What went wrong with Hyundai?

by

Published: April 1,2002

Pictured top: Sen. Trent Lott; pictured bottom: Bob Rohrlack

Speculation in the business community about what went wrong with the Hyundai courtship seems to center around the two camps involved — U.S. Sen. Trent Lott, a Republican from the Coast, and Gov. Ronnie Musgrove, a Democrat from North Mississippi.

Weeks after the automaker announced that Mississippi had not made the final cut as a possible location for an assembly plant, rumors continue to circulate that both Lott and Musgrove are blaming each other for that decision from Hyundai. But both camps deny any finger pointing.

“Yes, Trent Lott’s a Republican. I’m a Democrat. We both worked hard to get Hyundai here, contrary to popular thought,” said Musgrove. “We truly want Hyundai to be here.”

Lott said finger pointing doesn’t serve a purpose.

“We need to learn from the experience and move on,” he said.

Matt Friedeman, a professor, conservative radio talk show host and frequent political commentator in Jackson, said, “All in all, I would be very surprised if it wasn’t anything other than two guys trying to make something happen and wanting to take most of the credit for it, having a difficult time working together and it just didn’t happen.”

Michael S. Flynn, director of the Office for the Study of Automotive Transportation (OSAT) at the University of Michigan Transportation Research Institute, said second-guessing an automaker’s site selection decision is nearly impossible.

“My sense is that the final three or four (states) were quite close and the actual decision to eliminate one may have been for very specific and individualistic reasons,” he said. “For example, being closer to a nice metropolitan area, great golf or to streams and lakes and other quality of life issues, but the reasons vary with executives.”

Musgrove said, “We made the final four in the middle of a national recession, competing with economic developers across the nation, when 46 other states did not. We’ve had unprecedented success recently with the landing of Nissan and other manufacturers. Now is not the time to stop, but to work harder. Economic development starts in Mississippi with Bob Rohrlack, the head of our team, and the Mississippi Legislature. We must show one voice.”

One story circulating is this: Hyundai was shown sites all over Mississippi, but only one site — Pelahatchie — was acceptable to the South Korean conglomerate. Nissan allegedly complained to Lott about Hyundai possibly building a plant within 80 miles of its plant being built in Madison County. (In Alabama, the Mercedes and Honda plants are located 84 miles apart.)

Lott allegedly favored an industrial megasite in Northeast Mississippi near U.S. 78 at the intersection of Pontotoc, Union and Lee counties. The Hyundai possibility has been considered the primary reason for fast-tracking U.S. 78 to interstate status, since being located near an interstate was a site selection requirement. According to several sources, frustrated Hyundai execs decided to go elsewhere.

“When Hyundai president Kim Dong-Jin called to tell me of his company’s decision to eliminate Mississippi, he indicated there were two primary reasons for Hyundai’s action,” said Lott. “First, the company was concerned with the physical characteristics of the proposed site, which was located between Pelahatchie and Morton. In their view, this site was not as desirable as those offered by Alabama and Kentucky. Issues concerning soil, topography, tree removal and the like are all frequent obstacles which economic developers throughout Mississippi and our entire nation must face. Mississippi is certainly not unique in this respect. Therefore in hindsight we probably should have dealt with the site concerns sooner, and we must be better prepared to adequately address these challenges next time — especially when competing with states which may be offering more finished industrial sites.”

The Meridian Star published an editorial blasting Musgrove for the loss of the Hyundai project: “By insisting that Hyundai seriously look only at a site in Pelahatchie within a few miles of Nissan’s plant in Canton, Musgrove may have sealed the project’s fate before it ever got a good foothold in Mississippi. While company officials did ultimately explore other sites elsewhere in the state, including at least a cursory look at property in east Mississippi, Musgrove’s stubborn streak was apparently a factor in Hyundai’s decision.”

The editorial ended: “While it is easy to criticize our public officials when things go wrong, the Hyundai episode leaves questions that Musgrove will have to answer for himself. Maybe by 2003, the year of the next statewide elections, he will think of something that will satisfy a curious electorate.”

Buddy Bynum, former MDA spokesperson during Gov. Kirk Fordice’s administration, is the editor of The Meridian Star. He also previously served as editor of the Mississippi Business Journal.

In a rebuttal letter, Mississippi Development Authority chief Bob Rohrlack wrote, “If taking heat for landing on the short list for a second billion-dollar plant in Mississippi, in less than two years, is the kind of ‘heat’ you are talking about, then we’re proud to have been in the proverbial kitchen.”

After addressing each point, Rohrlack summed up: “In the future, we hope you will seek confirmation of your information by those people working directly on the recruitment projects.”

Another theory being discussed: The only site Musgrove wanted to push was Rankin County, for reasons that are still unclear. One theory was that the governor would have gained favor with Republicans in Rankin County, the largest Republican county in the state in money raised and in population, which would greatly facilitate his re-election in 2003.

Musgrove currying favor with Rankin Republicans didn’t make sense “because if Haley Barbour ends up running — and it looks like he’s going to — Rankin County isn’t going to vote for Musgrove no matter what,” Friedeman said.

Rohrlack, who accompanied a delegation of elected officials on three trips to South Korea, said that in between the first and second trips, Hyundai officials toured nine sites located throughout Mississippi.

Pelahatchie wasn’t one of the original sites, Rohrlack said.

“When the nine sites were pitched, all were eliminated and Hyundai told us to come up with another site,” he said. “We asked them to help us with more criteria. Based on that, the Pelahatchie site came up and Hyundai immediately honed in on that location.”

Soon after, MDA received word through a third party that there was interest in seeing another site, Rohrlack said.

“We had never been told that from the company,” he said. “We were getting information third and fourth hand and we kept stating that our job was to do what the company tells us to do. Just to cover our bases and make sure we were doing exactly what they wanted, the governor sent a letter that he co-signed with Lott telling them if they wanted to look at another site, we could accommodate them. They said, ‘fine, show us another site.’ While they were here, a representative from the Senator’s office pointed to another site and said, ‘that would work for you. You should look there.’ But before they left town, the president of the company told a group at a luncheon and told me twice in one-on-one conversations:
‘I would like to concentrate on Pelahatchie.’ Those were his direct words. And we said, ‘yes, sir, that’s what we’ll do.”

Lott said Hyundai began indicating concerns “as far back as November about the Pelahatchie site.”

“That’s why we started asking questions about finding a better site someplace else,” he said. “That did not happen.”

Between the second and third visits to South Korea, Rohrlack said the state once again received word “third and fourth hand” that Hyundai wanted to see anothe

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