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Amazon HQ Bids Raise Bar for New Auto Plants

Competition creates new incentive floor for auto projects.

by on Oct.20, 2017

Toyota President Akio Toyota and his Mazda counterpart Kogai announce their alliance.

Proposals for Amazon’s second headquarters were due last night and communities from across the United States e-mailed their bids hoping to be selected as the host for a $5 billion project that could eventually produce as many 50,000 direct and indirect jobs.

The battle royal now underway for Amazon is also expected to have a major impact on other economic and job development projects, which when combined are also expected to boost the amount of cash automakers will get for new future projects

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In a culture where even the opening of the equivalent of a new warehouse for a distributing almost anything is hailed by local politicians, Amazon is expected to attract dozens of proposals. Denver has been proclaimed by the New York Times as the front runner because it’s located near the center of the country; has a skilled workforce, lots of land and a public transportation system. 

But other communities like Austin, Texas, Kansas City and St. Louis, Missouri, Cincinnati, Ohio and Detroit have submitted bids. Tucson, Arizona, sent along a 21-foot tall cactus to demonstrate they had ample room to grow. The opening bids are all expected top $1 billion.

(For the full story on the Toyota-Mazda joint venture, Click Here.)

The chase for Amazon’s potential riches, however, is also expected to push up the price of bids from local bids and state governments for automotive plants, which also are counted on to produce jobs, according to Steve Sewell, executive vice president of the Economic Development Partnership of Alabama, which has successfully attracted companies such Mercedes-Benz, Hyundai, Honda and Toyota.

The southern United States has successfully lured new automotive plants to Alabama, Texas, Georgia, South Carolina and Tennessee.

The incentives offered by Alabama during the past two decades and other states in the Southern United States, such as Georgia, South Carolina, Tennessee and Mississippi, included everything from land to new infrastructure, new roads, buildings and extensive tax breaks in return for the promise the plant would bring thousands of jobs to the region.

The average price tag for the plant has ranged from $300 million from the older plants to more than $700 million to $800 million for more recent developments since the competition with Mexico for new plants has escalated.

Amazon has definitely raised the bar, Sewell said. It also put a new floor under bids for new auto plants.

(Click Here to see more about how automakers provide and take away jobs.)

With Amazon attracting huge incentive packages, Bloomberg estimated that the incentives for the Toyota-Mazda electric vehicle, which currently is the only automotive enterprise looking for a landing spot in the U.S., could easily top $1 billion.

Scott Vazin, Toyota vice president of communications, has declined to comment on the search for a new site, which is being handled by Toyota, or to discuss the incentives the joint venture is seeking or hoping to obtain.

In addition, new documents obtained by the Milwaukee Journal Sentinel this week show Michigan made a $3.8 billion bid for a Foxconn Technology Group factory, appearing to outbid the $3 billion winning offer from Wisconsin.

But Wisconsin started with extremely favorable tax laws for manufacturers and ultimately won out with a $3 billion offer that was heavy on cash, according to public records released by both states. The flat-screen display plant in Racine County is expected to employ thousands and return about $4 for every $1 invested by the states.

Both states have also bid on and might still receive another multibillion-dollar Foxconn factory, the documents show.

(To see more about Toyota, Mazda and Denso’s new partnership, Click Here.)

Michigan’s bid on the display plant — known as Project 818 — consisted mainly of waiving taxes on Foxconn’s property and operations in that state and included $1.5 billion in tax breaks given automatically to all manufacturers locating there, according to the Journal Sentinel.

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