Gotion Funding Left Behind . . . For Now
April 18, 2023
Article courtesy MIRS News for SBAM’s Lansing Watchdog e-newsletter
Gotion Inc. – a battery parts manufacturer with a questioned connection to the Chinese Communist Party – did not receive the blessing of the Senate Appropriations Committee Wednesday to receive state funding for a proposed factory in Big Rapids, but MIRS has learned the issue is one of educating members and that the project is not on the ropes.
The massive project promises to bring 2,350 jobs and $2.5 billion in investment to a historically impoverished Northern Michigan community, but the taxpayer-fueled incentives going to the company are ginning up political heartburn over public concerns that Michigan tax money could fund the Communist Party.
Senate Appropriations Committee Chair Sarah Anthony (D-Lansing) didn’t rule out the project coming back for a vote later and the governor’s office did not signal in its statement on the matter that the necessary legislative approval for the project was in doubt.
“I think anything is possible. Me fitting into a size two is possible,” said Sen. Sarah Anthony (D-Lansing), chair of the Senate Appropriations Committee, when asked if not signing off on the money for Gotion is possible. “But I think at the end of the day, we have to do our due diligence, right? And so that’s just what it is.”
On Oct. 5, 2022, Gov. Gretchen Whitmer commemorated the Michigan Strategic Fund (MSF) Board’s decision to officially request the House and Senate Appropriations committees to transfer $175 million from the state’s Strategic Outreach and Attraction Reserve (SOAR) Fund to support Gotion’s planned battery component manufacturing facility in Big Rapids and Green Charter Township.
The development, which would assemble four new production plants and dedicate 2 million square feet to producing cathode and anode battery materials, was highlighted by the state’s economic development corporation as being the largest-ever project for this region.
Simultaneously, it’s been criticized for having a parent company, Gotion High Tech Co. LTD, with July 2022 Articles of Association reading “the Company shall set up a Party organization and carry out Party activities in accordance with the Constitution of the Communist Party of China. The Company shall ensure necessary conditions for carrying out Party activities.”
Wednesday, the Senate Appropriations Committee moved forward with approving two SOAR Fund transfers 15-4 – consisting of $200 million for Novi-based energy storage and battery technology company Our Next Energy Inc. and $210 million to Ford Motor Company’s planned Marshall battery plant – while leaving the Gotion-related awards behind for now.
Because the grants have already received a greenlight from the Michigan Economic Development Corporation (MEDC) and the House Appropriations Committee, the Senate panel is their final stop before being deployed.
When asked who is the committee’s source of verification surrounding national security risks, Anthony explained “we are relying some on the MEDC, and then some of those questions we haven’t thoroughly started to explore quite yet, but again that’s the purpose of us waiting and holding off on this meeting in order to get those questions answered.”
While Gotion High tech Co. LTD is based in China, its subsidiary, Gotion Inc., is headquartered in California with research and development centers in Ohio, Singapore, China, Japan and Germany. The Silicon Valley subsidiary has also stated it will be voluntarily submitting to a financial review through the Committee on Foreign Investment in the United States, which is overseen by the U.S. Department of Treasury.
“Pressure is being put on from the citizen level to elected officials in both chambers. Questions are being asked, facts are being put before them that they have never had put to them before, it’s as if the scales are falling off their eyes . . . they’re having concerns . . . could this be injurious to their election chances?” said Joseph Cella, a previous U.S. ambassador to Fiji who’s now leading the Michigan-China Economic Security Review Group with Pete Hoekstra, the 2004-2007 chair of the U.S. House Intelligence Committee.
Cella told the media after Wednesday’s committee meeting that Gotion fits the profile of a subnational incursion that presents a national security threat to the U.S.
He said it doesn’t matter if a company is discussed as being merely a subsidiary, as not being affiliated with the Chinese Communist Party (CCP) or as being operated in California, because similar entities have been used as organs of the Chinese United Front Work Department and the Ministry of State Security (MSS).
“Whatever charge they’re given by the MSS, they have to do it. Things won’t end well if they don’t . . . so these are all reasonably prudent concerns. This has been a very hasty, rushed process despite the suggestions by the MEDC that due diligence has been done and everything’s fine,” Cella said.
Sen. Roger Hauck (R-Union Twp.), whose district covers Gotion’s designated site, told MIRS he ultimately supports the Gotion project “with reservations,” adding that the state should follow requests from the Big Rapids community to the federal government to investigate if there are any security threats involved with the development.
“But it’s a huge issue. I don’t know why China’s kind of taking over the United States secretly . . . I’m not a big conspiracy (listener), but you can kind of see it happening and I think we need to start pushing back,” Hauck said. “And if China misbehaves, there’s no reason why we can’t just say we’re not going to allow China to own property in our country anymore.”
Mecosta County is additionally surrounded by counties with some of the highest poverty rates in the state, like Isabella County with a 23.4% poverty rate, Lake County with a 22.3% poverty rate and Clare County with a 20.6% rate (from a University of Michigan report).
Hauck said to his knowledge, there isn’t any other comparable project that will deliver the same number of new jobs to the area.
“I’m hearing from both sides. Some people are concerned about the China aspect of it. Some people, obviously, they just don’t want to see their small town get larger,” Hauck said. “I think there’s more people who are for it because of the jobs. I can’t prove that, but just kind of what I’m hearing . . . and it’s a small community, (so a lot of people) don’t want to speak out – for it – because they’re afraid they’ll get hammered on.”
Rep. Tom Kunse (R-Clare) said on Off the Record that he backed the project 100% when it came out in September and October, “but nothing good has come since and it’s the connections to the Chinese and Communist Party.”
Kunse said he doesn’t think the CCP will set up shop in Big Rapids, but does list it as a problem when the board chair poses with members of the party and the company itself is “a fully owned subsidiary.” He has also indicated believing there might be a petition effort run by opponents to block the project.
When asked to comment on the Senate panel leaving the Gotion SOAR Fund awards behind and unauthorized for now, the governor’s office looked to the future.
“For the first time in our state’s history, we have a long-term plan to continue winning historic projects in the future. We are partnering with leaders in the legislature to compete for every job and every dollar of investment to make sure Michigan is the number one choice for businesses when they are looking to create good-paying jobs and investment,” said Bobby Leddy, Whitmer’s communications director, to MIRS.
Outside of the SOAR Fund, the Gotion project was additionally approved to receive $540 million in estimated state tax exemptions.