From 2006: Automaker project a group effort

McALLEN - Hidalgo County's quest for an automobile factory has spanned more than a decade, drawn in local, state and Mexican officials, and may have come close to crashing when McAllen Mayor Richard Cortez and Texas Gov. Rick Perry spoke publicly about recruitment efforts.
    Economic development leaders from McAllen and Mission are trying to convince South Korea's No. 2 automaker, Kia Motors Corp., to put its first North American assembly factory at a Sharyland Plantation site bordering the two cities. But if that doesn't work, the officials believe that other manufacturers like Japan's Nissan Motor Co.; Austria's Magna Steyr, a subsidiary of Ontario, Canada's Magna International Inc.; and the Audi division of Germany's Volkswagen AG may be considering building assembly operations in North America in the future.
    They say Hidalgo County will someday have an auto plant, likely a roughly $1 billion facility that would create thousands of jobs north and south of the border. An auto assembly plant would likely be the biggest single investment the Rio Grande Valley has ever seen.
    "I'm challenged to think of anything that's actually happened that would be anywhere close," said John T. Emery, dean of the University of Texas-Pan American's College of Business Administration.
    The project has spanned much of the 18-year life of the McAllen Economic Development Corp., charged with attracting businesses to Hidalgo County and the Reynosa area, and there has been a flurry of activity at the corporation and with other local and state development officials since at least August.
    That's because they believe enough rail, electricity and access road infrastructure, among other advantages, have now been built at the Sharyland industrial park to meet automaker requirements for a site.
    "When we learned that the Asian manufacturers were looking into building more plants in the United States ... we said, ‘Well, we can't sit around here and wait for them to come to us; we're going to try to go to them,'" Mayor Richard Cortez said in an interview.
    The first visit to see Kia came in 1992, when MEDC chief Keith Patridge and then-president and CEO Mike Allen went on a trip to see the company. Since then, the MEDC, the Mission Economic Development Authority, the Greater McAllen Alliance - a cooperative of Upper Valley economic development organizations - and the Sharyland site's owner, Hunt Valley Development, have worked to put together what Patridge describes as puzzle pieces that would make the site attractive to an automobile builder. Some consider the location the best automotive plant site in the country.
    In mid-November, local and state development leaders took a trip to Seoul, South Korea - Kia's headquarters - to meet with the company, which has reportedly had concerns with the relatively low population of Meridian, Miss., an early favorite to win the plant. The delegation presented data that included labor force projections for the McAllen area compared with those of states that were then viewed to be McAllen's main competitors: Alabama, Arkansas, Louisiana and Mississippi.
    But the McAllen Economic Development Corp. had had higher hopes for the trip.
    In September, Cortez and Mission Mayor Norberto Salinas wrote a letter to enlist Gov. Perry's help in wooing Kia, calling the plant "the most significant industrial location that will be announced in the United States" this year. They said Kia could build its assembly plant in the Upper Valley and locate some supplier plants in Reynosa.
    Tamaulipas was strongly supportive of the venture, they wrote, and the northern Mexican state's Gov. Eugenio Hernández Flores was willing to accompany Perry to Seoul. The mayors proposed that Perry lead the delegation and asked him to send a letter to Mong-Koo Chung, chairman and CEO of Kia Motors Corp. and Kia's parent, Hyundai Motor Co. The two companies, part of the Hyundai-Kia Automotive Group, operate separately in the marketplace but share research and development facilities and parts distribution networks.
    One of the MEDC's automotive industry consultants had advised the group that Perry's presence would ensure a meeting with Chung, but a no-show would likely mean the delegation would meet only with lower-level Kia representatives.
    Perry's letter to Chung requested a meeting in Seoul on Oct. 17.
    "Texas would like to bring a proposal for your consideration regarding future plants being considered by Hyundai/Kia Motor Company," Perry wrote in the letter. "The quality work force, low cost of living, the friendly regulatory environment, and our unique Maquiladora's (sic) suppliers on the border present a true opportunity for success. Investing in Texas and on the border would be a wise decision for Hyundai/Kia and I would like the opportunity to personally meet with you and present our story."
    But Chung spurned Perry.
    In a Sept. 23 letter addressed to the governor, the chairman thanked Perry for his interest but declined to meet with him.
    "As you may already be aware, Hyundai Motors has been successfully operating its recently established factory in Alabama, and Kia is in the initial stages of planning to build a factory in the pursuit of synergy effects with Hyundai's plant," Chung wrote.
    He said the company was negotiating with Mississippi rather than going through the competitive bidding process with other state governments and believed talks were almost concluded.
    "The proposed factory site in Mississippi is believed to be the most favorable location since it is well situated in the nearby vicinity of Hyundai's Alabama plant ... ," Chung wrote. "Given the current situation, we would like to devote all of our attention to building our U.S. assembly plant at the earliest possible time, and I sincerely ask for your understanding of our position."
    The trip was canceled, but a delegation without Perry was scheduled to meet with lowerlevel Kia representatives on the trip in November.
    Cortez, in an interview, blamed Hurricane Rita for the governor not going on the trip. The storm, which struck southeast Texas and southwest Louisiana in late September, "messed up our time schedule," he said.
    Despite the setback, Cortez and the governor couldn't resist mentioning the automaker recruitment effort during a small-business lunch in October at the University of Texas-Pan American.
    In a news conference following the mayor's and governor's remarks at the forum, Perry told reporters that it wouldn't be wise to disclose the name of the manufacturer "when we're in sensitive negotiations."
    The mayor also would not name the company, but after the speeches, the MEDC's Allen let slip Kia's name to an online news publication.
    "We're not in negotiations with the state of Texas at this time," Kia Motors Corp. spokesman Michael Choo said in a telephone interview Nov. 1 from his office in Seoul. "We have been contacted by the state government a while back. We've been contacted by various state governments over the past several months. We're only considering the state of Mississippi."
    A Perry spokesman said the governor was using the term "negotiations" more generally and not referring to any particular project.
    The mayor emphasized in an interview after the luncheon that he never said anything about "negotiations." Cortez said his reference to a possible auto manufacturer in his speech was designed as a tribute to the governor's willingness to help in the process.
    "He is extremely supportive of it," Perry spokeswoman Kathy Walt said of the automaker recruitment process. But ultimately, the decision of where to locate lies with companies, she added.
    "I think the governor's comments caught everyone off guard," said Steve Ahlenius, the McAllen Chamber of Commerce's president and chief executive.
    A lot of companies don't appreciate public speculation when nothing definite has been announced, said Pat Townsend Jr., president and CEO of the Mission Economic Development Authority. He said that Cortez almost spooked off Kia with his comments. "Unfortunately, the mayor and the governor said too much," the MEDC's Allen said.
    Perry spokeswoman Rachael Novier said the thought that Perry's comments might have endangered the recruitment process is mere speculation.
    Snagging Kia for the McAllen-Mission site would likely require an incentives package similar to the $133 million Texas offered Toyota Motor Corp. to put its sixth North American assembly plant in San Antonio.
    The MEDC coalition has asked Perry and the Texas secretary of state to help with automaker recruitment, and a Perry aide has said McAllen-Mission would get the same set of incentives Toyota got, Allen has said.
    Texas has a $295 million Texas Enterprise Fund set up to help close deals with companies that add jobs to the state. But some Valley leaders have complained that border and rural areas have been left out of grants from the fund.
    The governor's office does not comment publicly about enterprise fund deals until a final company decision has been announced, but Perry is willing to put the same effort and state money into helping McAllen and Mission land Kia as was given San Antonio for the Toyota plant, Novier said.
    "Every project is viewed on its merits," she said. "The governor has a well-demonstrated commitment to bringing investment to the Valley."
    The largest enterprise fund grant offered to date has been the $45 million commitment Perry made to Boeing Co. to locate a facility in Harlingen that was expected to employ between 800 and 1,200 people. Boeing ultimately pulled out of the deal for a better offer in Washington state.
    Asked whether the Valley landing an auto plant would help jump-start ongoing plans for a new Interstatequality highway link to the Valley or Laredo, known as the Trans-Texas Corridor 69, Novier said: "The governor is committed to making that a reality regardless."