In an announcement that shocked the city, pharmaceutical giant Pfizer announced plans Monday to close its Ann Arbor research and development facility near the University’s North Campus by 2008. Despite boasting revenues of $52.5 billion in 2005, the New York City-based company is closing several facilities worldwide to cut costs. At a time when Michigan’s economy needs every job available, this loss of thousands only spells out worse things to come and highlights the immediacy of addressing the undesirable qualities of the state’s workforce.
Pfizer’s cutbacks affect nearly 2,100 employees in the Ann Arbor area and, combined with previous cutbacks, affect almost 10,000 workers worldwide. The proposed closing is part of the company’s effort to save $2 billion a year in costs after reporting losses in recent years. The cuts amount to 10 percent of Pfizer’s global workforce but disproportionately affect Michigan.
In September 2001, the University sold much of the land the current complex sits on to Pfizer for $27 million and staffed much of the site with interns and researchers. After making the deal with the University, the company lobbied the City Council for tax breaks and abatements. Originally, it asked for a 50 percent abatement on a possible $800 million future investment. At the time, Pfizer warned the City Council that if it did not receive the tax breaks, it would look into building laboratories elsewhere.
Pfizer promised that the remaining tax revenues would benefit the city and the state for the next six to 12 years. Some financial firms even argued that the benefits would be accrued over a 15-year period. But Pfizer found it necessary to abandon its Ann Arbor laboratories after only six years.
Pfizer’s decision to leave Ann Arbor is telling because its operations will be tentatively assumed by at least two laboratories located in places with higher taxes than Michigan (Connecticut and California). Tax abatements that bring companies to the state are not necessarily evil, but Pfizer’s departure makes it clear that they are not the end-all answer: companies will still leave at the first sign of financial trouble. For Michigan to emerge from the economic rut it’s now in, high-tech jobs need to come and stay here.
To get companies to stay – especially those that command as highly-skilled employees as Pfizer – the state must commit itself to building an educational system that churns out the right kind of workers. Simply throwing out tax breaks may nominally help, but a matchless workforce is a far greater incentive for companies to move and stay here. So far, the state legislature has ignored higher education, making it the first to take a hit in a tight budget. Maybe the departure of Pfizer will finally open some eyes in Lansing.