Did Washington Lose 6,500 Jobs Over Right-to-Work?

July 30, 2014

News broke last week that Governor Inslee tried to “woo” Tesla Motors to build one of the biggest factories in the world in Washington State.  Unsuccessfully, it turns out.

The factory, dubbed a “gigafactory” by Tesla, will be 10 million square feet and employ an estimated 6,500 people to produce the lithium-ion batteries for the electric cars manufactured by Tesla.  A professional site consultant for major companies called Tesla’s $5 billion gigafactory the “most coveted economic development project in North America.”

The Washington State Department of Commerce confirmed the state mounted an “aggressive effort” last fall to convince Tesla to build the battery factory here.  Governor Jay Inslee, who ran his campaign with the promise of creating thousands of “green jobs” in Washington, even became personally involved in the state’s bid to win the project.  It seems that wasn’t enough to convince the company to pick the Evergreen State—Washington didn’t even make it to the finals.  The company has narrowed the finalists for the multi-billion dollar project down to New Mexico, Arizona, Texas, and Nevada, with California being considered as “improbable but not impossible,” according to Tesla CEO Elon Musk.

In fact, rumor has it the company began building the factory in Nevada a few weeks ago and is planning to break ground in another state as a back-up plan to safeguard against any obstacles that might delay Tesla’s ambitious 2017-completion date for the facility.

Why not Washington?  The professional site consultant, who has advised companies such as AT&T, Chevron, Dell, Honda, PepsiCo and Verizon Wireless, said Washington has a lot to offer Tesla.  Topping the list is the state’s low cost energy and the fact BMW builds the carbon fiber for its electric cars in Moses Lake.

But in the end, the consultant says the state’s “business climate disadvantages” killed Washington’s chances to land the factory.  And the state’s number one “business climate disadvantage” is the lack of a right-to-work law.

"Number one, it’s not a right-to-work state.  And this issue of contentious labor-management relations—with disputes with unions and work stoppages—that’s something that will make Elon Musk, the CEO of Tesla, cautious about investing in Washington state because of his experience in California."

“Manufacturing companies look for reasons to scratch off states when considering where to build major facilities—and no right to work law is at the top of the list.  I can’t underscore how critical right-to-work status is.”

Another professional site consultant agrees, saying that 50% of manufacturers automatically screen out any nonright-to-work state.

Earlier this year the United Auto Workers union announced it would seek to unionize Tesla Motors.  Less than a week later, Tesla announced the site finalists for its new gigafactory.  All are right-to-work states, with the exception of New Mexico.  California, another nonright-to-work state, was not on the original list of finalists, but was added in the “improbable but not impossible” category last month in what industry experts believe to be either a negotiating ploy to pressure the other states or an attempt to appease officials in the state where Tesla builds its cars and is headquartered.

And while New Mexico is not a right-to-work state, it has one of the nation’s lowest rates of unionization.  According to the Bureau of Labor Statistics, unions represent just 7.3% of New Mexico’s workforce; Arizona is only 6%, as is Texas.  Nevada has a much higher rate, with 16.1% of its workforce unionized; but it is a right-to-work state with one of the nation’s most competitive business climates. 

In comparison, Washington is not a right-to-work state, has a difficult regulatory climate for businesses and has one of the highest unionization rates in the nation at 19.7%.  The national average is 11.3%.

The lack of a right-to-work law in Washington has long been rumored to be a driver in Boeing's decision to locate manufacturing facilities in other, right-to-work states. On the heels of the contentious contract negotiations between Boeing and the machinists union last year, some lawmakers began calling for a dicussion on making Washington a right-to-work state.  Perhaps the loss of the Tesla gigafactory—and its 6,500 jobs and billions in direct investment—will add fuel to that fire.

UPDATE: Tesla announced it broke ground in Reno, Nevada in June for its gigafactory, but is still considering back-up sites in Arizona, Texas, New Mexico and California.