Winter 2007

QUIZ

It's Tupelo! For Toyota!

On Tuesday, February 27, 2007, Toyota Motor Corp. announced it is building a $1.3 billion, 2000-employee SUV assembly plant in Northeast Mississippi, near Tupelo. The 1,700-acre core site is located in Blue Springs, Miss., which is about 20 miles from Tupelo proper.

The Japanese automaker plans to begin production of the Highlander SUV model some time in 2010. Toyota will have an initial annual capacity of 150,000 vehicles. Operations at the plant will include stamping, plastics, body weld, paint operations and vehicle assembly.

Mississippi economic development officials reported that the new assembly facility will provide 2,000 direct jobs, an estimated 2,000 parts supplier jobs in the Northeast Mississippi region and about 2,000 temporary construction jobs. Annual payroll is expected to be $328 million Toyota officials said.

Incentives to the Japanese automaker include a bond issue of $293.9 million. Of that, $145.7 million will be spent on offsite infrastructure and $147 million on onsite infrastructure and training. Other incentives include a 20-year income tax exemption, sales and use tax exemptions, a 30-year fee lieu on property taxes, rebates on building materials and a withholding tax rebate of up to 3.5 percent of taxes withheld.

Tier 1 part suppliers will also receive approximately $30 million in infrastructure and training. Typically about five to 10 Tier 1 suppliers locate near a plant the size of the one Toyota has announced in Tupelo by the time it begins production. An official groundbreaking is expected in mid-to-late April. Other incentives to suppliers will be dictated by investment and job generation.

The successful recruitment of Toyota was led by Gov. Haley Barbour, Mississippi Development Authority executive director Gray Swoope and other state-level officials, David Rumbarger, president of the Community Development Foundation and other leaders in Union, Lee and Pontotoc counties.

An e-mail from Toyota's Dennis Cuneo

Note: This email, which was not labeled as confidential material, was sent to Michael C. Randle, owner of Southern Business & Development and its affiliated Web sites. The email came from Dennis Cuneo, who was a prominent member of Toyota's site search team and has been for years with the Japanese automaker. It should be noted the email was sent to Randle two minutes before Toyota started its press conference in Tupelo to officially announce its decision.

Sent: Tuesday, February 27, 2007 8:58 AM

Mike - I've been asked to contact you. I recently retired from Toyota, but still serve as a consultant to Toyota on issues such as site selection - and I was heavily involved in this one - and I'm at Tupelo today.

1. The Chattanooga site is an excellent site. It met all of our criteria, and is an acceptable site for an assembly plant in all respects - and I expect that someone will put a plant there some day. The State's incentive package was generous - and the Governor and the Congressional delegation worked aggressively on this project.

2. We did not reject the site because it was a former Superfund site or brownfield. Not all of our sites have been greenfields - in fact we took over an old GM assembly plant for our first assembly plant in the US (NUMMI). Toyota is also expanding its technical center in Michigan on a brownfield site. The Chattanooga site has been cleaned up - and 2 law firms and our environmental department said it was ok to use for an assembly plant.

3. The decision to select Tupelo was a close one - and the fact that we selected Tupelo should not be considered as a negative comment on Chattanooga. I'd personally recommend to anyone looking for an assembly plant site to look at Chattanooga. We started off this process by considering sites in 20 states. From those 20 states, we carefully narrowed down the list of sites - and to be designated a finalist, a site had to meet Toyota's demanding criteria. Chattanooga met those criteria - and that's why we made it a finalist.

Sent from my BlackBerry Wireless Handheld, Dennis Cuneo

Editorial

Coming in Second Hurts

(Revised from previous report of the same title published on 2/26 on www.SouthernAutoCorridor.com)

It's going to be interesting to see how or if Toyota will appease Arkansas officials since Marion, Ark., was not chosen as the site for the Japanese automaker's latest assembly plant in the Southern Auto Corridor (www.SouthernAutoCorridor.com). After all, coming in second hurts and coming in second twice hurts ten times as much. If you recall, Marion was the bridesmaid for Toyota's pickup truck plant that is now producing the Tundra model in San Antonio.

By reading Toyota's Dennis Cuneo's email above, it's unclear whether or not Marion or Chattanooga placed second in the site search. It doesn't matter. What does matter is Cuneo didn't even mention Marion in the email. There's nothing wrong with that, I guess. But I do find it strange. Dennis apparently was more interested in making sure the media knew (and more importantly to Toyota that our readers knew) that Chattanooga was not chosen because the Enterprise South site there in Chattanooga is a former brownfield.

But, there's no doubt that Marion has placed second (or third) again. Well, Toyota must address that and to date, they haven't. In fact, on Tuesday, February 27, the day of the announcement, Cuneo told me that questions regarding Marion's air quality were a major factor in the automaker's decision to dismiss Arkansas, or more specifically, the Memphis metro. On the same day we heard from several people who were told by Jim Press, the president of Toyota Motor North America, that air quality was not an issue in Marion; that Toyota could have built a plant there. What?

One of the critical reasons we chose Marion as the site for this latest Toyota plant was that we believed there was no way Toyota would keep Marion on the shortest of short lists and then scrub them again. If it wasn't Marion for this plant, then why did Toyota keep them in the hunt until the very end (actually, we now believe Toyota's deal with Mississippi was done in December)? 

Did Toyota use Marion to run media interference for them? We received information the week Toyota announced that the Japanese automaker, because of a court ruling on December 22, 2006, knew that Marion's and Memphis' air quality issues could be an obstacle for Toyota if it expanded a plant in Marion in the future.

So, if Toyota knew the Marion site was a potential risk back in December, why then did Arkansas officials find out they had been eliminated from the site search on Monday, February 26? Look, Marion and Arkansas officials have been through this before with Toyota (February of 2003 when the automaker chose San Antonio and Marion undoubtedly placed second then). It seems to us that a more diplomatic approach would have been to let Marion down earlier.

Toyota has affiliates in Eastern Arkansas in Hino and Denso. Those plants have all recently opened up shop. Speculation has been around for more than a year now that Japanese truck maker and Toyota affiliate Hino will build a truck assembly plant in Eastern Arkansas. We'll see. Hino currently operates a large parts plant in Marion. It is interesting to note that Hino officials over the last year or so have not been shy in their opposition to Toyota opening up an assembly plant in Marion.

Mike Randle
mike@SB-D.com

Politics: The Cross State Cooperation for Toyota

States cooperating in the recruitment of a major capital investment and job generating project is a relatively new thing in economic development. On the other hand, multiple counties in the same state that band together in a regional effort to land deals is old news. But when Alabama Gov. Bob Riley and then Mississippi Gov. Ronnie Musgrove shook hands in 2002 to formalize a two-state regional effort in the recruitment of industry to rural areas and small markets along the Alabama and Mississippi border, well, other states throughout this country were shocked. State cooperation at that level was not only unusual, in was unprecedented.

As for this latest large project, early on in Toyota's site search, Georgia Gov. Sonny Perdue, Alabama Gov. Bob Riley and Tennessee Gov. Phil Bredesen all signed a letter that promoted Chattanooga's Enterprise South site to Toyota. That all changed as the site search crunching began in the fall and early winter of 2006. I called Perdue's office in January and asked one of the Governor's right-hand men, "Are you still assisting Tennessee in landing Toyota in Chattanooga." I won't give you his exact quote, but it was a unique way of saying "no."

What changed after Perdue, Riley and Bredesen got together to try and convince Toyota to land in Chattanooga? Well, Tupelo's rise to the top of the site search list is what forced the change in cross state cooperation among the Peach State, the Volunteer State and the Heart of Dixie.

In the middle or possibly near the end of Toyota's site search work for this facility, Bob Riley did not realize Tupelo was a site seriously being considered by the automaker. Once Gov. Riley realized Tupelo was in the game, he changed his choice by either equally supporting Chattanooga and Tupelo or Riley moved his support to Tupelo exclusively. Again, Alabama and Mississippi have had in place a border development agreement. Mississippi Gov. Haley Barbour appears to be living up to that agreement struck by his predecessor. Tupelo's location factors in that agreement.

Even after Toyota made its announcement in February, Mississippi officials were unaware Riley had endorsed Tupelo to Toyota officials. How do we know Alabama's Riley changed his mind and endorsed Tupelo for Toyota? A high-ranking Toyota official, one very involved with the Japanese automaker's site selection process, told us so the day of the announcement.

Mike Randle
mike@SB-D.com

Tupelo's Marketing Strategy: Throw out the Biggest Lure, Be Patient and See What Bites

On June 22, 2005, I stopped by Tupelo on my way back from Memphis to my home town of Birmingham. I met with David Rumbarger, who I have known for at least 15 years. David even went to my high school here in Mountain Brook, Ala.

During our meeting, Rumbarger showed me a new trade show display about a new site called Wellspring. I looked at his display and I asked him, "Rumbarger, you are marketing this site to an automaker exclusively? Are you nuts?"

At the time, I did not agree with the Community Development Foundation's (CDF) marketing technique. What if a large steel maker or pharmaceutical project comes to town, I thought, and wants that site for a plant? I had never seen such a concentrated effort by a single economic development agency to lure an automaker -- only -- to a site in the South.

During our one-hour meeting, I realized Rumbarger and his staff were firm on their organization's commitment to bring an auto works to Northeast Mississippi. I didn't realize it at the time (should have), but Rumbarger and other officials in Northeast Mississippi had their sights dead-set on an automaker and they were willing to go "all in" for one. It worked and it is one of the most successful and effective marketing techniques I have ever witnessed in 25 years of being in this business.

Mike Randle
mike@SB-D.com

Six-for-Eight Since 1992

Let's go ahead and get it out of the way. As we do with all prospective automotive assembly plants in the South, we made a prediction where Toyota -- the latest automaker to call the Southern Automotive Corridor home -- would make its home. We picked Marion, Ark. We were wrong. But let's recall what we wrote while picking Marion in January. "So, if we're wrong, this is the one we will be wrong on. Since 1992, this one has been the toughest to call."

So, we're six-for-eight, not a bad day if you are a hitter in a baseball double-header. Let's just say again, this one was tough to pick. Does anyone want to put some money down that we don't get the next one right? Didn't think so.

Mike Randle
mike@SB-D.com

Toyota Tupelo Selection a Feather in Cap for TVA

Three or four years ago, we wrote that the Tennessee Valley Authority was getting serious about economic development, hiring talent it had never employed before in its economic development department and at the highest level. In fact, in last year's Ten Top 10s issue, which comes out in a few weeks, we cited TVA senior vice-president John Bradley in our Ten People Who Made a Difference category. Here's what we wrote.

"The Tennessee Valley Authority is the largest-reaching economic development entity in the South, representing seven Southern states. For years, however, they didn't act like it. In fact, we used to wonder what the economic development department at TVA did other than oversee its regional industrial development associations.

It's no coincidence that TVA's economic development department became more aggressive shortly after Bill Baxter, the former commissioner of the Tennessee Department of Economic & Community Development, was appointed to its board. Baxter is a no-nonsense, tireless warrior. He is certainly one of the South's most impressive economic developers." (Baxter resigned as TVA's Board Chairman on January 23 to return to private business.)

"We knew things were changing at TVA when Baxter was hired. But when he hired economic development veteran John Bradley, who previously was with the Memphis Chamber of Commerce, we knew the utility was serious about changing its ways from an economic development bystander to an economic development leader in the South. While Bradley is being named one of the Ten People Who Made a Difference this year, we could easily have given the recognition to the entire TVA economic development department, with a piece of that to Baxter."

Toyota's decision to pick a TVA-certified site, a supersite program the utility launched in 2004, is certainly a feather in the cap. Of Toyota's three-site short-list, two (Chattanooga and Tupelo) were TVA-certified sites. 

Mike Randle
mike@SB-D.com

Toyota Decision Supports the Fact that in 14 Short Years, Alabama is Fast-Becoming the Center of the Automotive Universe

Mississippi's successful recruitment of Toyota is a great achievement. Now the Magnolia State is about to be the home to two Japanese automakers, builders of cars and trucks that are as predictably successful and void of any investment risk that you can find out there in the industry recruitment game.

But is it just Mississippi that benefited from Toyota landing in Tupelo? No, the rest of the Southern Automotive Corridor will benefit as well. But no state other than Mississippi will take advantage of this deal more so than Alabama.

Look at a map. Alabama now has OEM plants to the north (Saturn in Maury County, Tenn., Nissan in Smyrna, Tenn., and Toyota in Huntsville, Ala.), the east (Honda in Lincoln, Ala.), the west (Mercedes-Benz in Vance, Ala. and Nissan in Canton, Miss.), the south (Hyundai in Montgomery, Ala.), the southeast (Kia is building its new plant just across the Alabama/Georgia border in West Point, Ga.) and now the northwest (Toyota in Tupelo, Miss.).

No state or territory in North America can show such a map to automotive suppliers other than possibly Michigan or Ontario and I'm not sure Michigan wants to show that map, considering what has occurred up there. Yes, Toyota's latest decision is great for Mississippi. It is almost as great for Alabama.

Mike Randle
mike@SB-D.com

Arkansas' Beebe: Toyota Jilted Arkansas Because of Air Quality

It should be noted that, just in case you are unfamiliar with a map of the state of Arkansas, most Arkansans call Marion, Ark. "Memphis." After all, Marion is just across the Mississippi River from West Tennessee's center for industry and commerce.

Arkansas Gov. Mike Beebe said on February 27, the day Toyota announced it will build its newest assembly plant in Northeast Mississippi, that air quality issues in Crittenden County, where Marion is located, were behind the Japanese automaker's decision. Toyota's Dennis Cuneo said the same to us on the same day.

Beebe revealed that Arkansas put up about $200 million on the table for Toyota to pick Marion. That package is about $100 million light of the package put together by Mississippi. However, it should also be noted that Toyota would have had to spend much less money developing the Marion site compared to the one it chose in Northeast Mississippi.

Gov. Beebe, who was sworn in earlier this year, cited a federal court case, the South Coast Air Quality Management District vs. the EPA. On December 22, 2006, a judge in Washington, D.C. made a decision in the U.S. Court of Appeals that EPA's revision of the National Ambient Air Quality Standard for ozone be reviewed. The review also reversed, temporarily, EPA's relaxation of ozone standards, which included those in Crittenden County, Ark. 

China Surges Past Japan as World’s Second-Largest Vehicle Market

With 7.2 million units sold in 2006, China has passed Japan for the first time in sales of cars and trucks. Japan sold 5.7 million vehicles during the same period and sales of cars and trucks totaled 16.5 million units in the U.S., far and away the world leader. The 7.2 million unit total represented a 25.1 percent increase in automobile and truck sales in China. Auto sales last year for Shanghai General Motors, a GM joint venture, topped 365,000. Shanghai GM led all Chinese automakers in sales last year with Chery Automobile Co., placing second with 272,500 vehicles sold. Chery is involved with DaimlerChrysler in a joint venture in that country. The biggest selling vehicle in China is VW's Jetta. You can learn more about the Chinese automotive market by logging onto www.caam.org.cn

Only St. Louis Affected by Chrysler's Cuts

Chrysler is expected to eliminate at least one shift at its assembly plant in St. Louis. The latest round of downsizing announcements made by a domestic automaker -- this time by Chrysler -- seems to be kind to the South, with only St Louis affected. Other cuts made by Ford and GM over the last two years have or will reduce automaker assembly plants in the Southern Automotive Corridor from 23 to 16.

ALABAMA

Supplier Picks Auburn

Korean suppliers Seohan Auto USA and Seohan Driveshaft USA, have selected Auburn, Ala., for a new facility. The company will hire about 200 workers and invest $40 million in the deal. The companies already supply Montgomery's Hyundai plant with front and rear axles.

Honda Supplier Expands in St. Clair County, Ala.

Yachiyo Manufacturing of Alabama is investing $28 million in its parts plant in Steele, Ala. The company is adding 72,000 square feet to its facility and adding 78 new jobs. Yachiyo suppliers the Honda assembly plant that is located in Lincoln, Ala. 

Alabama Continues to Rake in Parts Suppliers

Since Hyundai began operations in Montgomery in 2005, Alabama became the epicenter of the Southern Automotive Corridor. While Tennessee, Kentucky and Alabama remain the South's most active states in the recruitment of new automotive companies and existing auto industry expansions, Alabama, in terms of location, has quickly become the heart of Southern Auto Corridor. In 2006, more than 25 new parts supplier plants and expansions were announced in Alabama. The deals represented an investment of $325 million and resulted in 2,250 new jobs. Toyota, Honda, Mercedes-Benz and Hyundai operate OEM plants in Alabama. Kia is building its first U.S. plant just across the Alabama line in West Point, Ga. And Nisssan and Saturn operate assembly plants in nearby Tennessee and Mississippi.

Ohio-based Honda Supplier to Build Plant in Cullman, Ala.

Cardington Yutaka Technologies said it will invest more than $50 million to build a 168,000-square-foot plant, creating about 200 jobs, to make torque converters and exhaust systems for the Honda auto plant in Lincoln, Ala.  To be named Alabama Cullman Yutaka Technologies, the facility––the Honda supplier’s third in the U.S.––will be built on 75 acres in the Cullman industrial park.

GEORGIA

Lund International Consolidating Operations to Georgia

Suwanee, Ga.-based Lund International, a manufacturer of automotive parts and accessories, is moving jobs and production from a facility it is closing in Colorado to an existing facility in Lawrenceville, Ga. Lund officials have made other consolidation moves, notably a closure of a plant in Bakersfield, Calif. Last year, the company, which produces aluminum grilles for cars and trucks, moved its corporate offices and distribution center from Duluth, Ga., to Suwanee.

KENTUCKY

Parts Supplier Expanding in Kentucky

Chicago-based UGN, a parts supplier to Japanese automakers, announced in the winter it is expanding its interior parts components plant in Somerset, Ky. UGN, which operates a 300,000-square-foot plant in Somerset, is a joint venture between Swiss company Rieter Automotive, Winterthur, and Nihon Tokushu Toryo Company

NORTH CAROLINA

Toyota Racing Building Facility in Charlotte Area

California-based Toyota Racing is building a chassis manufacturing facility in Salisbury, N.C. The announcement was made in the Winter quarter and follows other projects that are located in High Point and Mooresville, N.C. The $22 million facility will support Toyota's recent NASCAR racing entries. This is the first year Toyota has fielded cars on the NASCAR racing circuit.

Michigan-Based Parts Distributor Expanding in Charlotte

Southern Logistics, a subsidiary of Michigan-based Detroit Diesel, has expanded its operations in Charlotte by 50,000 square feet at the TransWest Business Park.

Freightliner Cutting Jobs Again in N.C.

The commercial truck market is volatile, much more so than the consumer automotive market. That volatility is no more evident than what has occurred at Freightliner's plants in North Carolina. The heavy truck manufacturer added almost 1,700 jobs at its three facilities in the Tar Heel State from 2003-2005 and many of those that were hired are now getting pink slips at those same locations. In the latest round of cuts, Freightliner plans to eliminate as many as 1,200 jobs at its truck assembly plant in Rowan County, N.C. The plant currently employs about 4,000, down from approximately 5,600 in 2004. Rowan County is located just north of Charlotte.

WEST VIRGINIA

NGK Spark Plugs Building Second Plant in West Virginia

NGK Spark Plugs USA is building another plant in Sissonville, W.V., located in the Charleston region. The company already operates an oxygen sensor plant and distribution center in Sissonville, employing about 220 workers. The new facility is being built in West Virginia because there's no room to expand at the company's facilities in Irvine, Calif. NGK supplies Honda and other automakers. The company is headquartered in Nagoya, Japan and its U.S., unit is based in Michigan.