By Deepa Seetharaman
DETROIT Dec 11 Michigan, a symbol of U.S.
industrial rise and decline, is about to get a second look from
The heavily unionized state took a big step toward
encouraging business investment on Tuesday with "right to work"
legislation that prohibits union membership as a condition of
While Michigan must still address other problems such as its
outdated infrastructure and high taxes, the legislation puts the
Wolverine state in the company of 23 other states that have
passed "right to work" laws to attract investment.
"We're going to see some major investments in Michigan over
the next two to three years," said Neil De Koker, the head of
Troy, Michigan-based trade group the Original Equipment
Suppliers Association, which represents auto component makers.
Supporters of right-to-work said it tempers industry fears
of dealing with the United Auto Workers union and makes Michigan
more competitive against neighboring industrial states such as
Ohio, which does not have such a law.
"Maybe this is a game-changer for Michigan," said Steve
Bernstein, a labor lawyer with Fisher & Phillips. "If we're
going to compete with states like Ohio, maybe they're saying,
well, this is an ace in the hole for us."
But experts cautioned against expecting a flood of new
investments or immediate improvements in the state economy. The
two bills passed on Tuesday do not affect existing labor
agreements, including the UAW's deals with the big three U.S.
automakers that expire in 2015.
General Motors Co, Ford Motor Co and Chrysler
Group LLC run 13 plants in Michigan, out of a total 30
factories nationwide, according to Morgan Stanley.
The UAW remains a strong force in Michigan, where 17.5
percent of workers are unionized, the fifth-highest level in the
"It's still the headquarters of the UAW," said Arthur
Schwartz, president of Labor and Economics Associates and a
former labor negotiator for GM. "You think the UAW will not try
to organize an auto-related business? That's not going happen."
NOT A ONE-ISSUE THING
In 2007, the UAW agreed to a two-tier wage structure and
last year agreed to implement more flexible work rules and
eliminate the jobs bank program that gave laid-off workers
nearly their full salary and benefits.
But those changes have not been enough to change the UAW's
reputation. Many auto investors were worried the UAW will push
to recover benefits when the current contract expires in 2015,
Morgan Stanley analyst Adam Jonas said on Monday.
Investors feared that "all the good work since the crisis
could be chipped away over time," Jonas said during a call with
investors. "Moving to right-to-work in Michigan would go some
distance towards calming those fears."
Companies also look for a talented labor pool - one
advantage for Michigan, which has skilled trades people and
engineers who are now unemployed or under-employed in the wake
of the auto sector's restructuring.
Labor laws are also an important consideration for companies
when they search for sites to build factories, but local and
state tax rates weigh heavily on decisions.
Eliminating Michigan's tax on industrial personal property
(a tax on manufacturing equipment) would go a long way to
improving the state's competitiveness, said Rick Baker, the head
of the Grand Rapids Chamber of Commerce.
Nearly all of Michigan's neighboring states have eliminated
the tax, but now the question is how do communities offset that
loss in funding to pay for public services.
"It's not just a one-issue competitive thing," said Bob
Clark, a labor relations consultant in Brighton, Mich., and
Ford's former labor economist.
Ford pays 80 percent of its North American property taxes in
Michigan, even though only half its property is in the state.
This spring, Ford Chairman Bill Ford has called for the repeal
of the tax.