From 2006: The Big Lure

McALLEN - A young and growing labor force coupled with infrastructure improvements has enabled Hidalgo County to become a serious player in the hunt for automakers who who want to build new production facilities, local economic development officials say.
    They are confident the area will land a major auto factory, and they are in the process of trying to lure Kia Motors Corp.'s first North American production plant to a Sharyland Plantation industrial park.
    But one Kia observer from outside the Rio Grande Valley disagrees.
    The site, which borders Mission and McAllen, is not a likely option for Kia because the area is not located near an Interstate highway and it is too far from suppliers to the Montgomery, Ala., plant Kia's parent company, Hyundai Motor Co., owns, said Mike Randle, editor and publisher of Southern Business & Development trade magazine, based in Birmingham, Ala.
    Kia and Hyundai, part of the South Korea-based Hyundai-Kia Automotive Group, operate separately in the marketplace but share research and development facilities and parts distribution networks.
    "Kia needs its mom, which is Hyundai," Randle said, adding that Kia visited South Texas in December, shortly after talks with Mississippi, an early favorite to win the plant, fell through.
    "You're not going to see Kia venture to Texas. If Kia were to go to Texas, an entire new network of suppliers would have to be created."
    Kia wants to start construction on its plant in June, Randle said, and locating close to an Interstate for marketing visibility is also important to the company. The fact that the Valley has no such road could be a deal-breaker, but that designation isn't as important for Japanese manufacturers such as Nissan Motor Co., which local development officials are also eyeing.
    Keith Patridge, president and CEO of the McAllen Economic Development Corp., said U.S. Highway 281 is an Interstate-quality road, and the Sharyland site offers many other benefits.
    A fully operational auto production plant in Hidalgo County would take about two years to build and bring in a roughly $1 billion investment to the area, Patridge said.
    The plant itself - which would produce 300,000 vehicles a year - would need about 2,000 workers. Suppliers would create another 4,000 to 6,000 jobs in the McAllen and Reynosa areas, and spin-off employment could bring the newjob total to 26,000 to 30,000.
    Just because Kia isn't a likely option for the Sharyland location, Randle says it is not to say other automakers will not look at the industrial park. His magazine listed the Sharyland site No. 8 of the South's top 12 locations for automotive assembly plants in its spring 2003 issue.
    Randle predicts seven to eight foreign auto makers will locate plants in the U.S. in the coming 10 to 12 years. They could include factories for Kia, Nissan, Toyota, Honda and maybe BMW, or a Volkswagen-owned maker such as Audi or Porsche.
    At least two, but most likely three, of those new plants will locate in Texas in the next two or three years, Randle said.
    Other Texas cities with sites suitable for large-scale projects include Corpus Christi, Laredo, Waco, Austin and Victoria, according to SouthernAutoCorridor.com, which Southern Business produces.
    "McAllen will certainly be one of the sites they look at," Randle said.
    Patridge has said Hidalgo County will land an auto assembly plant at some point.
    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 between the corporation and other local and state development officials since at least August.
    That's because they believe enough rail, electricity and access road infrastructure, as well as other advantages, have been built that meet automaker requirements. They also believe that, in addition to Kia, other manufacturers such as Japan's Nissan Motor Co., Austria's Magna Steyr and Germany's Audi may be considering building assembly operations in North America in the future.
    McAllen, Mission, 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 automaker.
    "This is a project we've been working on for about 18 years," Patridge told city and business leaders at the January MEDC board meeting. "Last fall, we decided it was time to take the show on the road."
    In mid-November, local and state economic development officials took a trip to Seoul, South Korea, and presented Kia officials - who have reportedly had concerns with the relatively low population of Meridian, Miss., an early favorite to win the Kia plant - with 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.
    MEDC executives think the McAllen and Reynosa areas' labor force could be just the thing to snatch a deal with Kia or another automaker away from competing states, primarily because of the sheer size of South Texas' workforce, which is not particularly well-trained or educated.
    As the majority of baby boomers begin to retire in 2011, the nation will face a shortage of workingage people compared with the number of jobs expected to be created.
    The number of the nation's population between the ages of 18 and 64 begins falling by 2007, according to TIP Strategies, Bureau of Labor Statistics and U.S. Census data the MEDC presented to Kia in November. From roughly 2 million workers this year, the number falls to about 1.45 million by 2011 and sharply after that to roughly 350,000 by 2020 through 2025.
    By that year, the labor force of the four other states will be declining, but Texas' and McAllen-Reynosa's will be on the increase. That's because of its young population now and because the population itself is growing due to a relatively high birth rate and people moving into the area, Patridge said.
    About 35 percent of people in Hidalgo County are younger than 18, compared with 28 percent in Texas and 25 percent nationally.
    That will make for a 2.8 millionstrong McAllen-Reynosa work force by mid-2025, according to MEDC data - more than Mississippi's and Arkansas'. Louisiana will have 2.9 million available workers that year, and Alabama will have 3 million.
    Sharyland Plantation is a master-planned community with residences in the north and the planned industrial park in the south.
    Of the 6,000-acre Sharyland Plantation, about 2,000 acres are available for an automotive plant and suppliers. They will only likely take up 1,200 to 1,500 acres, Patridge said.
    MEDC officials say they have two sites in Hidalgo County other than the Sharyland business park that could be suitable for an auto factory, but Patridge would not disclose the locations to keep those land prices from spiking.
    The Sharyland site offers benefits that include ready-made access roads, as well as electricity through wires and poles owned by Sharyland Utilities, a division of Dallas-based Hunt Power, which is affiliated with Hunt Ventures, a venture capital firm. Hunt Realty Corp., owner of Hunt Valley Development, is also affiliated with Hunt Ventures.
    Sharyland Utilities electric system is one of the most reliable in the state, Patridge said. That's because, with the exception of high-tension lines, its distribution lines are underground. That prevents outages from dust gathering on above-ground wires. The system also is redundant, with power coming into the development from two different sources.
    And the site is flat, which means savings for a company locating there because it would not have to pay to have major grading done.
    The industrial park's closeness to a floodway would provide a natural buffer zone as well, Patridge said, meaning additional property wouldn't have to be purchased to create that buffer.
    Among other selling points for the Sharyland site is its proximity to an $11 million regional multimodal transportation center under development adjacent to the McAllen Foreign-Trade Zone, near the intersection of Military Highway and South 23rd Street.
    Described as a "trucks in, trains out" facility, the center will bring a new type of rail service to McAllen in which trailers hauled into the center via truck will leave the center on rail cars.
    Another advantage is the planned $60 million Anzalduas International Trade Bridge - which will connect Mission to the outskirts of Reynosa - that could be completed in mid-2008. That would link the Sharyland site to a 16,000 acre industrial park in Reynosa where additional auto plant suppliers could be located.
    There are already 47 automotive supplier companies in McAllen and Reynosa, Patridge said.
    The MEDC has brought in automotive consultants to assess the site.
    "Many have told us they think this is the No. 1 site in America," he said. "And so what we're doing is we're out marketing the heck out of it, trying to find a company that we can locate there."