Dean Barber

Where Will the $1.6 Billion Toyota-Mazda Plant Land? Part 2

In Corporate Site Selection and Economic Development on August 23, 2017 at 12:24 pm

In my last blog, I said both political and business factors will determine what location is chosen for a future assembly plant operated jointly by Toyota and Mazda.

For the dozen or so states competing, this is red meat and bidding war has resulted. The prize is 4,000 good-paying direct jobs, three or four times that in indirect jobs, and a capital investment of $1.6 billion.

The fact that this search was publicly kicked off at a time when President Donald’s Trump administration is pushing for wholesale changes to the North American Free Trade Agreement is no coincidence. The first round of negotiations between the United States, Canada and Mexico ended on Sunday.

Said President Trump at a raucous rally of supporters in Phoenix Tuesday night: “I think we’ll probably end up terminating NAFTA at some point.”

Trump’s threat to pull out of NAFTA probably comes as no surprise to Toyota. The company operates two manufacturing facilities in Canada and one in Mexico, with a second, a $1 billion plant, now under construction in Guanajuato.

As I previously stated, Toyota has a history of building political capital. The fact that the company has 10 manufacturing facilities in eight states is indicative of its political acumen that spreading the wealth is a good strategy. It is the basis for my analysis, which essentially is educated guesswork.

My gut tells me that Project Mitt, as it is being referred to, will go to a state that has no or maybe only one OEM assembly plant. There is a certain appeal to being The Big Fish in a little pond.

I also think Southern states will have an edge over Midwestern states for reasons of taxation, regulation and proximity to ports. But when you mix politics and site selection factors, you are capable of getting a bit of a strange brew. It’s one that JLL, hired in an advisory role, will have to taste.

So here is my quick-and-dirty, state-by-state analysis, with accompanying news reports, much of which are hopeful thinking to say the least.

Alabama

A state where I lived for more than 20 years, I cut my teeth on economic development working primarily on automotive projects. I learned that well-coordinated teams win projects and I was lucky enough to frequently be a member of those teams.

We had a spate of success, successfully recruiting not just the OEMs to the state, but many Tier One and Tier Two suppliers as well. Those experiences as the basis for my consultancy today, so I have very fond memories of Alabama.

Alabama has three auto assembly plants –Mercede-Benz in Tuscaloosa, Honda in Lincoln, Hyundai in Montgomery. Between the three of them, they turned out more than 1 million vehicles last year.

Toyota also has an engine manufacturing plant in Huntsville. Auto-making experience is a given for Alabama, but the state may be hard-pressed to come up with the number of workers than the Toyota-Mazda project will require.

Report: Official says north Alabama may have edge in state’s bid for Toyota-Mazda plant  Birmingham Business Journal, Aug 21, 2017

Arkansas

Arkansas was a finalist for the Toyota factory that opened in Blue Springs, Miss., in 2011. Arkansas Economic Development Commission spokesman Jeff Moore said the state “certainly has interest” again. That would be a “duh” statement.

Toyota-owned Hino Motors recently announced plans to expand its operations in Marion to include 563,000 square feet of manufacturing and office space. Hino makes axles and related parts for different Toyota models.

There is no other OEM assembly plant in the state, which is good, but Arkansas’ biggest drawback may be geography. It may be just too far away from the bulk of its suppliers.

Report: Arkansas submits proposal for $1.6 billion Toyota-Mazda auto plant KATV Aug 18, 2017

Georgia

Georgia makes a lot of sense. Kia’s assembly plant in West Point, near the state line with Alabama, opened in 2009. As such, it is one of the newer assembly plants in the country, employing about 3,000 people, and it’s the only one in the state.

The state’s training program, Georgia Quick Start, has improved the skill sets of more than 1 million employees in 6,500 projects. It’s considered one of the best in the country.

There are more than 500 Japanese companies in the state that employ about 30,000 people. The fact that Georgia has five interstate highways that extend more than 100 miles is a plus. Interstate 75, running north to south, is the longest at 355 miles.

Georgia crafted its largest incentive package ever in 2015 in its bid to win a Volvo, only to have the project choose neighboring South Carolina.

Report: Will Georgia make a play for a Toyota-Mazda factory? Atlanta Journal Constitution, Aug 4, 2017

Illinois

While state lawmakers recently approved the expansion of EDGE tax credits, they also last month passed a 32 percent personal income tax hike. To say that Illinois would be a surprise if chosen is an understatement.

A two-year budget impasse has severely hurt the state’s business climate and reputation. Moody’s Investors Service recently affirmed Illinois’ current rating with a negative outlook, saying a downgrade remains possible in the next two years.

According to Moody’s, Illinois owes over $250 billion in unfunded pension debt, far higher than the $130 billion the state says it owes. For the past three years, Illinois has lost more residents than any other state. 114,144 Illinoisans left for other states from July 2015 to July 2016.

Rivian, a privately-funded startup with research facilities near Detroit and San Francisco, bought the former Mitsubishi plant in Normal, which was shut down last year. The company reportedly has a working prototype for an electric vehicle inside the 2.4-million-square-foot plant. When it comes to actual production, well, I believe it when I see it.

One more thing, Illinois is not a right to work state, unlike all its neighboring states. To be blunt, I’m not sure why Illinois would be in the running for this project.

Report: DeKalb, Rochelle are possible sites as Illinois pursues 4000-job Toyota-Mazda plant Chicago Tribune, Aug 10, 2017

Indiana

Toyota has a 19-year-old assembly plant in southern part of the state that builds the Sequoia sport-utility vehicle and Sienna minivan and is undergoing a $600 million expansion.

The company earlier this year announced it would invest $600 million and hire 400 new workers at the Gibson County plant as part of its plan to expand production of the Highlander SUV. That factory has 5,000 workers.

The auto industry employs more than 100,000 people in Indiana, which include Honda, Subaru and Chrysler. The fact that Toyota is already there and that automotive has such a strong presence in the state may preclude Indiana from being chosen.

A site just east of New Carlisle in St. Joseph County could be under consideration, according to The South Bend Tribune. 

Report: Indiana is vying for a Toyota-Mazda plant that will hire 4,000 people  Indianapolis Star, Aug. 21, 2017

Iowa

While Iowa isn’t known for automotive manufacturing, Debi Durham, director of the Iowa Economic Development Authority Toyota, said Toyota has asked the state for information on specific sites that could house a new assembly plant.

Iowa Gov. Kim Reynolds said the state is “extremely competitive” in its hunt for the Toyota-Mazda plant. I am not sure how she would know that, as that would be the call of the project team.

“We are going to do everything we can ― up to a limit. You have to know where you draw a line,” Reynolds said. “But we’re competitive. This would be great for the state of Iowa.”

The Hawkeye state can point to state rankings showing a lower cost of doing business, but the fact remains that it is distant from most existing suppliers. That is not to say that new supply chains cannot be built by Toyota, but I think Iowa is a stretch because of geography.

Report: In Iowa’s hunt for Toyota factory, this site leads the packDesMoinesRegister.com, Aug. 22, 2017

Kentucky

Gov. Matt Bevin told auto executives that a shovel-ready 1,550-acre site in central Kentucky, south of Elizabethtown near Interstate 65, is an ideal location for the investment.

Bevin pushed successfully for a right-to-work law and other business-friendly measures this year, and pledged to compete aggressively against rival states.

Toyota already has an 8-million-square-foot factory in Georgetown, Ky., that makes more than 500,000 Camry, Lexus and Avalon vehicles per year, as well as 600,000 engines.

Toyota is investing $1.3 billion into the 8,200-job facility, which draws from 350 suppliers and commodities vendors, 100 of them in Kentucky.

While there are certainly efficiencies of using an existing supplier network, the fact that Toyota is already in Kentucky, which also boasts two Ford factories in Louisville and General Motors’ Chevrolet Corvette plant in Bowling Green, may dissuade it from locating there.

Report: Kentucky to make big push for $1.6B Mazda-Toyota factory The (Louisville) Courier-Journal, Aug. 9, 2017

Michigan

No foreign automaker operates an assembly plant in Michigan, the traditional home of the nation’s auto industry. Being home court for the Detroit Three auto companies and the UAW certainly has not created great appeal in the past/

But the union threat is not what it was and Michigan, of all places, became a right-to-work state in 2012. Last month, Gov. Rick Snyder signed a package of bills into law last month that allow companies that expand or relocate to Michigan to receive up to a 10-year, 100 percent abatement on the personal income-tax withholdings of new employees. It applies to companies that bring up to 3,000 jobs to the state at average wages in the region.

The Toyota Motor North American R&D Purchasing and Prototype Development Center, the company’s largest research center outside of Japan, officially opened in May in Ann Arbor. The facility employs 1,600.

While Michigan’s business climate has drastically improved, possibly more so than any other state, it may be a long shot for Toyota to have an assembly plant there. Legacies tend to linger.

Report: Michigan’s bidding for $1.6-billion Toyota-Mazda plantDetroit Free Press, Aug 18, 2017

Mississippi

The Toyota plant in Blue Springs, Miss., opened in 2011 as the sole U.S. assembly location for the Corolla, which the future Toyota-Mazda partnership plant will produce in addition to Mazda crossover models.

About half of the 1,700-acre Blue Springs site, remains vacant, with roads and sewers already in place awaiting further investment. With existing supply chains in place for the Corolla, it would only make sense for the project to locate there.

However, Blue Springs, which employs 2,000 people, may not have the capacity to employ an additional 4,000 people, which is what the joint project is calling for.

Again, I look at Toyota’s history of seeking greener (or at least different) pastures for political purposes. I will say the same for Texas, as I did for Kentucky and Indiana.

Report: Mississippi in the running for new auto plant Jackson Clarion Ledger, Aug 8, 2017

North Carolina

I like the line that I used in my last blog – “Ever the bride’s maid and never the bride.” It’s precisely why I am predicting that North Carolina will win the prize.

The Tar Heel state has no automotive assembly plants to compete with for talent, although it has been in the hunt for them for years. That very void and the fact that North Carolina really wants to win this project is what may prove to the difference maker for Toyota, which would gain political capital from the swing-state’s congressional delegation.

North Carolina has about 26,000 workers at 300 automotive suppliers in the state, which gives Toyota a buildable base from which to work. The tech-savvy Research Triangle will be viewed as a plus, especially in a coming age of autonomous cars.

There are four mega-sites in North Carolina that I identified in my last blog. The 1,774-acre Greensboro/Randolph Megasite, southeast of Greensboro, may be the best. We shall see.

Report: NC’s lack of automaker plant presence may boost chances at landing Toyota-Mazda project Winston-Salem Journal, Aug 13, 2017

Ohio

A strong manufacturing workforce; centrally located; a plethora of automotive suppliers — all logical reasons why Ohio should be in the mix.

Also, Toyota has existing assembly plants in neighboring Indiana and Kentucky and the R&D center in Michigan. Ohio just makes sense, as it would be close to existing and potentially new suppliers.

But like Illinois, Ohio is not a right-to-work state. While that didn’t scare off Honda, which operates a non-union assembly plant in Marysville, it might prove to be a stumbling block for Toyota.

Ohio isn’t saying whether it’s trying to land the Toyota-Mazda plant, which doesn’t mean anything. Staying mum is a defensible strategy.

Report: Could Southwest Ohio win 4000-job Toyota-Mazda plant?Cincinnati.com, Aug 17, 2017

South Carolina

From a pure standpoint of manufacturing environment and business climate, it’s hard to beat South Carolina.

And in recent years, some of the world’s best manufacturers – BMW, Mercedes-Benz, Volvo and Boeing among them — have beat a path there.

But it’s South Carolina’s very success that may hamper its ability to lure Toyota there. Those are big companies that I just named with a big presence in a small state. Toyota/Mazda/JLL may like what they see in South Carolina (I certainly do), but they may come to view the field as being just too crowded.

The onus on the state will be to prove just the opposite.

Report: South Carolina among states chasing 4000-job auto plant  Charleston Post Courier, Aug 9, 2017

Tennessee

Tennessee has been biding its time, waiting, watching, and getting ready.

Hoping to lure the Toyota plant that eventually went to Blue Springs, Miss., the state acquired property dubbed the Memphis Regional Megasite. The 4,100-acre site is situated 32 miles east of Memphis along Interstate 40.

Tennessee has spent more than $140 million on the Memphis Megasite, building roads and water and sewer lines.

“There will be a lot (of) people fighting hard for that plant, and we intend to be at the lead,” Tennessee Gov. Bill Haslam told the Associated Press.

Critical to the Toyota-Mazda team’s thinking is whether the site, or rather the surrounding region, offers a sufficient labor pool in terms of quantity (numbers) and quality (skills.) Tennessee must prove its case to prevail.

To be sure, Tennessee has a strong and growing automotive sector that includes three major assembly plants and automotive operations in 86 of its 95 counties and employing some 130,000 people. There are more than 900 automotive suppliers in the state.

Nissan’s North American headquarters is in Franklin, and with an assembly plant in Smyrna. At its Spring Hill site, General Motors produces the Cadillac XT5 and the GMC Acadia, as well as 4-cylinder and 8-cylinder engines. Volkswagen has more than $1 billion invested in its Chattanooga assembly plant that employs more 3,200 workers, turning out Passats.

Report: Gov. Bill Haslam wants Tennessee to land new Toyota-Mazda plantChattanooga Times Free Press, Aug 8, 2017

Texas

Last but not least is my home state. Within a year or two, I figure those Japanese executives who are based at Toyota’s new North American corporate headquarters in Plano, north of Dallas, will learn to swagger. (We call it walking.)

You see, you don’t just move to Texas. Texas moves into you. Having said that, I would be surprised if Texas were chosen with its investment here, which includes an assembly plant in San Antonio, which opened in 2006.

The San Antonio plant, the sole producer of Tundra full size pickups, in addition to Tacomas, has been running overtime to keep up with demand since April 2015. Built with a production capacity of 200,000 vehicles a year, the plant has been producing more than 230,000 for the last two years.

Texas is an unlikely choice because Toyota wants to spread the love and its clout, my overriding premise. However, if there is one state capable of pulling a rabbit out of a 10-gallon hat, it is Texas. I cannot count Texas completely out, only because it continues to surprise me.

Report: San Antonio officials announce bid to win $1.6 billion Toyota factorymySanAntonio.com Aug 4, 2017

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

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  1. Great review, Dean.

    Michael

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