Hyundai: Behind the story

By By Buddy Bynum
April 17, 2002
In a time of budget cuts, slow growth and deficits, can Mississippi afford to compete for automotive manufacturing projects such as Hyundai? The answer is the state cannot afford not to.
But just as I know Mississippi must compete, I also know a full-fledged debriefing should be conducted on what went wrong with Hyundai  not to dwell on it, but so whatever it was can be fixed as the next automotive manufacturers and suppliers are recruited.
Can Mississippi successfully recruit against a $252 million incentive package offered by, say, Alabama?
Is our state committed to the notion that existing businesses, that is to say the ones already here, deserve top priority over prospects? For example, would it be more productive for the workforce if the state helped Nissan expand, or spent money and time to attract Hyundai?
Are the fundamentals of the state's two-year-old economic development plan especially the Advantage Mississippi program under which Nissan was recruited still sound?
Let's look at a couple of things.
First, the good news is that Nissan, which is building a $930 million automotive manufacturing plant in Madison County, is hiring again. The bad news is that after 40,000 applications, it has yet to find the 4,000 workers it needs. Is that a troubling sign? A number of experts have argued, so far without much success, that every cut in the state's education and training programs reduces the likelihood of landing another Nissan.
If you read this newspaper, you know some of the Hyundai story, but let's cook it down to what might have appeared in a newspaper's classified ad where the number of words determines the cost. "Small state seeks large Asian car maker. Site firm, benefits flexible."
In at least one instance of the Hyundai recruitment, money was not the object. At a Feb. 5 meeting in Seoul, Gov. Ronnie Musgrove offered to pay Hyundai $50,000 a day for any delays in building a new plant on a site in Pelahatchie, if the company would only build there. Hyundai president Kim Dong-jin reportedly told the governor that was big money, but his company really needed a site that was ready to go, not one with problems. He was more concerned about meeting the company's self-imposed schedule for building its billion-dollar North American automotive manufacturing plant.
Thirty days' delay under the scenario outlined by Musgrove would have cost $1.5 million  not enough to square the state Medicaid program, but perhaps enough to keep a few good professors on the job for a few more years. In today's economic development world, though, with a project of Hyundai's size, $1.5 million may only pay the cost of admission.
In the Hyundai recruitment, Mississippi was competing against an incentive package offered by neighboring Alabama that includes things Mississippi cannot offer  a-20 year exemption from state income taxes, for example. Now that's real money.
A $10 million commitment for advertising, public relations and marketing from the Retirement Systems of Alabama was also included in that state's package. Can or has the Public Employees Retirement System of Mississippi ever considered similarly supporting the cause of economic development?
And then comes the question of the actual site proposed for Hyundai, the Pelahatchie site. There is overwhelming evidence that MDA continued to push Hyundai toward Pelahatchie well after the company said there were serious problems that could delay its schedule. And, Hyundai was not about to delay its schedule.
Let's look for the silver lining. One MDA staff member has been quoted as saying the state developed a huge bank of information on the Pelahatchie site that can be used for future marketing purposes. That's good for Pelahatchie.
To its credit, the state is funding a labor survey for the East Mississippi Business Development Corp. that should produce a true picture of the local workforce. MDA could also help by funding archeological, engineering and environmental studies at a local prospective site, but so far has not been willing or able to do so.
MDA put a lot of money into Pelahatchie and must eventually get something back. MDA and the Legislature must also realize that local economic development agencies need new tools for a new era. Innovative help from the state to do fundamental work to get sites ready for the next big recruitment project could pay enormous benefits.