Note: The following letter was sent on Nov. 17 from Peter Karmanos, Jr., chairman and CEO of Compuware Corporation, to U.S. Sen. Richard Shelby, R-Ala., a critic of bridge loans for American automakers. For the full text click here.
The intent of this letter, however, is not to take you to task for the inaccuracy of your comments or for the over-simplicity of your views, but rather to point out the hypocrisy of your position as it relates to Alabama’s (the state for which you have served as senator since 1987) recent history of providing subsidies to manufacturing. During the segment on “Meet the Press,” you stated that:
We don’t need government — governmental subsidies for manufacturing in this country. It’s the French model, it’s the wrong road. We will pay for it. The average American taxpayer is going to pay dearly for this, if I’m not wrong.
I trust it is safe to say that when you refer to “government subsidies,” you are referring to subsidies provided by both federal and state governments. And if this is in fact true, then I am sure you were adamantly against the State of Alabama offering lucrative incentives (in essence, subsidies) to Mercedes Benz in the early 1990s to lure the German automobile manufacturer to the State.
As it turned out, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the state also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the state gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.
With all due respect, Senator, where was your outrage when all this was going on? Perhaps on principal you did disagree with your colleagues in the Alabama State Government over these subsidies, but I don’t recall you ever going out and publicly decrying Alabama’s subsidization strategy. I certainly don’t recall you going in front of the nation (as you did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If you had, however, you could have talked about how, applying free market principles, Alabama shouldn’t have had to resort to subsidies to land Mercedes Benz.
Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn’t have been required.
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