Republican tech CEOs do win elections -- in Michigan

November 4, 2010: 11:12 AM ET

The self-styled "toughest nerd in Michigan" was quiet on the auto bailout that may have saved his state's largest industry. But former Gateway CEO Rick Snyder is now taking on one of the U.S.'s biggest turnaround jobs: governor of Michigan.

By Doron Levin, contributor

One of the nation's sickest economies will soon be moving to intensive care. Rick Snyder, a political outsider and former computer executive heading the Republican ticket, obliterated his opponent in the race for Michigan's governor on Tuesday, promising to restructure a state economy long dominated by unions and automotive manufacturers.

Snyder, 52, rode into office on a twenty-point margin of victory that, together with GOP gains in the legislature, appears to have delivered him a broad mandate to reform taxation, cut the deficit, reduce the size of government and streamline regulation. He defeated his opponent, Virg Bernero, the mayor of Lansing, who was endorsed by the United Auto Workers union.

The CPA and former chief executive of Gateway, who styled himself as "one tough nerd," spent about $6 million of his own money to finance his campaign, while forgoing contributions from political action committees. He has promised to try to abolish Michigan's business tax, which is based on income and revenue, often imposing liabilities on enterprises that are unprofitable.

By substituting a 6 percent tax on income, Snyder has said he could reduce taxes by about $1.5 billion while making the burden "fairer." Economists estimate that Michigan's current budget deficit is between $1 billion and $1.6 billion. The state government has shut down twice since 2007 due to partisan wrangling over how to balance revenue and expenditures.

Snyder, hoping to replace lost automotive jobs and revenue, is opposed to tax incentives for attracting new industry to Michigan from elsewhere. "What people must understand is that these incentives aren't free, they result in everyone else having to pay higher taxes,'' he said. "We have to make the state favorable for business in a way that will cause them to invest, expand and hire more people. Then others will want to come."

Michigan under current Gov. Jennifer Granholm has granted the motion picture industry a 40 percent tax incentive for movies filmed in the state, which has cost about $100 million. Snyder has said the incentive will "probably have to be scaled back."  Local investors in sound stages and other businesses tied to moviemaking include several backers close to his campaign.

In September the state's unemployment rate stood at 13.1 percent, compared with the national rate of 9.6 percent. The bankruptcies of General Motors and Chrysler, scores of automotive suppliers and hundreds of smaller businesses have devastated economic activity, as well as the state's morale. Snyder, speaking on his bus Friday, said "the state's culture needs to change."

"We've got to stop being so negative in this state, stop looking in the rear-view mirror and stop being divisive among ourselves,'' he said. "I'm going to tell people who come to us for money, don't tell me how much you want, for education, for example.  I'm going to ask they what kind of outcomes you want to achieve for Michigan and its people, then we'll see what we're paying for.''

As governor, Snyder could be in the position of telling powerful public employee unions like the Michigan Education Association that the state can't afford the same level of salaries, pensions and benefits it has been paying. He knows that union opposition to budget-cutting by a state that birthed the United Auto Workers union could get ugly. But he's not intimidated.

"When I was at Gateway if I asked why we were doing something and was told that's the way we've always done it, I threw that person out of my office," he said. "I was No. 2 at Gateway for about six years, so I was the vice principal," the person who sometimes had to deliver bad news: "I don't yell and scream, but people will find that I get the job done."

From 1999 to 2009, Michigan's ranking in per capita personal income dropped to 37 from 17 among the states, largely due to job cuts at automakers and suppliers and lower production of vehicles. Since 2000 Michigan has lost 867,500 jobs or almost a fifth of the total.

"We used to be a wealthy state, now we're a poor one," said Joseph Lehman, president of the Mackinac Center for public policy, based in Midland, Michigan. "We can no longer afford the burdens we put on business that we once did." By bringing public-sector compensation in line with the private sector, Michigan could save $5.7 billion annually, according to an estimate by the Mackinac Center.

Snyder said he sees himself in the mold of other Republican governors, such as Chris Christie of New Jersey, who are taking a hard line on state fiscal issues.

"I think Christie has been a great example for all of us,'' said Snyder of New Jersey's GOP governor, who has gained renown by attacking his state's budget deficit with aggressive tactics such as last week's decision to halt construction of a $5 billion rail tunnel to Manhattan.
Michigan has few, if any, projects whose cancellation could save a big sum. But the state's new governor will be engaging in lots of smaller belt-tightening initiatives, many of them with public employees.

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