Amid Gotion furor over China, Michigan vows to change how it vets firms

• Concerns over a planned EV battery plant and the company’s ties to China have prompted the MEDC to reconsider its vetting process 
• State development officials say they will also seek more community input earlier in site decisions
• Lawmakers raised more questions about whether to approve $175 million in incentives for Gotion Inc. for the Big Rapids project

LANSING — The Michigan Economic Development Corporation said it is changing how it evaluates large-scale development after backlash over a proposed EV battery component factory in Big Rapids involving a company with ties to China exposed holes in its international vetting.

Nonetheless, the MEDC continues to recommend the state spend an additional $175 million in incentives on Gotion Inc., which plans to invest $2.3 billion in the factory that could employ up to 2,350 people.

“If it’s going to happen in the U.S.,” said Quentin Messer Jr., CEO of the MEDC, “why wouldn’t we want it to happen here in Michigan?”

Related:

• Jobs v. China: How politics, communist ties roiled $2.3B Gotion plan in Michigan
• Gotion funding on hold in Michigan, amid uproar over China ties
• McMorrow: Democrats plan changes to Michigan’s business incentives

But after weeks in which conservative activists and, increasingly, Democratic lawmakers raised concerns about Gotion, Messer said his office is now exploring U.S.-based Gotion’s corporate ties to its Chinese parent company, Gotion High-Tech, and the Chinese Communist Party. 

“We are being much more aggressive about trying to understand ownership structure,” Messer told Bridge Michigan Thursday. That includes, he said, whether U.S subsidiaries of Chinese companies have independent boards or “the engagement of any shareholder with the Chinese Communist Party.”

He said MEDC is now asking questions about any such connections “in a much more intentional and consistent manner … because of geopolitics changing.”

Messer talked to Bridge about the MEDC’s new approach to Gotion and other businesses seeking state incentives — an approach he described as “evolving” this year — following his testimony Thursday before the state Senate Committee on Community and Economic Development.

The committee questioned Messer about the Strategic Outreach and Attraction Reserve (SOAR) fund, the $1.6 billion pool of state money established in late 2021 to help Michigan compete with other states for so-called transformational business projects. 

While SOAR initially passed with a bipartisan majority, questions have since intensified about whether the spending is worth it. State Sen. Mallory McMorrow, a Democrat from Royal Oak and chair of Senate Appropriations, said the legislature now expects to reform its incentive strategy, though no details have been announced.

Messer said about 16 projects are currently in the MEDC’s pipeline, with two accepted offers totaling about $100 million and 14 more in earlier stages. None have been made public, he said, but he said the SOAR funding has been an important recruiting tool.

In the meantime, the state’s approval of the $175 million SOAR incentive for Gotion — part of $1.14 billion in an incentive package from state and local governments and Consumers Energy —  is on hold. Legislators say they still have unanswered questions about the proposed factory that would be in Green Township, north of Big Rapids in Mecosta County. While the community was largely in favor of the project when it was announced in October, over months the proposed factory has divided the community. 

Support comes from the number of jobs that will pay starting production wages of $24 per hour — or about $50,000 per year — plus benefits, an amount more than Mecosta County’s median household income. 

Detractors have largely focused on the Chinese connection, at a time when U.S.-Chinese relations have become strained and the Chinese Communist Party has become more aggressively involved in corporate activities. 

Chuck Thelen, Gotion Inc.’s vice president of North America Manufacturing, has said there is no connection between the Chinese Communist Party and Gotion’s U.S. operations. 

Senators on the Appropriation Committee did not name Gotion on Thursday, but many of their questions stemmed from the issues arising from the backlash in Big Rapids.

State Sen. John Cherry, a Democrat from Flint, asked Messer about the role of community acceptance in SOAR-funded projects. Protests are taking place in Marshall, where Ford plans a battery factory, and Eagle Township, where a megasite is being assembled with semiconductors in mind. In contrast, Van Buren Township, in western Wayne County, welcomes the Our Next Energy factory, which had its $200 million SOAR award finalized by the state on Wednesday.

“We don’t want to be forcing projects down the throats of people who don’t want them,” Cherry said. 

Messer told Cherry that the MEDC has not screened for local receptiveness to projects;  local economic development offices and elected officials are part of the planning. However, he said, community reaction will be considered in “a much more explicit manner,” in the future, possibly through asking companies to fund more community engagement. 

“It’s my belief that the majority of residents want the opportunities (from the economic development investment),” Messer said. However, he added, opposition “does come up.”

Messer, who called the Big Rapids project an “economic anchor” for the struggling community in his presentation, also took questions on equity and transparency, as well as on how MEDC weighs foreign investment. 

In the case of Gotion, Messer said the company was not flagged by the federal government as posing a concern through either the foreign agent registration or the The Committee on Foreign Investment in the United States, which reviews transactions for national security risk. (Gotion Inc. said it has voluntarily submitted its funding details to this committee.)

State Sen. Jonathan Lindsey, a Republican from Coldwater, asked about screening for security risks and whether the MEDC is doing basic checks or proactively asking “what are the potential threats associated with any project.” 

“Is there room for improvement for us to maybe set new standards to say we need to do more review on these things?” Lindsey said. 

Messer replied that the Legislature must decide what extra vetting it wants to make a part of the SOAR program. When SOAR was established, he said, “it seems like a quaint time in the geopolitical world order.”