Save Money in this Sunday's paper

Eye On Development

comments

Missing out on Toyota: 4 takeaways

By Eric Frazier
Eric Frazier
Eric Frazier covers economic development. He has been reporting and editing at the Observer for more than 15 years. If you have a story idea or news tip to share, contact him at:
Toyota-US Headquarters
Damian Dovarganes - AP
The National Headquarters of Toyota Motor Sales U.S.A. Inc. is seen in Torrance, Calif. Toyota said Monday that it will move its U.S. headquarters from California to Texas. Small groups of employees will start moving to temporary office space there this year, but most will not move until late 2016 or early 2017 when a new headquarters is completed.

Talk about the Big One That Got Away.

Economic development leaders in Charlotte and Raleigh are still trying to figure out why North Carolina finished second to Texas in the super-secret sweepstakes for Toyota’s new North American headquarters and the 4,000 jobs that go with it.

It’s not a stretch to say it would have reshaped the economic landscape in Charlotte. It would have pushed down unemployment by adding thousands of middle- and upper-class new residents who would buy homes, cars, groceries and otherwise muscle up the regional economy.

We finished second to the Dallas suburb of Plano, Texas, in a selection process that started with 100 or so potential sites.

So making the final two with so much on the line offers a strong statement about the trajectory of Charlotte’s economy.

But, as one local economic developer told me, finishing No. 2 is still a loss. Close counts only in a select few endeavors.

“Horseshoes and hand grenades, right?” David Swenson, a senior vice president with the Charlotte Regional Partnership, offered with a chuckle.

With that in mind, here are four takeaways from Charlotte’s near-miss with the world’s biggest automaker:

1 Airline service matters. Toyota officials, while guarded about their impressions of specific cities, said a thriving airport with nonstop service to Asia was important to them.

Charlotte has no direct flights to Asia, surely a negative for the Japanese automaker. That contrasts with the Dallas/Fort Worth airport, where American Airlines has direct flights to Tokyo.

Toyota’s move to Texas will involve shifting about 1,600 workers from the company’s current U.S. manufacturing headquarters in Erlanger, Ky. About 600 of those positions would go to other Toyota sites.

For years, Erlanger had strong access to nonstop flights from the Delta hub at nearby Cincinnati/Northern Kentucky Airport, but Delta has pulled out, greatly reducing flight options. Chiquita cited the lack of nonstop flights when it agreed in 2011 to move its headquarters from Cincinnati to Charlotte.

Economic developers here are hoping Charlotte gets Asian flights after US Airways’ merger with American, but a spokeswoman said there aren’t any such plans at the moment.

2 Incentives aren’t always the key. We lost a Boeing aircraft plant early this year after Washington state coughed up a massive $8 billion incentives package that dwarfed North Carolina’s $632 million offer for a site near Charlotte Douglas International Airport. However, such subsidies don’t seem to figure as prominently in assessing why Toyota bypassed Charlotte.

Texas gave the company $40 million in incentives. Consider for comparison purposes that North Carolina and local officials gave Chiquita about $22 million to bring 375 jobs, a fraction of Toyota’s 4,000.

Automotive industry analysts say Toyota, which has made billions selling Camrys and energy-efficient Priuses to suburban soccer moms, wants to crack the truck market dominated by Ford and Chevy.

And Texas is the biggest truck market in the country. Moving there gets their headquarters folks closer to Toyota’s Southern manufacturing plants and perhaps brings more Texas-bred engineers and executives aboard.

“They’ve long recognized that their growth strategy is not going to be selling even more Priuses to even more Californians,” said James Rubenstein, an auto industry analyst at Miami’s Ohio University. “Their growth strategy is to sell trucks.”

3 Don’t expect to see another automaker prospect. At least not anytime soon, Rubenstein told me. Companies such as Volkswagen and Mazda are heading to Mexico, lured by its extensive free trade agreements around the world and its ability to handle cargo ships from the Atlantic or Pacific.

“I don’t see anyone who has forecast that there would be any new assembly plants in the U.S. in the coming years,” he said. “The only longshot is Hyundai, which might need a third one” in addition to sites in Alabama and Georgia.

4 Secrecy issues will surface again. Toyota’s emissaries visited Charlotte and talked to Swenson and others without ever saying they were from Toyota. Leaders in Charlotte and Raleigh weren’t the only ones caught off guard when the news finally broke. The company’s own employees, as well as the governors of California and Kentucky, were surprised by the news.

Jeff Edge, who leads the Charlotte Chamber’s economic development unit, said he had never seen a major corporation put Charlotte on the short list for relocation and visit without identifying itself. He wonders whether Toyota leaders had already settled on Texas but didn’t want to tell Charlotte of its planned move for fear news would leak out.

North Carolina is in the midst of revamping its economic development system in hopes of giving job-recruiters more freedom to operate behind the scenes in such situations. They’re putting the state commerce department’s marketing and business-recruiting functions under a quasi-private agency.

Critics question whether that will mean more secrecy and looser ethical standards; they point to conflicts of interest and excessive executive pay that have accompanied such arrangements in other states.

North Carolina legislators are expected to take up legislation this month that would set rules for the new agency. N.C. Commerce Secretary Sharon Decker has said she wants to keep an open, ethical process, but she also wants a system that reacts more nimbly than the current one allows.

She said, for instance, that the state’s open-records law keeps North Carolina officials from signing expansive secrecy agreements some companies seek before discussing their projects.

Michael Tadych, a lawyer for the N.C. Press Association, said current laws give economic developers plenty of secrecy while negotiating with prospective firms, and require disclosure of the firms’ interest only after the bargaining ends.

It sets largely the same privacy boundaries as Texas’ open-records law, he added.

Eric Frazier writes about development, jobs and the economy. Got a story tip? Contact him at 704-358-5145, efrazier@charlotteobserver.com or @Ericfraz on Twitter.
Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more



Quick Job Search
Salary Databases
CharlotteObserver.com