Facing South

Toyota Reveals Limits of Great Southern Jobs Scam

Last month, Toyota made a decision that didn't get a lot of press, but sent ripples of concern through state houses across the South.

The Japanese auto giant announced that it was going to bypass offers of hundreds of millions of dollars in "recruitment incentives" (corporate subsidies) from several Southern states, and would instead set up shop in Ontario, Canada, which was offering much fewer give-aways.

The decision to head north was an embarassment for Southern states eagerly competing to lure Toyota, on several levels. Not only did they lose a trophy job-creator for their state. But the reason Toyota gave for the move was especially damning:

"The level of the workforce in general is so high that the training program you need for people, even for people who have not worked in a Toyota plant before, is minimal compared to what you have to go through in the southeastern United States," said Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, whose members will see increased business with the new plant [...]

Several U.S. states were reportedly prepared to offer more than double [the] subsidy [Southern states were offering]. But Fedchun said much of that extra money would have been eaten away by higher training costs than are necessary for the Woodstock project.

He said Nissan and Honda have encountered difficulties getting new plants up to full production in recent years in Mississippi and Alabama due to an untrained - and often illiterate - workforce. In Alabama, trainers had to use "pictorials" to teach some illiterate workers how to use high-tech plant equipment.

Starting with Alabama's successful bid to lure a Mercedes plant in 1992 with an incentive package that eventually cost over $300 million in tax breaks and other give-aways -- while the state's education system was under court order for lack of funding -- Southern states have shoveled billions of dollars to huge foreign automakers, turning the South into the "new Detroit."

But now companies are waking up to the limitations of locating in a state that cares more about handing out tax breaks than investing in its people.

Unfortunately, state leaders haven't caught on -- indeed, states like North Carolina expanded their corporate give-away programs in the last legislative session. Below the fold is a piece I wrote on the North Carolina debate that will appear in today's Independent Weekly (not online yet, but check out this excellent weekly here it's online now here):


Chris Kromm

When North Carolina handed Dell Inc. - the second biggest computer maker in the world - over $280 million in tax breaks and other "recruitment" incentives last year to set up shop in the state, the backlash was fast and furious.

Community leaders and advocates howled at the idea of shoveling taxpayer money to a company that in 2004 made over $3 billion in profits. Lawmakers decried Dell's strong-arm tactics (which included questioning the state's "patriotism" if they didn't hand over the money). Journalists were incensed at the Dell deal's secrecy. A conservative former N.C. Supreme Court judge, Robert Orr, went to work on a lawsuit challenging the constitutionality of the give-away, which he filed in June.

"It's just an insult to other business owners in North Carolina," said Perri Morgan, an advocate for small and independent businesses. "I think with every deal, a few more people wake up."

Morgan likely had a shipment of alarm clocks sent to state leaders last week, when after months of growing skepticism over the Dell handouts, lawmakers decided to do it all over again.

Last Friday, Governor Mike Easley signed into law a two-year extension of the state's two biggest corporate subsidy programs, the William S. Lee Act and the Job Development Investment Grant Program, calling them "smart, targeted tools to bring and grow jobs in North Carolina."

But author and advocate Greg LeRoy has another label for such deals, which is the title of his recent book that he'll be discussing in Raleigh on August 10: "The Great American Jobs Scam."

North Carolina is "a kind of petri dish," said LeRoy in an interview for the Independent Weekly, for a silent scandal unfolding across the country. Every year, cash-strapped state and local governments shell out over $50 billion in tax breaks, free or cheap land, subsidized city services, cash grants, and other give-aways - mostly to big, profitable corporations - to entice them to re-locate or expand in their area.

The deals are often shrouded in secrecy, according to LeRoy, and offer few guarantees of delivering prosperity. And they commonly involve a laundry-list of "scams" that short-change taxpayers and communities, including:

* Create a Bogus Competitor: State documents reveal that Dell scared North Carolina leaders into thinking they were about to lose the plant to Virginia - although Virginia leaders now say they only offered $8 million for the facility.

* Pay Poverty Wages, Stick Taxpayers with the Tab: Subsidies often don't require that the jobs created offer a decent wage. Wal-Mart has collected over $1 billion in breaks nation-wide - including at least two counties in North Carolina - despite offering wages and benefits so low that, for example, 25% of the people on TennCare, Tennessee's health program for poor residents, are Wal-Mart employees.

* Take the Money and Run: Many companies have collected millions in taxpayer-funded subsidies, only to pack up as soon as they expire. Or worse, they don't do anything at all, like the company in Haywood County that shuttered after a year without having created a single job (the county got the money back after years of legal wrangling; not all places are so fortunate).

"Up until 1996, North Carolina had an approach that worked well," says LeRoy. "It was dedicated to investing in public schools and an excellent university system. That paid off."

But state leaders hastily passed the Lee Act in 1996 after nearby states had landed "trophy deals." LeRoy points to "a raft of evidence" that the Lee Act hasn't worked, draining millions in state tax revenue while largely benefiting wealthy areas.

Among the evidence is a 2004 study by the N.C. Justice and Community Development Center, which found that just 5% of the Lee Act credits had gone to the state's poorest counties. Despite some improvements, Amna Cameron of the Justice Center calls last Friday's extension "more of the status quo."

How to beat the jobs scam? Demand that the details of taxpayer give-aways be made public. Insist on standards, such as guarantees that jobs will pay a living wage, and "clawbacks" to reclaim subsidies if the company doesn't follow through.

But his top recommendation is to get back to investing in what works.

"This is my agenda for creating good jobs: reinvestment in skills and infrastructure, not more corporate disinvestment by tax dodging," LeRoy concludes his book. Corporate subsidy deals "were always dumb ideas. Now it is glaringly obvious: they are wasteful handouts we can no longer afford."

Sounds like Toyota agrees.



People Referenced:


re: Toyota Reveals Limits of Great Southern Jobs Scam

The article explains exactly why these companies go to southern right to work states, says alot about what these corporations think of the people doesnt it.
Want to continue to live in poverty then keep the mouths shut like the southern states have done for yrs, they are the reason wages have fallin in the last 7 yrs.

re: Toyota Reveals Limits of Great Southern Jobs Scam


re: Toyota Reveals Limits of Great Southern Jobs Scam

lets face it everybody nows that americans are not to smart anymore.


re: Toyota Reveals Limits of Great Southern Jobs Scam

As Forest Gump stated, STUPID IS AS STUPID DOES.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Put a tax on foreign cars useing our highways

re: Toyota Reveals Limits of Great Southern Jobs Scam

you're right Wolfgang...you are a prime example. It's "knows" not "nows".

re: Toyota Reveals Limits of Great Southern Jobs Scam

you're right Wolfgang....but you just proved their point. It's "knows" not "nows" !

re: Toyota Reveals Limits of Great Southern Jobs Scam

allmost everyone in washington dc is corrupt, funny how you walk in worth a dollar and walk out a millonare

re: Toyota Reveals Limits of Great Southern Jobs Scam

Has anyone here learned punctuation, capitalization and spelling.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Not only is it "Know" but also "too".
Your responses to Wolfgang have just proven HIS point.

re: Toyota Reveals Limits of Great Southern Jobs Scam

I'm afraid that by capitalising instead of underlining "HIS" Jer from NC just made Wolfgang into a deity. I suspect Wolfgang was being drawing attention to the part about an illiterate workforce.

re: Toyota Reveals Limits of Great Southern Jobs Scam

I think you mean American people are not TOO smart. Unlike you of course.

re: Toyota Reveals Limits of Great Southern Jobs Scam

I wonder what Senators Corker, Vetter and Shelby have to say about this.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Yes, because GM and Fords made in Mexico are certainly more Foreign than a Honda made in Ohio. Or the Chevy Aveo, which is Korean designed and built in places such as China and the Ukraine.

So yes, lets tax imported cars.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Maybe the workers in the southern states show consider unionizing. Maybe then they wouldn't be SOL.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Wolfgang-Not only is it "knows" instead of "nows" it is also "too" instead of "to!"...Also, Americans should be capitalized!

I would also argue that your statement "everyone knows (nows) that Americans (americans)are not too (to) smart anymore" is wrong as well.

Wolfgang-Just curious where you are from? Southern Germany?

I went to High School in Louisiana (That's the deep south just like Alabama and Mississippi who are mentioned in the above article...I assume you are just as ignorant in High School Geography as you are in High School English)!...Even in Louisiana, Alabama and Mississippi they teach us basic English skills and proper spelling both of whom you failed to demonstrate!

I have to hand it to you though. In one sentence you proved you are dumber than the southern people mentioned in the article! Nice going!

re: Toyota Reveals Limits of Great Southern Jobs Scam

Also, a sentence begins with a capital letter.You just proved your own point.

re: Toyota Reveals Limits of Great Southern Jobs Scam

I have worked in Manufacturing in the North and the South. You get what you pay for. Toyota is right! The northern workers are far more educated and take far more initiative than the southern workers.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Hey Wolfgang, you're not "too" smart.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Sad day. The failure was by politicians who lacked vision and a clergy who preached the sanctity of profit at the expense of knowledge.

My condolences to my Southern countrymen and women, but ultimately the choice is theirs: they can keep letting big money and its lackeys in the church tell them what an "American" is, or they can decide that for themselves.

re: Toyota Reveals Limits of Great Southern Jobs Scam

Hey, Barn. I thought you guys hated unions down there.:)

re: Toyota Reveals Limits of Great Southern Jobs Scam

Hi Dirk,
Please allow me to add my insight to your argument over who is the smarter person between the two of you. You don't need to capitalize the words high and school. Also, your sentence should have read "both of which", not, "both of whom". My last observation is that you ask Wolfie where he was from due to the name he had been given, so by this logic I have to ask you; where does the name Dirk originate? Is that a common name in the southern U.S.? I'm university educated, and from Canada, and I guarantee that there are many people better educated but really, how do we know the true measure of smart? As for the situation North America is in with regards to manufacturing, it is simple:
We are all in big trouble because the Chinese are still coming and they play really unfairly.
p.s. I'm just messing around, Dirk, with the who's smartest stuff buddy.

re: Toyota Reveals Limits of Great Southern Jobs Scam

I owned a Chevy made in Mexico, I will not ever do that again. My American made Honda has not had one issue and has the mileage on it that killed 3 transmissions in the Chevy. Also Unionization is a great idea, we need another government bailout with taxpayer money don't we?