Thursday, January 24, 2002

Labor supply called key for Hyundai

Ohio seen as also-ran to win plant

By Mike Boyer
The Cincinnati Enquirer

        Hyundai Motor Co.'s decision on where to build a new U.S. assembly plant may not turn on tax incentives or transportation costs but on labor availability, says a Miami University professor who has studied automakers' location decisions.

        For that reason, geography professor James M. Rubenstein thinks it's unlikely Ohio will prevail in the race with three other states to land the South Korean automaker's planned $1 billion plant. The facility is expected to employ up to 2,000.

        “I think we're the underdog,” said Mr. Rubenstein.

        Still, top Hyundai executives accompanied by Gov. Bob Taft today will look at a site near Mount Orab, 32 miles east of Cincinnati in Brown County. Friday, they'll tour Wapakoneta, south of Lima on Interstate 75.

        U.S. Rep. Michael Oxley, R-Ohio, whose district includes Wapakoneta, returned from a weekend trip to South Korea to meet with Hyundai chairman Chung Mong-Koo to say Ohio and Alabama were the automaker's top choices — and Wapakoneta was the preferred site in Ohio.

        Gov. Taft said Wednesday that Ohio, Kentucky, Alabama and Mississippi are in contention. Hyundai has kept its deliberations mostly private.

        Rep. Bob Riley, R-Ala., said he and Hyundai president Dong-jin Kim toured sites near Montgomery and Opelika on Wednesday. Mr. Riley, who visited Hyundai in Korea in November, also said the automaker had narrowed its search to four states.

        While Hyundai spokesmen have been mum on the selection process, the automaker has said it expects to make a decision by mid-year so it can begin production by 2004.

        The new plant won't be Hyundai's first experience in North America. In 1989, it opened a $400 million plant in Bromont, Quebec, to build small cars. The plant was closed six years later.

        But Hyundai's North American sales increased 42 percent last year to more than 346,000 units. That rise, coupled with increased trade pressure and impending competition in Korea from General Motors Corp. (which is acquiring rival Daewoo), triggered Hyundai's new site search.

        This time Hyundai is using greater care in picking a manufacturing site, officials said, looking at the total cost of production and not just the most inexpensive plant location.

        The problem with Quebec, Mr. Rubenstein said, was its isolation from the heart of the U.S. auto market, increasing the cost of shipping parts and completed vehicles to dealers.

        “One of Ohio's big advantages is we're closer to the market center,” said Mr. Rubenstein.

        “The question is the market area for Hyundai,” he said. “Are they better off in Ohio or (in the South)? The answer is that it probably is not that dramatic a difference in terms of where they're trying to ship cars to.”

        Another plus for Ohio is its extensive network of automotive suppliers, but that advantage was lessened over the last decade as more foreign automakers have built assembly plants in the South and developed a network of suppliers for those plants.

        “The big variable then is the climate,” Mr. Rubenstein said. “The labor climate and literally the physical climate.”

        "We know about the situation down South, that plants are attracted there by the non-union environment.” he said. “That's been important. But what's more important on the labor front is availability of labor.”

        In analyzing potential sites, Hyundai will be looking at the labor skills of workers within a 45-mile commuting range.

        Unemployment in Brown County, where Mount Orab is located, stood at 6.2 percent in December, while it was 4.5 percent in Auglaize County, where Wapakoneta is located.

        “It's not as simple as looking at the unemployment rate,” said Mr. Rubenstein. “They're also looking at who are the other major employers and are they growing, declining or stagnant? Who do they have to complete with for labor?”

        Wapakoneta's proximity to Marysville and Anna — Ohio cities where Honda employs about 13,000 in four different plants — could make it less attractive from a labor-supply standpoint, he said.

        But Brown County's small labor pool, despite its relatively high unemployment, is also a big disadvantage. The county's labor force, employed and unemployed, is 20,800, according to the Ohio Department of Job and Family Services, compared with 25,700 in Auglaize County. If you add in surrounding counties, the labor pool is bigger up north.

        Mount Orab's lack of access to the Interstate highway system has been cited as a drawback, but Mr. Rubenstein thinks Ohio 32 — which cuts across Brown County — offers good access.

        “It's a four-lane limited access highway with nary a vehicle in sight.” But the downside to that lack of traffic is “there's not a lot of people there. That's the labor (force).”

        The Brown County site was a finalist in Toyota Motor Corp.'s search for the truck assembly plant that was built in Princeton, Ind.

        Enquirer Washington Bureau reporter Derrick DePledge contributed to this report.


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