Toyota Motor Corp.'s year-end decision to build another assembly plant in Indiana was not based on receiving millions of dollars in state incentives - although that didn't hurt.
To build its latest $800 million factory, Toyota opted for the Princeton, Ind., site for primarily two reasons: The automaker already had a truck plant there with established human resources, and the location is near Toyota's other manufacturing operations in Kentucky and Missouri.
But Indiana's pledge for $28 million in tax abatements, along with another $20 million or so in various training grants and local tax exemptions, helped swing the deal, says Dennis Cuneo, vice president for legal, environmental and external affairs for Toyota Motor Manufacturing North America Inc. in Erlanger, Ky.
'Incentives were not our main concern, but they were important in our decision,' Cuneo says. 'Without the incentives, this may not have been as competitive of a location as we needed for it to be.'
Still, Indiana's $45 million to $50 million in benefits are vastly different from what some states have used to woo other recent auto-assembly plant projects. They are even a far cry from what at least two states offered Toyota itself to land the Indiana project.
Michigan officials proposed approximately $225 million in incentives to put Toyota's new plant on a site near Grand Rapids, Mich. Alabama told Toyota that it would provide the same size of incentive package it gave Mercedes-Benz U.S. International Inc. in 1995 and American Honda Motor Co. last year.
Mercedes was given $253 million to construct its $300 million sport-utility plant in Vance, Ala., while American Honda reportedly has been promised about $150 million to build a $400 million assembly plant in Lincoln, Ala.
'Our competitors are getting big packages,' Cuneo says. 'It's hard not to talk to states about them when your competitors are getting them. It would be foolhardy for a company to ignore what's being offered.'
Cuneo said the Michigan proposal was particularly hard to dismiss. Toyota, once a despised intruder in the U.S. automakers' home market, would never have considered a Michigan assembly location a decade ago. Then, Toyota was just beginning to learn how to build cars outside of Japan. Some company executives thought U.S. workers had too many bad habits to build vehicles the way Toyota wanted it done.
But with the Michigan incentive package, the idea looked appealing, Cuneo admits.
'Michigan is now our biggest supplier state,' he points out. 'We bought $1 billion worth of material from Michigan last year. So it makes some sense to think about assembling there.'