1. When GMC closed the Ypsilanti plant, almost 20 percent of Ypsilanti’s population became unemployed overnight. Who were the primary and secondary stakeholders affected?

2. How would you describe GMC’s actions from a maximizing profits or a moral minimum perspective?

3. GMC was found to have the legal right to close the plant. Was its action ethical? Why or why not?

General Motors Corporation (GMC) operated two plants in Ypsilanti Township, Michigan (Ypsilanti). From 1975 to 1988, GMC took advantage of 11 tax abatements, which lowered or eliminated taxes owed on real estate, provided for in a Michigan state statute to encourage business owners to create and maintain jobs in the state. As part of the tax abatement application process, GMC would consistently represent that its plants offered local residents nearly 13,000 jobs. In 1991, GMC announced that it was consolidating its operations and closing one of the Ypsilanti plants. More than 4,000 jobs were lost. Ypsilanti sued GMC for breach of promise and for misrepresentation. The lower court ruled in favor of Ypsilanti, finding that GMC’s promises were binding and that allowing GMC to close the plant would result in unfairness and would impose an extreme burden on Ypsilanti residents. 

The Michigan Court of Appeals reversed the lower court and found for GMC. The court found that the promises of long-term relationships and the expectation of continued operations based on receipt of the tax abatements were not legally binding on GMC. 

“First, the mere fact that a corporation solicits a tax abatement and persuades a municipality with assurances of jobs cannot be evidence of a promise. The very purpose of tax abatement legislation is to induce companies to locate and to continue business enterprises in the municipality. . . . The fact that a manufacturer uses hyperbole and puffery in seeking an advantage or concession does not necessarily create a promise. For example, statements such as ‘We’re partners’ and ‘We look forward to growing together’ were found not to constitute a promise to keep a collective bargaining agreement in force for the foreseeable future so as to create [a binding promise generating] a continuing duty of the employer to honor an expired agreement. . . . It has never been held that an abatement carries a promise of continued employment.”