State drafts all-out plan to keep Kmart

[Allan]

State drafts all-out plan to keep Kmart

Mich. faces uphill battle because it has more tools to lure companies than retain them.

By Daniel Howes / The Detroit News

Convincing Kmart Holding Corp. to keep its headquarters in Michigan is a tough sell, but the state isn't giving up on the Troy-based retailer.

Not yet, at least.

Among the incentives aimed to keep Kmart in its ancestral home are cuts in its Single-Business Tax burden, creative financing to offset infrastructure costs associated with a move from its oversized building on West Big Beaver Road and help in selecting a site for a downsized, 400,000 square-foot headquarters.

The prospective sites being touted for Kmart in southeast Michigan include the Centerpoint East office building at the corner of South Blvd. and Opdyke Road; several sites in Troy, which is offering to abate a portion of Kmart's property taxes on any new headquarters; and the city of Detroit, which is pushing locations along Campus Martius and the Detroit River.

Finding would-be locations that suit Kmart's slimmed down needs really is not the problem. Michigan's bigger challenges are the comparatively few options it, and most other states, can offer companies to keep them from leaving, as well as the general desire by Chairman Edward Lampert to use a headquarters move as a pretext to shed as many as 1,800 of Kmart's 2,250 headquarters jobs and to remake Kmart's corporate culture.

That's probably tougher than moving offices to a sunnier clime, as the folks at Ford Motor Co.'s Lincoln Mercury division can attest now that they're back in Michigan from California and still groping for a future.

Neither of the conditions weighing on Michigan's bid to retain Kmart can be overcome easily. The state's incentive package for Kmart is "very aggressive," the president of the Michigan Economic Development Corp., Donald Jakeway, told me Tuesday.

"What we're trying to do is keep a corporation in Michigan that wants to get out. We've got an uphill battle. All states have that problem - they have many more tools to attract (corporate investment) than to retain it."

Michigan is no exception.

The campaign to keep Kmart puts the state on the downside of an equation that typically favors states wooing prospective corporate citizens, not those desperate to keep others from leaving.

Enter the state of Georgia and metropolitan Atlanta, the leading candidate outside Michigan to land Kmart. Companies seeking to establish or relocate headquarters in Georgia are eligible to receive income tax credits of $5,000 per job per year if the jobs pay twice the county average wage rate, according to economic development policies in Georgia.

The tax credits are available to companies that provide 50 or more jobs, invest just $1 million or pay wages that exceed a Georgia county's average wage rate. Altogether, those are some pretty low thresholds in a Sun Belt state that also should be able to undercut Michigan's prevailing wage rates, higher workers compensation and health-care costs.

One Oakland County official says Michigan can't "even come close" to the Georgia income tax credits.

Not that Michigan can't be competitive. This cornerstone of the Old Economy has built a reputation under its former Republican governor and his Democratic successor as a competitor for new business investment, much of it focused on technology and automotive research and development.

But housing the R&D operations of the world's largest pharmaceutical company, Pfizer Inc., in Ann Arbor and welcoming tech expansions for Toyota, Nissan, Hyundai and Detroit's automakers are different gambits than making a successful play to keep Kmart.

Selling Michigan to the new Kmart brass - most of whom have no connections here - is tougher because the big-and-slow company culture Kmart built within Michigan is perceived to be a major cause of the retailer's continuing troubles.

That may be partly true. The ineptitude of Kmart's directors, their misguided strategies, poor personnel choices and the apparent corruption of several key executives didn't help much, either.

Severing the new and Kmart from the old could help build a new culture. But it's hard to see how new, non-Michigan faces at headquarters would persuade disaffected consumers to abandon Wal-Mart and Target to give Kmart another chance. Again.

No, that decision would be made strictly on prices, merchandise and the condition of Kmart stores, not the location of its headquarters or whether the chairman cleaned house before he moved down south to collect a bonanza of tax credits and incentives.

If Kmart isn't fixable, why bother moving? If it is fixable, are its Michigan roots the biggest impediment to getting it right? Probably not, which is why Michigan should press its case until the Blue Light flashes for the last time.

Daniel Howes' column appears Sundays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or at [email protected].