Toyota loss tough, but there’s a silver lining

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Published: February 24,2003

BATESVILLE — It was a tough loss.

For more than six months, Paul Alexander waited to hear where Toyota would build its sixth North American automotive assembly plant. When the list was whittled to four sites, the rural town of Como, located 48 miles south of Memphis on Interstate 55 and with a population of 1,300 people, was still on it.

But when Japan’s largest automaker made the announcement earlier this month, it was San Antonio, Texas, that won the $800-million plant, 2,000 jobs, and $37.4-million payroll. Instead of being built in Mississippi, close to the Memphis MSA, population 1.1 million, the auto assembly plant, which will produce 150,000 Toyota Tundra full-size pickup trucks annually, will be built on a 2,000-acre site in Bexar County, Texas, population 1.4 million.

“It hurts,” said Alexander, CEO of Panola Partnership Inc., the local economic development organization that worked on the superproject. “It hurts bad right now. I think everybody locally and at the state level did everything they could possibly have done to land the deal.”

For Alexander, the superproject represented many sleepless nights. Since joining Panola Partnership in January 2001, the Delta native has worked hard to boost existing industry and bring new business to Panola County, population 35,000. When Korean automaker Hyundai considered a site near Pelahatchie before deciding to build its plant near Montgomery, Ala., Alexander began looking for ways to market his area to Toyota.

“We were not one of the sites considered by Hyundai,” he said. “I did a lot of research to see if we could contend for another superproject. I knew if we thought of ourselves as Northwest Mississippi, we wouldn’t be on the radar, but because we’re inside 40 minutes of a major metropolitan area, we figured we might be. So we made sure people involved in the project knew about us.”

Alexander’s hard work paid off. The final four sites considered by Toyota also included Marion, Ark., just across the Mississippi River from Memphis, and Jackson, Tenn., 86 miles east on I-40. In a rare move following Toyota’s announcement to locate the new plant in San Antonio, corporate officials praised Mississippi, not Arkansas or Tennessee.

“It is not Toyota’s usual policy to comment on other sites we look at as part of our selection process, but in this case I’d like to make an exception for Mississippi,” said Dennis C. Cunco, senior vice president of Toyota Motor Manufacturing North America Inc. “We were very impressed with the potential site in Mississippi and the bi-partisan spirit of government officials with whom we worked. This was a difficult decision for us, and we had to choose from several attractive options.”

Alexander was appreciative of the praise. “If we say it, it’s bragging,” he said. “If they say it, it’s a fact. The fact that we were first runner-up for a superproject for the second largest corporation in the world says plenty.”

Months ago, analysts speculated that San Antonio was the frontrunner simply because it made more sense. It better fit Toyota’s plans to tap Latin American markets, Texas is already a huge market for its full-size pickup trucks, and it is closer in proximity to Mexico. Toyota is building a $140-million factory near Tijuana, Mexico, just south of San Diego, Calif., that will produce 20,000 small pickups annually beginning in 2005. Toyota has car assembly plants in Indiana, which also makes Tundras, Kentucky, California and Canada, and an engine plant in Alabama.

In the last quarter of 2002, Toyota announced its net income grew 94% to roughly $1.8 billion and, thanks to cost-cutting measures, its operating profit rose 23%. The new plant will be another critical step for Toyota’s effort to boost its U.S. auto market share to 15% by 2010.

“Consumers in the U.S. Southwest are big truck buyers, and Texas is in the middle of that market,” said Art Niimi, head of the company’s North American manufacturing operations. The new factories should boost Toyota’s annual production capacity in North America from its current 1.25 million vehicles to 1.65 million units by 2006.

“Although many people accepted the fact that San Antonio was a frontrunner for the very reasons they announced, I’ve seen a lot of things change at the last minute,” said Alexander. “If you read the statements the company made, it was a decision made when it was made. Not months ago. If you think back to Nissan, everybody thought it was going to Alabama and then look what happened. So I never felt it was dead until it was dead.”

In 2000, Nissan announced it would build a $930-million plant near Canton. Last year, Nissan announced it would build a second phase to the plant, bringing the total investment to $1.4 billion. Alabama has reaped the biggest benefits of the trend of automakers building plants in the southeastern U.S., landing factories from Honda, Mercedes, Hyundai and Toyota in the last decade.

“Landing a superproject is not an inclusion game, it’s an exclusion game, and the goal, of course, is to be the last one standing,” said Alexander. “We weren’t, but now we’re on the radar screen of every corporation in the world looking to locate in the region.”

Mississippi Development Authority spokesperson Sherry Vance called the state’s courtship of Toyota “a tremendous effort.”

“The local leaders handled themselves in such a professional manner and this was expressed by company officials when they announced they were going to San Antonio,” she said. “It takes everyone working on a singular focus, and everyone involved did exactly that.”

Toyota will receive at least $133 million in incentives from Texas, including $27 million for job training and $15 million for a rail line to service the plant. The state plans to spend $66,500 for each of the 2,000 jobs created at the plant, less than the $117,317 Alabama offered Hyundai last year to build a plant in that state. Mississippi offered Nissan $20,000 per employee.

“Ours was probably the best competitive package,” said Alexander, who declined to disclose the financial package Mississippi offered, but added, “I’m sure we would’ve put together a similar training program to what was done for Nissan.”

“I think people are a little bit misled by incentives,” he said. “Most are driven by components like tax abatements and infrastructure. But Toyota told us that, while incentives were important, their decision would be broader based than just the bottom line.”

Landing the Toyota plant would have been a financial boon to Northwest Mississippi, which includes part of the economically depressed Delta.

“It’s tough right now,” said Alexander. “There’s a lot of activity, but nobody’s spending money.”

For now, Alexander can catch up on much needed sleep.

“There were nights when I couldn’t close my eyes without thinking, ‘did we do everything today we could do, answer all the questions Toyota needed answered, or is there something more we could have done?’ Now that it’s over, I have no regrets. There’s nothing I can think of that the state or I would’ve or could’ve done differently. I was extremely pleased with how our people responded locally. I can’t think of an occasion when they didn’t respond in a very positive and aggressive way. That’s the only way you get to compete for such a big project for so long.

“We were never told we were out of it. By Toyota’s comments, it proves we were in it ‘til the end.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com</a.

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