GE proclaims success, despite battery plant closure

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Schenectady

In the summer of 2012, hundreds of General Electric workers gathered in Building 66 on the company's city campus to celebrate the official opening of GE's $105 million plant that would manufacture sodium metal halide batteries, a new form of power that CEO Jeff Immelt said could grow into a billion-dollar business by the end of the decade.

Battery plant tax breaks

Recovery Act Advanced Manufacturing tax credits*$25.5 million

Empire State Development grant $12.5 million

Schenectady Metroplex Development Authority grant $5 million

NYSERDA grant $2.5 million

Local and state sales tax breaks $2.2 million

Total: $47.7 million

*General Electric said the IRS has not determined a final total and the credits are being reviewed

Source: Times Union research

But in 2015, after almost a year of workers taking buyouts or transitioning to different parts of the company, production of the so-called Durathon battery was halted.

The plant was initially projected to employ at least 350 people, but four union workers are all that remain at the facility that received $22.2 million in state and local grants and tax breaks to create what county officials then called the largest economic development project in the city's history. Also, the project was slated for up to $25 million in federal tax credits to offset the opening costs.

Still, despite what GE itself calls a failure based on the cost of the battery and other market pressures, the company says it met all of its investment and job goals — saying that more than 300 people continue to be employed by GE, with 100 salaried employees in the now-named "Energy Storage" division. GE said it "added and created" jobs, therefore meeting its commitments for the government grants and tax breaks it received.

"GE exceeded our commitment to hire 350 people, with total employment of 450 at the Energy Storage business' peak in 2014," GE spokeswoman Chris Horne said in a written statement to the Times Union. GE's detailed response last week to questions about the company's tax breaks marked the company's first public statements on the issue since November, when 34 of the remaining battery employees were given a 90-day notice that their jobs were being eliminated.

The company said 13 of those found other jobs in the company, adding: "GE's investment of $170 million also far exceeded our original commitment of $100 million."

But state Assemblyman James Tedisco, a Republican from Glenville whose district formerly included Schenectady, said it's his understanding that many of the union employees who transferred inside the company — most to the steam turbine/generator business — were filling spots that were left vacant through attrition, and that the company did not create the jobs it promised.

"If these corporations want our assistance, want our grants, our funding, they have to retain those jobs for a minimal amount of time ... or they have to give that money back," Tedisco said. "It doesn't appear to me they're living up to their obligation."

The $47.7 million in possible tax credits and grants the Schenectady battery plant received is arguably small compared to the billions in other incentives General Electric has accrued over the years for its worldwide business.

Empire State Development, the state's economic development arm, noted in its plans for the battery facility that since 2000 it has given GE, or GE-affiliated companies, five other grants totaling $28 million to create or retain jobs in New York state.

In terms of the battery plant, GE's initial technology involved a battery that could quickly produce power while storing large amounts of electricity.

It was meant at first for buses and locomotives, but GE then switched to look at it for the telecommunications industry.

It's believed the cost of producing the batteries, in tandem with the lowering price of oil and gas, contributed to Durathon's suspension.

"Durathon battery technology is well-suited for certain applications, but isn't cost effective enough compared to other battery technologies," said Horne, GE's spokesperson. "To be competitive, we sometimes have to make difficult business decisions, and unfortunately market realities required a shift in our strategy."

The Schenectady Metroplex Development Authority, which borrowed $5 million to give to GE as part of an incentive package to have the battery plant located in that city, continues to cheer the creation of the Durathon plant. Metroplex borrows the money for its grants and then uses the small percentage of Schenectady County's sales tax — less than one percent — that is dedicated to Metroplex to pay back the loan. Under that formula, it cost Metroplex about $60,000 to borrow the money for GE.

"The fact that GE held on to those employees, that those people are working today in Schenectady, is a positive, very positive outcome," said Ray Gillen, Metroplex's chairman. "It's not right to say the plant closed. The building is open."

Mike Ferrar, acting director of the New York state Authorities Budget Office, said local authorities or industrial development agencies often consider any new employment — even fleeting — a win if the company has threatened to lay off employees or move jobs elsewhere. As a result, many authorities across the state still do not include language in grant or tax-break agreements that require money to be returned if expectations aren't met.

"It's more of that relationship of: 'We're just happy that you're here,'" Ferrar said.

General Electric had been studying locations across the country for the battery plant.

As detailed in a 2011 New York Times story, General Electric is one of the most successful American companies at lobbying for changes in federal tax laws and obtaining tax credits.

Before announcing the creation of the plant with then-Gov. David Paterson in 2009, GE worked out a state and local deal that involved a complex package of $20 million in grants, and additional local and state sales tax breaks on construction materials that in the end added to $2.2 million.

GE also attempted to receive federal stimulus funding for the plant from the Department of Energy. After that failed, it was successful at being eligible for up to $25.5 million in tax credits under a Recovery Act Advanced Energy Manufacturing program announced by the White House in January 2010.

The battery plant was part of $115.5 million in tax credits GE got through that program for sites stretching from Vermont to Alabama.

The company, however, said the level of battery plant credits is still being reviewed by the Internal Revenue Service. The IRS would not release details on GE's case, saying tax information relating to a specific entity or individual is private.

The battery plant's money grants were comprised of the $5 million in Metroplex money; a $2.5 million research grant from the New York State Energy, Research and Development Authority (NYSERDA) and a $12.5 million grant from Empire State Development.

The local union then had to negotiate a temporary layoff of workers in turbine and generator manufacturing with the company in order to reduce costs ahead of the plant's opening, the Times Union reported in 2010.

"The reality is GE is a tremendously profitable company, with billions and billions of dollars in profits," said Ron Deutsch, executive director of the Fiscal Policy Institute, a non-partisan think tank in New York state. "Quite honestly, they don't need our tax incentives to locate anywhere. ... It's not a good use of taxpayer dollars."

Empire State Development had a jobs agreement with what was called GEMx Technologies, the limited liability company name used by the battery plant. GE says that the entire grant has been paid. But there was a recapture stipulation in the agreement that called for certain percentages of money to be paid back if employment levels weren't met up to five years after the state's payment to the company was made.

On Saturday, ESD spokesperson Chyresse Wells sent the Times Union a statement saying GE will continue to employ nearly 300 former GEMx workers and the state's project review showed "GE far exceeded investment commitments... and, for two years, its job commitment as well."

The City of Schenectady Industrial Development Agency said at the plant's height in 2013 it employed 386 workers, according to documents filed with the state Authorities Budget Office. General Electric's spokesperson said that number was only based on a quarterly estimate, and the company maintains that at one point 450 people did work there in 2014.

In September 2014, however, union workers were put into a temporary layoff when an industrial furnace in the factory malfunctioned. Those with at least six months experience got paid 75 percent of their wages while they waited for the problem to get fixed. Then in January 2015, GE announced production would be greatly scaled back, with 50 employees remaining at the factory.

Brian Sullivan, business agent for the unionized workers at the plant, defended GE's actions concerning the battery plant and its levels of employment.

"Any employee who wanted to continue to maintain their employment had that opportunity. Anyone who wished to leave, was offered a generous exit package," Sullivan wrote the Times Union in an email. "It is unprecedented that a negotiation like this could happen. The company and the union were able to agree to relocate all our folks, without any layoffs! That is huge! OUR biggest investment are the employees! That is how we all stay in business!"

Sullivan said out of 235 unionized workers at the plant, 61 took a buyout before the plant's closure, with the remaining employees switching to the steam turbine business.

In February 2015, the Times Union reported some employees chose to leave when faced with changes in shifts and work responsibilities.

General Electric said they're actively looking for new manufacturing opportunities for Building 66.

GE is now working on customizing batteries depending on the type of system it will be used in.

"GE remains committed to its Energy Storage business," said Horne, GE's spokesperson. "To meet the needs of today's evolving global market we have transformed into a full energy storage system and solutions provider, rather than simply a battery manufacturer."

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