Kentucky got Toyota in 1986, but why have none come since?

since toyota broke ground in 1986, kentucky has not been able to attract a new assembly plant; why not?

ssloan@herald-leader.comMay 1, 2011 

It was a rainy day 25 years ago when ground was broken in a muddy Georgetown field for the state's newest company. At the time, people expected big things, but few knew just what a presence Toyota Motor Manufacturing Kentucky, one of the state's largest employers, would become in Central Kentucky.

Since that groundbreaking in 1986, Kentucky has watched as other Southern states became the destination of choice for foreign automakers looking to build plants.

BMW went to South Carolina. Honda, Hyundai and Mercedes-Benz chose Alabama. Kia chose Georgia. Nissan and another Toyota plant went to Mississippi. Toyota also went to Texas. And most recently, Volkswagen chose Tennessee, the state Kentucky beat for Toyota's first wholly owned U.S. factory so many years ago.

Those who follow the industry point to a number of factors — timing, work force and labor laws. And some say it's in Kentucky's best interest to not have another plant locate here.

Selecting a site

Dennis Cuneo knows what to look for in a potential plant. The former Toyota executive was the automaker's North American site-selection guru for more than a decade. In his time, he led the company to locate a truck plant in Texas and a future home in Mississippi.

Automakers tend to start by looking at communities with a "broad-brush search," he said. Now, online information is studied, and some might do formal proposal requests. The narrowing down is done based on the individual project.

Take Toyota's pickup plant. "We went with San Antonio because Texas is where the largest percentage of full-size pickups are sold," he said.

When it came time for another plant, it was actually one area's high unemployment rate that attracted his attention.

"Before the Great Recession, unemployment was pretty low, but in Tupelo, it was 7.9 percent," he recalled last week. "That was the center of furniture manufacturing, which was quickly offshoring to China.

"The skill set is comparable to assembling automobiles, so we knew there was a higher percentage of people looking for work who were from an industry with a strong work ethic."

Toyota looked at Kentucky, but it wasn't the right fit.

"You don't like to put all your eggs in the one basket," said Cuneo, who is now managing partner in the Washington office of the law firm Fisher & Phillips.

He said Kentucky has appealing sites. Elizabethtown offers a central location and good highway access, while Hopkinsville is close to Fort Campbell and its constant stream of well-trained soldiers returning to civilian life and looking for employment.

Kentucky presented options to Volkswagen, though the German automaker chose Chattanooga. The Tennessee site was "almost shovel-ready," while Kentucky's wasn't, said Larry Hayes, secretary of the state Cabinet for Economic Development. Kentucky had offered Elizabethtown as a location for Hyundai but was the runner-up when the South Korean automaker chose Alabama in 2002.

The state now owns the land in Elizabethtown, Hayes said, and also noted that local officials control a site in Hopkinsville.

Work force, other factors

Beyond land, there are other factors that leave Kentucky trailing other hopefuls, observers say. First is the fact Ford, GM and Toyota all have substantial operations here.

"Whoever comes into the state is going to be the fourth automaker who is here," said Kim Hill, director of research at the Center for Automotive Research in Ann Arbor, Mich. "When you pick up the phone to call the governor, the feeling is you could be fourth in line. The state's already kind of saturated."

Another often cited criticism is Kentucky's lack of what's called a right-to-work law. Every state south of Kentucky has the law, which says workers don't have to join unions even if they're represented by them. Previous efforts to pass such a law here have failed.

"It's a lot easier to work and be more flexible at a non-union company than within a union company," said William Parsons Jr., chairman of the Bowling Green-based Global Automotive Conference.

But others question the importance of such a law. Cuneo, the former Toyota executive, said it's not "a positive or a negative" to him.

The state also no longer has such a firm grip on low energy prices, noted Ken Troske, chairman of the Center for Business and Economic Research at the University of Kentucky's Gatton College of Business and Economics.

"While we remain a very low-priced energy state ... in terms of what industrial consumers pay, the difference is not very large anymore," he said.

Troske also pointed out Kentucky trails other states in workforce quality.

"Building these cars has become a much more sophisticated operation," he said. "This is probably not a job a high school dropout can do anymore. ...

"We remain one of the least-skilled states in terms of overall educational achievement. I've got to believe that hinders the ability to attract assembly plants."

It also might be difficult for other automakers to find their potential workforce here because of the industry's prominence.

Since opening, Toyota has doubled the size of its Georgetown plant, and in 1996 it located its North American manufacturing headquarters in Erlanger, in Northern Kentucky. Automotive suppliers have flocked to the region. Ford has reinvested in its two Louisville plants, and General Motors is expected to announce this week it will invest more than $100 million in improving its Corvette plant in Bowling Green.

Kentucky was home to 433 motor vehicle-related facilities employing 64,175 people as of April 11, according to the Cabinet for Economic Development.

"They're very picky these days on employees," Hill said. "Toyota went through almost 100,000 applicants in San Antonio to find the 2,000 they needed. ... They want the best people at these plants because they're paying them great wages."

No need for more?

A new plant would bring jobs, but it might not be best for the state's economy, Troske cautioned.

Manufacturing typically accounts for about 18 percent of Kentucky's economic output, and motor vehicles are more than one-third of manufacturing in the state, he said.

"Cars make up a larger component of our economy than a lot of what you would think of traditionally as automotive states, including Ohio," he said. "We would become very dependent on cars if we got a lot more of them."

He noted the reliance on vehicles helps explain why Kentucky's unemployment rate has remained so high after the recession while the nation's has eased somewhat.

"The automotive industry took such a large hit in the last recession," he said.

Troske said a state "would like to avoid being focused on one thing."

"All you've got to do is look at Detroit," he said.

"And Pittsburgh is only now coming back," he added. "That was the steel capital of the world, and it left. And Pittsburgh, while it is showing nascent signs of life, is certainly not the most dynamic economy in the world."

Still looking

So how has Kentucky measured up in the 25 years since ground was broken for Toyota? Is it still fertile ground for a new plant?

"I wouldn't say you're doing anything wrong," said Hill, of the Center for Automotive Research. "You've been taking care of the folks who are in your state right now, and you're making sure they are very happy and content and want to keep building vehicles in Kentucky.

"You're doing that rather than chasing after somebody else and having your homegrown guys thinking, 'What are they doing for me while they're bending over backwards for them?' "

And those home-growns just keep growing, noted Hayes, the economic development secretary who was cabinet secretary for Gov. Martha Layne Collins and played an instrumental role in luring Toyota to Kentucky.

He said the governor and GM plan to announce later this week that the Corvette plant in Bowling Green will see more than a $100 million investment by the automaker.

And with Kentucky as a home to GM, Ford and Toyota, Hayes said the state has three of the best with GM's sales skyrocketing in China, Ford's growing in the United States and Toyota as the top-selling automaker globally last year.

"We have what many people would say is the best of the best as you look at the future," he said.

He added the state's always looking for a fourth. To get it, though, Toyota's Cuneo stressed patience and owning a good site.

"There's certainly room in Kentucky for another assembly plant," he said. "Kentucky has a good reputation.

"Toyota's experience has been very positive."

Reach Scott Sloan at (859) 231-1447 or 1-800-950-6397, Ext. 1447.

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