Filed under: Trends
Georgia's peach of an offer to secure Kia plant draws criticism
Korean automaker made headlines this week
by announcing it had selected Georgia as the home state for its first-ever North American plant. The new facility will
mean up to 2,500 jobs for the area.
But as with virtually every big contract landed like this, there’s a story behind the fight to be the winning locale. ABC News tracked down the story behind the political dance between the automaker and local and state officials.
In the end, local and state government handed Kia about $400 million in incentives— around $160,000 for each job that the plant is expected to bring to Georgia.
As job creation is likely to be among the key issues in this year’s gubernatorial election, sitting Governor Sonny Perdue is drawing accusations of politically-motivated corporate welfare.
Click through to read more about the Kia situation, as well as further details on the contentious debate surrounding business incentives.
[Source: ABC News]
Reader Comments (Page 1 of 1)
Richard Warren 12:20PM (3/16/2006)
So in other words, they gave away 6.4 years of these employees wages as an incentive figuring about 25,000 per year.
That's not creating jobs, that's buying jobs. It gives KIA an unfair advantage in that it's not really paying those workers, the state is, read us, the taxpayer.
So if were talking wlefare here, then why not help the domestic automakers out if needed?
Oh, I forgot they are not imports. Yep, they found the stupid people alright, it's us.
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Booth McKeown 12:45PM (3/16/2006)
West Point's economic situation did not come out of a vacuum. For 100-plus years, West Point-Pepperell and its predecessor companies provided thousands of jobs in textile manufacturing to area residents. In the late 1980s, Robert Farley, owner of Fruit of the Loom, staged a hostile takeover of West Point-Pepperell, at the time the largest textile manufacturer in the US. Farley chewed up the company, sucked the marrow from the bones, and left thousands jobless in what had been a one-industry town.
Many people, like me, were forced to pick up and move on. Many more stayed and made the best of things, taking jobs at lower pay, many with 40-50 mile commutes, trying to make this little town work.
Kia is picking up Farley's trash. Yes, it's an expensive process. However, I applaud Governor Perdue and other officials in their foresight. Over the years this money will be repaid many times over, and a lovely little town will once again not only survive but thrive. My only regret is that the bill for this can't be sent to Robert Farley.
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Booth McKeown 12:45PM (3/16/2006)
West Point's economic situation did not come out of a vacuum. For 100-plus years, West Point-Pepperell and its predecessor companies provided thousands of jobs in textile manufacturing to area residents. In the late 1980s, Robert Farley, owner of Fruit of the Loom, staged a hostile takeover of West Point-Pepperell, at the time the largest textile manufacturer in the US. Farley chewed up the company, sucked the marrow from the bones, and left thousands jobless in what had been a one-industry town.
Many people, like me, were forced to pick up and move on. Many more stayed and made the best of things, taking jobs at lower pay, many with 40-50 mile commutes, trying to make this little town work.
Kia is picking up Farley's trash. Yes, it's an expensive process. However, I applaud Governor Perdue and other officials in their foresight. Over the years this money will be repaid many times over, and a lovely little town will once again not only survive but thrive. My only regret is that the bill for this can't be sent to Robert Farley.
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Steve C. 12:46PM (3/16/2006)
"Politically-motivated corporate welfare?"
Sounds like a press release from the UAW.
Georgia (like other states that are home to the idea that states and their larger employers can be true partners) obviously sees the significant long-term economic multiplier effect of 2,500 new jobs.
I'm sure some view this as a "zero sum" game -- e.g., Georgia didn't gain 2,500 jobs, Ohio and Michigan lost 2,500 jobs -- and they're right, to a degree. And to the degree that it's true, it's sad and will be stressful to those employees whose jobs are lost.
I have been a "corporate executive" for my entire career and I've lived in nine different states and two foreign countries, chasing the best job and best company to work for. The message I would deliver to the auto worker who's losing their job sometime in the next couple of years is to suck it up and move where the jobs are. Those of us in "senior management" do it all the time and yes, it's stressful, especially on the family, but being unemployed is even more stressful.
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AJ 1:05PM (3/16/2006)
I live in Georgia and this is terrible. Kia is putting the plant close tothe line between us and Alabama. That means our govenor is paying to get Alabama jobs. We gave them tax breaks and they would have built here either way because they wanted to be close to Hyundia. Basically Alabama is getting free jobs that Georgia will pay for. We have always made fun of Alabama, but they out smarted our govenor this time.
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bernie 2:47PM (3/16/2006)
Some of these postings are so naive I can't believe it. Anybody who knows anything about economic development should have some idea what it takes to land a manufacturing plant in 2006. And most people who have attended college knows the rule of thumb that one manufacturing job attracts between 7-10 other jobs (suppliers, services) along with it.
Quick story about taking risks and the rewards it can bring: In the 1960s, Birmingham and Atlanta were about the same size. A group of economic development experts made an appeal to Atlanta's mayor to make the city the heart of the southeast by ponying up for a top tier airport, mass transit and a highway infrastructure that would attract businesses and jobs for years to come. Many fought it tooth and nail, citing "tax boondoggles" and resisting change as people often do.
Today Atlanta is the gem of the region, hosting Superbowls and the Olympic games. It is home to hunfdreds of corporations large and small. Its economy is virtually recession proof, while Birmingham sits idling in neutral... a backwater vestage of the steel industry, racism and a provincial economic development attitude.
In economic development, if you snooze, you lose. And it's a good thing Georgia's fortunes aren't tied to the provincial, backward loser's thinking on this page.
Kudos to GA for not letting this one get away.
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Mike 3:54PM (3/16/2006)
Bernie, there's a difference between investing in infrastructure like highway and transit and buying jobs at a very high price. Perhaps these jobs will pay off in the long run, but boy that's a lot of money. And when you start thinking about what else that money could have bought, you wonder if this deal was really the best way to promote economic development. I don't know the answer, of course, but I wonder.
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Richard Warren 4:11PM (3/16/2006)
Well Bernie,
I've been on our towns economic development board for 13 years and my wife was the assistant director of Colorado Springs for 7 years.
I agree with your figure of 6-7 jobs, if there is no surrounding infrastructure of services, suppliers etc:. If they are near then the job creation figure is far less. What we do know is that the financial side will flow those job dollars about 7 times through the area.
My point being is this: States will offer huge incentives to attract a new venture like KIA but most and if you read the postings here, don't want to RETAIN or develop domestic companies, by making huge incentives avaliable in many cases just exacerbates job loss in an other area.
It is ahuge advantage to basically cover your companies wages for 5 or 6 years at taxpayer expense, sure their are jobs, yes the money flows, but who is paying at the base, we all are.
The fact is and we've done it most of the time you don't have to give anything, just read the article, this says it all:
"So why would Kia choose Georgia over the richer offer in Mississippi? Analysts say the big dollars are only part of the site-selection process. Companies have to locate plants near their suppliers, transportation networks and skilled labor."
They were pretty much going to go there anyway, and it works many times like this.
In our case a few years ago a company was looking to move to our town, they approached us. Then they told us at a later meeting well other towns are offering us this. Well we checked, the other towns were offering, NOTHING (loose lips sink ships) we decided to wait, nervous, you bet. In the end, our location, location, location were what they wanted. We got those 300 jobs for nothing.
It's also naive, to not consider the additional taxpayer funded expeses, like water treatment plant resizing, sewer,water,roads,additional school costs,street lighting costs, police protection and depending on the business what is the impact on existing businesses.
I'm for economic development but not at any cost, and 160,000 per job gives each employee 5 to 6 years of paid wages at taxpayer expense.
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Jaimie B 4:12PM (3/16/2006)
"So if were talking wlefare here, then why not help the domestic automakers out if needed?"
You just don't get it do you? You're obviously slow so let me spell out to you what you missed this past 5 years:
- GM and Ford are closing plants and laying off workers left, right and center. Why you ask? Because they are losing customers at an alarming rate. So much so that industry experts are forecasting Toyota to overtake them and be the #1 car manufacturer in the world.
- knowing this cold hard fact, why the hell would they want to open up another plant when they can't even keep the ones that are already open? DUH???? GM and Ford managment are the dumbest ones around but even they can figure this out.
- On the other end of spectrum is Kia's financial situation. It is booming. And no one can argue with this. It is expanding so much that they deemed it necessary to build a new factory to keep up with skyrocketing demand. You know, that same type of demand only your Ford/Gm can DREAM about.
Look, you've expressed your hatred towards imports most specifically Asian in the past, and it does speak volumes regarding yourself as a person. But that's your business. But to criticize a company that wishes to employ citizens of this country, who some I'm sure were laid off by your dearly beloved sht-carmaker, and somehow twist it to make them look unfair is utterly brainless.
Good luck in explaining your xenophobic reasoning to the 2,500 some people they will be hiring. I'm sure they'd be glad to listen to your drivel.
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iQuack 4:46PM (3/16/2006)
States have the power to tax their citizens, so should also have the power to give tax relief when it makes sense to attract job-creating industry.
When you tax something, you get less of it, and when you subsidize something (or reduce taxes already imposed) you get more of it. If you want jobs in your state, cut taxes or offer subsidies if that's what it takes to attract employers.
There's no such thing as a "tax break." There is only relief from taxes that are excessive in the first place.
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Brian W 5:24PM (3/16/2006)
"You just don't get it do you? You're obviously slow so let me spell out to you what you missed this past 5 years:"
No Jamie B You seem to be the one that doesn't get it.
Kia is building a new plant because of the rising Won.
We are giving away huge amounts of money to Asian companies to come here and replace American companies. They are not creating one single job.
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Brian W 5:27PM (3/16/2006)
"You just don't get it do you? You're obviously slow so let me spell out to you what you missed this past 5 years:"
No Jamie B You seem to be the one that doesn't get it.
Kia is building a new plant because of the rising Won.
We are giving away huge amounts of money to Asian companies to come here and replace American companies. They are not creating jobs, in fact they use a much higher amount of foreign venders, so we are really losing American jobs.
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Ryan 5:58PM (3/16/2006)
#11
What part of 2500 jobs are you not understanding?!
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iQuack 6:05PM (3/16/2006)
If GM or Ford were strong and wanted incentives to build factories in whatever state, they'd get a deal as good as KIA's.
But GM and Ford are closing factories, not building them. If KIA has products that meet buyers' needs, then KIAs will be built, not Fords or Chevys. And American labor will build those KIAs, too.
Maybe KIA and others can build better cars for less money because they don't bear the heavy weight of the UAW. Well, that's too bad and the sooner the UAW is busted to pieces, the better.
The UAW will kill it's host companies if it doesn't wake up from the dream world it's in.
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Rob 8:05PM (3/16/2006)
I love kia =)
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Analytical 11:50AM (3/17/2006)
I can't believe these profoundly idiotic posts!!! $400 million in incentives only materialize if KIA builds and operates their plant. $160,000 per job???? It's $160,000 if KIA builds and operates their plant. So, what did Georgia lose??? Nothing. Nada. Zero. What did they gain??? They gained $400 million in incentives to give to KIA. How much did it cost to Georgia? Zero. Why would KIA throw away $1 BILLION dollars in incentives from Mississippi? Because... KIA can get tax incentives anywhere. They preferred West Point for these reasons:
1. Education proficiency
2. Past history of manufacturing plants
3. Infrastructure (ie roads, trains, power lines, etc
4. Climate (robotics rarely need A/C, only humans do)
5. Weather (Katrina and other hurricanes, tornados
6. Ethnic mix
7. Diversity awareness
8. Distance from their parent, Hyundai
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Andrea 12:06AM (5/20/2006)
Be sorry you have Kia in Georgia instead of Mississippi. They make nothing but lemons...trust me, I know what I am talking about. Maybe they will close and go back to Korea.
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