Economic Development, Lakeshore, and Manufacturing

LG Chem's state and Holland incentives still valid

Production at Holland plant on hold due to lower demand for GM's Volt.

October 24, 2012
| By Pete Daly |
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LG Chem's state and Holland incentives still valid
President Obama and Gov. Granholm meet with officials at the groundbreaking of the LG Chem battery-cell plant in Holland in July 2010. Photo by Rene Mireles

State and local investment incentives that were offered two years ago to LG Chem Michigan to manufacture batteries for electric vehicles in Holland are still valid, although the new plant has not begun production yet and the company cannot state when it will.

Kathy Fagan, a spokesperson for the Michigan Economic Development Corp., said LG Chem Michigan was granted a $25.2 million state tax credit in return for creation of jobs and a state tax credit valued at $100 million as an incentive to produce advanced battery cells for electric vehicles.

“They have until the end of the year before they can start collecting on either one of those,” said Fagan.

LG Chem Michigan has drawn no money on those yet and “they are not out of compliance at this point,” said Fagan.

The city of Holland also approved a Renaissance Zone designation for the LG Chem property, which exempts the plant from most local taxes for several years. According to the Renaissance Zone Development Agreement for Renewable Energy Facility, on file at Holland City Hall, LG Chem must invest $302 million in the plant by December 2014, and create 300 new full-time jobs there by December 2015.

Holland City Manager Ryan Cotton said “they seem to be within the terms of the agreement,” referring to LG Chem Michigan.

One-half of that $302 million investment would ultimately be repaid to LG Chem, as an incentive from the U.S. Department of Energy under the American Recovery and Reinvestment Act program to encourage development of batteries in the U.S. for electric vehicles.

In a statement provided to the Business Journal by LG Chem Michigan, the company said it has invested more than $150 million in the plant and created 200 jobs. However, the employees are now on “rolling furlough” in which they work 75 percent of their normal hours, and the plant has not yet begun the planned production of advanced batteries for electric vehicles GM is making.

As to when the plant will begin production, LG Chem stated that “the market will indicate when it is necessary to begin production. At this time, LG Chem Michigan is not able to make a definitive projection of how long the rolling furloughs may last because that will ultimately depend on market conditions and consumer demand.”

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