Officials in Ohio are laying down a big bet. They're gambling that hundreds of millions of dollars worth of incentives will convince Fiat Chrysler Motors (FCA) to locate its new Jeep Wrangler production line at the company's plant in Toledo, where the sport utility vehicle is currently produced.
According to The Wall Street Journal, a proposal being discussed would allow Fiat Chrysler to finance the new facility through government-backed programs that would allow the company to repay the money through a "lease-to-own arrangement." It's unclear exactly how the purchase would be financed, and officials with the automaker and the state declined to disclose details of the discussions. Building an auto plan will cost between $200 million and $400 million, according to the newspaper.
JobsOhio, a state economic development agency, will disclose the amount of incentives if an agreement is reached, according to Matt Englehart, an agency spokesman.
"Northwest Ohio's workforce is second to none and another great asset in the effort to keep the Wrangler in Toledo," he wrote in an email to CBS MoneyWatch. "We will continue to work closely with Fiat Chrysler Automobiles as they near a decision."
Fiat Chrysler has told officials in Toledo that they'll need more land than the 100 acres that they've cobbled together for the automaker, the paper says. A spokeswoman for Toledo Mayor Paula Hicks-Hudson didn't return a phone call seeking comment. Jeeps have been made in the Ohio facility for decades.
States are willing to give large manufacturers tax incentives to locate their operations in their areas because they generate lots of jobs and create positive public relations. Alabama has made hundreds of millions of dollars worth of deals with Hyundai, Daimler and Honda (HMC) in recent years. Volkswagen (VLKAY) has gotten huge breaks from Tennessee.
More recently, Nevada has provided more than $1 billion in incentives to electric-car maker Tesla (TSLA) to locate its battery gigafactory in the state. New Jersey officials provided Japanese automaker Subaru a $118 million tax break last year for moving its U.S. headquarters to the economically stressed city of Camden, about 4 miles from where its offices currently are located.
Critics of these of deals note they don't guarantee jobs.
"For example, in 2009 NCR Corp. announced that it was relocating its 125-year-old headquarters from Dayton, Ohio, to a suburb of Atlanta, costing Ohio nearly 1,300 jobs," according to the nonprofit Good Jobs First. "The announcement took place not long after Ohio eliminated two taxes deemed unfriendly to business: the corporate franchise tax and tangible personal property tax."
Fiat Chrysler CEO Sergio Marchionne has said he would like to keep Wrangler production in Toledo. But as the Toledo Blade noted, he told an industry conference that it would "cost significantly more to do that" than build Wranglers at another plant. The next-generation Wrangler, which will have a lighter aluminum body, is expected to begin production in 2017.
"We are not commenting on any aspect of the incentive package presented to the company," wrote Jodi Tinson, a spokeswoman for the automaker, adding "we do not have a timetable for a decision. Toledo is one of our highest-ranking plants as measured by World Class Manufacturing. Mr. Marchionne has also been on record with his praise for the Toledo workforce."