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Wednesday, May 24    |    Upstate South Carolina News, Sports and Information

Catching Toyota's eye
Can South Carolina land Japanese automaker's next plant?

Published: Sunday, May 7, 2006 - 6:00 am


By Rudolph Bell
BUSINESS WRITER
dmbell@greenvillenews.com

With sales booming, Toyota Motor Corp. is contemplating another North American plant, triggering another high-stakes competition among states to land the thousands of jobs that would no doubt go with the investment.

Can South Carolina seize the opportunity?

If a recent report in The New York Times is to be believed, the Palmetto State has already been bypassed.

The Times reported last month that Toyota was considering four southern states -- Arkansas, Tennessee, Virginia and North Carolina -- as possible locations for its eighth North American vehicle assembly plant. The newspaper cited "executives involved in the company's thinking," but did not name them.

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Victor Vanov, a spokesman at Toyota's North American manufacturing headquarters in Erlanger, Ky., called the Times article "pure speculation."

He did say, however, that Toyota could expand its North American manufacturing network with a new vehicle assembly plant or a new engine plant if sales continue to increase. But right now, he said, Toyota has its hands full with three North American manufacturing expansions that are in the works and hasn't decided the location of the possible additional plant.

"I don't think anybody's necessarily been ruled in or ruled out," Vanov said.

It's not surprising that the Japanese automaker is still talking about expansion. Toyota is poised to replace General Motors Corp. as the world's largest carmaker, and, according to a May 3 report in The Wall Street Journal, expects a 35 percent increase in North American sales by 2010, to 3.3 million units.

In 2003, Toyota announced a new plant in San Antonio, Texas, that is scheduled to start turning out its Tundra pickup truck later this year.

In June, Toyota said it would build a new plant in Woodstock, Ontario, to make its RAV4 SUV. And in March the carmaker said it would begin making its popular Camry at an existing plant in Indiana in partnership with Subaru.

The New York Times article said Toyota was considering properties near Greensboro, N.C.; Chattanooga, Tenn.; Roanoke, Va.; and northeast Arkansas for the new assembly plant. The Times also reported in the April 15 article that Toyota was weighing whether to build a new assembly plant or expand the one already announced in San Antonio. The newspaper also said Toyota is considering Michigan, Indiana and Kentucky as possible locations for a new engine plant.

In South Carolina, officials won't say whether they're in the hunt. Gov. Mark Sanford's office and the state Commerce Department said through spokespersons that they don't comment on economic development projects they may or may not be involved with.

But economic development experts -- asked to speculate on why South Carolina may not be on Toyota's short list -- said the state may not have enough available incentive money or the right so-called "megasites."

Burnie Maybank, an attorney with Columbia's Nexsen Pruet firm who specializes in economic development and a two-time director of the state Revenue Department, said South Carolina has not kept pace with other states such as Alabama in so-called "hard-dollar" incentives.

Soft-dollar incentives such as various tax credits aren't as effective as they used to be because multi-state manufacturers, particularly automakers, have very little tax liabilities anymore, Maybank said.

South Carolina used to have up to $250 million in hard cash to land major manufacturing investment, but most of that went to facilitate an expansion at BMW Manufacturing Co. in Greer and to lure Boeing Co. suppliers Alenia North America and Vought Aircraft Industries to North Charleston, Maybank said.

Presently, he said, the state has about $40 million to $50 million it could put on the table, and will have another $17 million if economic development legislation passes the General Assembly this year as expected. But that's not enough to compete with states such as Alabama that are willing to spend $80 million to $100 million to construct a building for an automaker, he said.

Still, Maybank said, "There's no doubt, on a huge project, the General Assembly would happily go back to the well."

"We remain very competitive on the smaller and medium projects," he said. "Where we have been left sorely behind is what I'd call the megaprojects."

South Carolina has proven itself capable of beating other Southeastern states for auto industry investment, but it has also lost out on some big deals.

Since South Carolina landed the BMW plant in 1992, Mercedes, Honda and Hyundai picked Alabama for new plants, while Nissan chose Mississippi and Toyota selected Texas.

Still, this past fall, South Carolina beat Georgia when DaimlerChrysler AG said it would hire 220 people for a new plant in North Charleston to assemble its Dodge Sprinter van and would expand the plant if sales go as hoped. A top DaimlerChrysler executive wouldn't say how big the plant might get, but South Carolina officials said a three-phase plan calls for 1,800 jobs and a $435 million investment.

Several years earlier, Georgia thought it had secured a bigger version of the Sprinter plant for a site near Savannah, but that never came to fruition.

The DaimlerChrysler plant -- if it develops in North Charleston as hoped -- would be South Carolina's second major automotive assembly plant after BMW's 4,500-worker plant near Greer.

In March, Georgia was the winner and South Carolina the loser, when Kia Motors Corp. unveiled plans to build a $1.2 billion, 2,500-worker plant in West Point, Ga., near the Alabama line.

Gov. Sanford has said that Kia inspected a site in Aiken as a possible location for the plant but wanted to be closer to parts suppliers gathered near its sister company Hyundai Motor Co.'s new plant in Montgomery, Ala. Negotiations between South Carolina and Kia never began, Sanford told The Greenville News in March.

"It never bubbled up to the point where (the Commerce Department) was directly in any kind of negotiation, or the governor's office was ever in any kind of negotiation," he said. Jim Bruce, a site consultant in Norcross, Ga., who helped Toyota pick Georgetown, Ky., for its first U.S. plant in the mid-1980s, said South Carolina ought to feel good about the auto industry investment it has already landed.

"South Carolina -- if you look at the big picture -- is pretty well endowed," Bruce said. "For a smallish state to have two pretty big assembly plants is something to feel good about. Is there an opportunity for a third one? I just don't know."

Dennis Braasch, a Greenville engineering and construction executive who has helped design and build auto assembly plants for 25 years, said several automakers are planning or considering new plants, "and I would sure like to see South Carolina pursue them aggressively."

"You have to think if they (Toyota) are looking at Virginia and North Carolina, then South Carolina could be considered in the same mix," Braasch said.

Two site consultants wondered whether South Carolina had the right so-called "megasites" -- properties with at least 1,500 acres that automakers demand for new plants.

Jim Kupferer, managing director of Fluor Corp.'s Greenville-based site selection unit, said one South Carolina megasite -- in Chester County along Interstate 77 between Columbia and Charlotte -- is smaller than the 2,000-plus-acre sites that Toyota has favored in the past.

"I don't see South Carolina with one of these huge sites with the potential for supplier parks next to it," Kupferer said.

Mark Sweeney, a Greenville consultant who helped Nissan pick Canton, Miss., for a new plant in 2000, agreed that megasite options could be an issue for South Carolina. Sweeney said he's not aware of any South Carolina sites that have been certified by a third party -- such as his firm, McCallum Sweeney Consulting.

South Carolina "is certainly prepared to present large properties to automotive clients," Sweeney said. "We think the Chester site is a very good site in a good state of readiness. I can't speak yea or nay about the other large sites that they show because we haven't looked at them in a long time."

Sweeney said his "professional guess" -- if The New York Times is to be believed -- is that Toyota had additional states on its list before narrowing the list to Arkansas, Tennessee, Virginia and North Carolina.

"It's possible that South Carolina's geography didn't match up with this project, but the fact that Chattanooga and Greensboro are reportedly in makes me think that might not be the case," Sweeney said.

His firm, McCallum Sweeney Consulting, helped the Tennessee Valley Authority certify megasites for new auto plants, including the Chattanooga site that Toyota is eyeing, according to The New York Times. Sweeney's firm was also hired by Duke Energy to identify megasites within its electric utility's service territory in the Carolinas.

That service territory includes the Greensboro area. Duke has given the site study that McCallum Sweeney prepared to the Commerce Departments in South Carolina and North Carolina, but has not released it to the public.

Zen Matsui, a vice president with Creform Corp., a Greer company that supplies material-handling systems to Toyota plants in North America and Japan, said the automaker's growth has been keeping his company very busy.

"Definitely they are looking at new locations," Matsui said. "Could it be South Carolina? I don't know."

C.R. "Buzz" Canup, an Anderson native and site consultant for Angelou Economics in Austin, Texas, said no one who is not directly involved in Toyota's site search can predict what the automaker will do.

Before announcing the San Antonio plant, Toyota disclosed that it was looking in Texas, Arkansas, Tennessee and Mississippi, Canup said,.

"Conversely, just a few months ago, they announced a project in Ontario, Canada, and up until the point of announcement, very few people had any idea they were searching for a new assembly plant," he said.


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