Posted by Joseph Y. Calhoun, III

Well, not exactly.  A story in the WSJ today highlights the criteria GM used to choose where to manufacture their new green, government mandated, econobox.

When it was deciding where to build its new compact car, General Motors Corp. made a point of saying it would push politics aside and use strictly commercial criteria.

So Tennessee’s three top officials were astonished last month, in a meeting with GM, when they were told the first two criteria were “community impact” and “carbon footprint” — or how the choice would affect unemployment rates and carbon-dioxide emissions.

“Those didn’t strike us as business criteria at all,” said Tennessee Sen. Lamar Alexander, who was joined in the meeting by fellow Republican Sen. Bob Corker and the state’s Democratic governor, Phil Bredesen. Those factors, Mr. Alexander said, “seemed odd for a company struggling to get back on its feet.”

On June 26, after a monthlong competition, GM tapped an existing factory in Orion, Mich., pushing aside competing plants in Spring Hill, Tenn., and Janesville, Wis.

All the sites had merits, but the Michigan plant had additional attractions. It is embedded in a struggling state that is a Democratic stronghold. The Orion site, 35 miles from GM’s Detroit headquarters, is also close to tens of thousands of current and former United Auto Workers union employees, whose pressure previously helped persuade GM to scrap plans to build the car overseas.

Other bloggers are playing up the partisan political angle which is obvious:

Tennessee Sen. Lamar Alexander was shocked, shocked when the decision was made to build the government’s new dream car at the Lake Orion plant near Detroit. The three plants competing to build Obama’s mini Greenmobile were Janesville, WI, Spring Hill, TN, and Lake Orion, MI. Michigan won out as a favor to Governor Granholm and the very powerful and rich backers of the Democratic Party, the UAW. I wrote about the GM and Chrysler takeovers being orchestrated political restructurings aimed at serving the larger interests of the US government. When the government, along with the pay-for-favors thieves in Congress and special interest power players, nationalizes and runs a business, decisions will always be made with political considerations/favors being first up on the agenda. Decisions will never be made on the basis of profit-and-loss and winning and retaining satisfied customers.

I think the more interesting part of the article is that even with massive subsidies, it appears that GM will not be able to turn a profit on this car:

GM plans to invest more than $800 million to retool the Orion plant, with the aim of building its first U.S.-made compacts by 2011. The operation is expected to employ 1,400 workers. The UAW agreed to allow GM to employ lower-cost workers earning $14 to $16.23 an hour, compared with the current base of $28 an hour, with less-expensive benefits than traditional assembly-line personnel.

Troy Clarke, GM’s head of North American production, told reporters after the Orion announcement that GM was confident “that we have the ability to do this on a very cost-competitive basis.”

Even with the labor savings, analysts question the logic of building a compact car in the U.S. Margins are so tight that even Toyota and Honda have opted to build their smallest models in countries with lower labor costs. “Virtually nobody makes cars that size in the U.S.,” said CSM Worldwide automotive analyst Michael Robinet. “There is a reason why GM at the outset was going to bring this car in from China.”

Estimates peg GM’s losses on U.S.-built small cars at roughly $1,000 to $2,000 per vehicle sold in recent years. Lawmakers and congressional staffers involved in the compact-car competition said GM acknowledged the company expected to struggle to break even on the venture. GM views small cars as central to its bid to become what Mr. Clarke called “the greenest car company in the world.”

Anticipating higher gasoline prices, the cars will be “more and more toward the sweet spot of the market” when they roll off the assembly line sometime after 2012, Mr. Clarke said. Even before the competition got under way, GM officials told the U.S. auto task force in late May they were inclined to pick the Orion facility.

Michigan won the bidding by offering $779 million in business tax credits over the next 20 years, along with $130 million in federal funds for worker training. Local officials threw in additional $102 million in incentives.

If Michigan wants companies to locate in their state, maybe they should just cut taxes across the board rather than playing favorites. They couldn’t offer this amount of tax credits if their rates weren’t already so high. Besides how is this fair to a company that is already located in Michigan and paying the taxes GM won’t? 

Even with $1 billion in tax subsidies and lower wages, GM still can’t turn a profit on this car. If this is the plan to revive GM, it will remain on government life support for a long, long time.