Mazda-Toyota skipped N.C., but state still has $1.6 billion up for grabs

In late 2017, North Carolina economic development officials jumped into the competition for a new Mazda-Toyota assembly plant in a big way.

They put together a blockbuster incentives package to attract the automakers to a megasite near Greensboro, ponying up state and local benefits totaling $1.6 billion.

But that 10-figure inducement didn't win the plant.

North Carolina was one of two finalists, but the venture chose a site in Huntsville, Ala., 14 miles from a Toyota engine plant. Alabama's incentive package was enormous in itself — $700 million. But it was still less than half of what North Carolina offered, and it didn't matter. Other less tangible factors swung the deal away from North Carolina, including Toyota's long-standing government relationships in Alabama and Huntsville's proximity to a supply base that serves Toyota's Corolla assembly plant in Tupelo, Miss.

But far from being discouraged by the lost project, North Carolina officials say they're fine-tuning their proposal to compete for the next big car plant — whatever it might be.

"We were hungry, we were really hungry, and some folks might not believe it, but we're even hungrier now," said Brent Christensen, CEO of the Greensboro Chamber of Commerce.

And the megabucks incentives?

That's just the price of admission in the competition to win a plant, they say. Necessary, but not sufficient by themselves.

Anna Lea Moore, vice president for economic development for North Carolina Railroad Co., said any serious site proposal has to offer generous incentives, including land and infrastructure, and has to be ready for quick development.

"You have to get all of that due diligence done along with the land acquisition," Moore said. "That, plus state incentives, is how you win a deal."

But North Carolina's zeal goes beyond state pride. Auto assembly plants are prized because they create a large, well-paid work force, as well as spinoff employment at suppliers that move nearby. That's an economic engine, as well as being a feather in the cap of local officials at re-election time.

In that regard, the Mazda-Toyota project was particularly alluring. The Huntsville factory, scheduled to start production in 2021, will have two lines producing the Toyota Corolla and an as-yet unidentified Mazda crossover. Total automaker investment is estimated at $1.6 billion, with annual production of 300,000 vehicles.

The big appeal for economic developers is jobs. Within five years, the Alabama plant is projected to employ 4,000 full-time workers with average pay of $65,000 per year.

Bernard Swiecki, director of the Automotive Communities Partnership at the Center for Automotive Research in Ann Arbor, Mich., said those job numbers, along with the jobs-multiplier effect of just-in-time suppliers springing up nearby, are what stirred North Carolina's $1.6 billion proposal. More recent news of plant closings, such as those announced by General Motors, and the possibility of industry disruption by changes such as car-sharing, have had little effect on states' desire for new auto plant investment, he said.

"States have been willing to offer more and more because of the long-term benefits of landing that plant," Swiecki said.

North Carolina's effort gives a glimpse of the pressure and complexity involved in competing for a car plant.

In readying a proposal for Toyota and Mazda, North Carolina officials quickly learned that, as Christensen puts it, "speed is king." Automakers want to see an expensive new plant producing vehicles — and revenue — as soon as possible.

"A company that has a project of the magnitude that requires a megasite is looking to get up and running," he said.

"We did about five years' worth of work in six months to be ready and to show the companies that they could be up and running in 18 months or less."

Moore said the 1,800-acre site south of Greensboro, which is one of four megasites that North Carolina is offering to employers, came together through the efforts of a team of government and private entities.

The checklist to show the Toyota-Mazda alliance that it could break ground quickly was exhaustive, she said. The team had accounted for the necessary land acquisition; utilities such as water, sewer, natural gas, power and fiber optics; highway access; rail access, environmental studies and permits.

"Any community that has a site worth its salt will have all of these," Moore said. "To a client, the best communities are the best-prepared."

Because of the site's proximity to Greensboro, utilities were nearby, Christensen said. Buying land was more difficult. The ideal situation would be to find one or two farmers ready to retire and sell off hundreds of acres, he said.

But that wasn't the case for the Greensboro site.

"All of the infrastructure was very close," he said. "The issue we had was that we didn't have one or two landowners. We had 100 tracts of land to acquire, and 70-some owners."

On another front, the economic development team enjoyed an advantage because a Norfolk Southern rail line adjoins the property site. Norfolk Southern is a so-called Class 1 railroad, one of seven large railways with track that can carry cargo throughout North America.

Christensen said it would have been "very expensive and very difficult and, more important to the client, very time consuming," to have to bring such a line to the site.

"A big part of a search is 'Where is there a Class 1 rail line, either adjacent or very close?' "

Swiecki said North Carolina is well-positioned to compete for the next automaker looking for a plant site. That might be a new market entrant, such as an Indian or Chinese manufacturer.

"Companies want a ready site, as close to production as possible," he said. "You are starting ahead of the game if you have a ready site under your ownership that has infrastructure and utilities. And that is what they have."

Moore reasoned that losing to Alabama for the Mazda-Toyota plant gives North Carolina a selling point. Being one of two finalists indicates that the Mazda-Toyota team judged the North Carolina site to be suitable.

"We learned that first place is best," she said. "But second place is a great marketing tool."

How soon the next automaker begins looking for a plant site is uncertain, in part because of unsettled U.S. trade policy, Swiecki said. If the United States-Mexico-Canada Agreement replaces the North American Free Trade Agreement, the industry will have some stability in regional trade, he said.

But the possibility of changes in tariffs by the Trump administration, which could be followed by reversals under a subsequent administration, is a red flag for automakers planning major capital expenditures at the moment, Swiecki added.

"Those tariff moves are much more problematic in making investment and plant-location decisions," he said.

Moore believes automakers are holding off on plant decisions accordingly: "We're certain about the uncertainty."

In the meantime, North Carolina will continue to refine its megasite, striving to show automakers it is standing by with a speedy path to the start vehicle production.

Christensen said, "We're working just about every day to continue to develop that site so that the timeline gets shorter and shorter."