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Honda comes to Indiana June 29, 2006

Posted by Tom in Community, Economic Development, Workforce.
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In a major economic development coup, the State of Indiana secured a new, $500+ million Honda automobile production plant for Greensburg, Indiana. This is a huge boost for a section of the state that has been hit hard by by regional and global economic shifts. Don Iannone at Economic Development Futures Journal offers his insights, as well as a link to the announcement.
Bill Testa at the Chicago Fed offers up his analysis of the Honda relocation here. He attributes the Indiana siting to its proximity to the Honda supply chain:

The choice of the Midwest rather than the south is a company-specific story rather than a reversal of the industry’s southward movement. Honda’s decision to site its next assembly plant in the Midwest is very consistent with the crucial role that supply chains and logistics play in today’s manufacturing environment. In this regard, the Midwest’s continued high concentration in automotive parts and related industries keeps it a contender for future siting of North American automotive production facilities.

The quality of the Indiana workforce apparently played a role in the decision, as Indianapolis’ WTHR conveys:

Former automotive workers in cities like Anderson, which was built largely by GM, say Honda would be smart to employ the cities idle production talent pool as it searches for skilled workers. In fact, automotive analysts say it’s Indiana’s automotive workforce that helped land Honda.

Sadly for Ohio, a main competitor with Indiana in the Honda derby, workforce may have been a deciding factor in the decision to go west:

Lt. Gov. Bruce Johnson, director of the state’s development department, said Honda wanted to build the plant near its suppliers, but not so close that the suppliers’ workers would be tempted to take higher-paying jobs at the new assembly plant. That would put Honda in competition with its own suppliers, he said, and raise the cost of the parts.

David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., agreed that building the plant in Ohio might have lured workers away from some of the automaker’s own suppliers in the state.

Honda appears commited to investing in its nearly 2,000 new workers in Greensburg, according to Inside Indiana Business (with audio link).

UPDATE: The Fort Wayne Journal-Gazette indicates that the price to the State of Indiana was steep:

Indiana offered $141.5 million in incentives to the company, which included tax credits and abatements, training assistance and a promise to expedite a long-sought interchange upgrade at U.S. 421 onto Interstate 74, state officials said.

Now I’m going to let my economic development naivete show…$141.5 million for 2,000 jobs equals State incentives of $70,750 per job. That seems like a lot of money. Can any expert care to comment on this? Are there comparable numbers for other incentive packages? I’ve never looked at the relative value of incentives before, so perhaps it is a reasonable amount.

Regardless, incentives that high make one wonder if having a top tier workforce will ever be enough to entice companies to a region. Is it possible to sell a company on high value as opposed to cheap…or free money?

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Comments»

1. Tom K - July 11, 2006

I’m no expert but it’s said that for each job Honda creates, 6 additional jobs are created..
Thus 2,000 x 6= 12,000 +2,000=14,000 new jobs. The incentive pkg now drops down to
$8,143 per job. Then add the new jobs that the growth in local infrastructure and services will contribute to the Decatur Co area alone…now subtract the State and local income tax on jall these jobs….then add the 6% sales tax on all that these 14,000+ people spend in IN…..
I think you will see that the $114M you are questioning is a pretty good investment!
Gov. Daniels did a great thing for IN in making that deal happen. We here in Greensburg and Decatur Co. couldn’t be happier!

2. nascar - August 17, 2006

I wonder what kind of impact this will have on Indianapolis if any at all. I know that its a hour away so who knows.


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