification is to continue to provide a federal tax credit to help electric vehicles be more accessible to all customers," Ginian said in an email .

In addition to GM's lobbyists, four lobbyists from Hans Scarborough, Austin, a Texas-based firm, which Hans founded in 1994, are working on behalf of GM, including Hans, according to discovery data.

GM also dealt with two other lobbyists earlier this year to focus on electric and automotive vehicle issues: the Polaris-Hutton Group and the DS2 group. The fourth firm, S-3 Group, was hired by GM in 2014, and earlier this year it added the tax credit in its lobbying portfolio.

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