Hyundai hole in Indiana

August 9, 2010
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Indiana’s success with courting Japanese automakers is legendary. Subaru, Toyota and Honda assembly plants have made the state look like a shining jewel by Rust Belt standards while Detroit automakers fight for their lives and continue to struggle to get back their market dominance.

But Hyundai has steered around Indiana. The rising Korean industrial giant and its sister company, Kia, have chosen the South, locating plants in Alabama and Georgia in recent years. Last month, Hyundai said it would build a $90 million power transformer plant near its car plant in Montgomery.

The transformer plant isn’t huge compared to the $550 million Honda plant southeast of Indianapolis in Greensburg, but it also might be just a start for Hyundai. The plant could be expanded.

Why does Hyundai keep avoiding Indiana? Secretary of Commerce Mitch Roob says it’s because Indiana isn’t even under consideration because it’s not a right-to-work state, meaning all workers can be forced to pay union dues if their co-workers vote for a union.

Roob’s remark raises the question of whether a charge at passing right-to-work will emerge in the next General Assembly. Don’t be surprised if it does. If Indiana adopted a right-to-work law, the state would instantly become more competitive, but unions claim average wages would slide.

Some observers criticize the focus on sweepstakes projects like Honda. Having 100 plants with 200 workers is more stable than one with 2,000, they contend, and resources spent chasing big projects could be better allocated to helping startups, which have potential for explosive growth.

One reason Indiana and lots of other state still like huge manufacturing plants is that they employ a lot of people who don’t have four-year degrees, and Indiana is famously short on college-educated workers. The plants also attract parts plants, which in turn hire hundreds or thousands more workers, also largely without bachelor’s degrees.

What are your thoughts about Hyundai, and the state’s continued efforts to lure auto plants?

 

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  • Ford shines
    It is not fair to include Ford in with the other two Detroit car companies. The Blue Oval is showing profits every quarter. And GM has shown tremendous gains recently. I am not even sure why the Detroit automakers were mentioned in an article about Hyundai not having a plant in Indiana.
  • Huh?
    "Mitch Roob says itâ??s because Indiana isnâ??t even under consideration because itâ??s not a right-to-work state, meaning all workers can be forced to pay union dues if their co-workers vote for a union."
    Are you telling me that Hyundai is tougher to attract than Toyota, Honda and Subaru? This sounds like an excuse, Mitch. These things just don't fall in your lap. Get to work.
  • Sustainable Competitive Advantage
    Indiana would be an island of opportunity in middle America.

    Right To Work State Map
    http://www.nrtw.org/rtws.htm
  • Your Fired
    Results Matter.

    Not impressed with Mitch Roob so far. His condescending attitude and political partisanship might work in government, but it turns off decision makers in the private sector.

    Is Mickey still available?

    Time is ticking Mitch......

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  1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

  3. Clearly, there is a lack of a basic understanding of economics. It is not up to the company to decide what to pay its workers. If companies were able to decide how much to pay their workers then why wouldn't they pay everyone minimum wage? Why choose to pay $10 or $14 when they could pay $7? The answer is that companies DO NOT decide how much to pay workers. It is the market that dictates what a worker is worth and how much they should get paid. If Lowe's chooses to pay a call center worker $7 an hour it will not be able to hire anyone for the job, because all those people will work for someone else paying the market rate of $10-$14 an hour. This forces Lowes to pay its workers that much. Not because it wants to pay them that much out of the goodness of their heart, but because it has to pay them that much in order to stay competitive and attract good workers.

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