How Did Georgia Lure Korean Carmaker?

March 15, 2006 — -- Finding a new job in manufacturing is tough in today's America. Finding 2,000 of them is nearly impossible.

So this week when Georgia landed a new Kia car plant that might mean up to 2,500 jobs, many people wondered how the state did it.

According to the Bureau of Labor Statistics, U.S. manufacturers have cut more than 3 million blue collar workers from their payrolls in the past decade. That has forced state and local governments around the country to use tax and other incentives to lure blue collar positions to their districts, a practice called smokestack chasing.

State and local governments in Georgia offered the Korean automaker Kia about $400 million in incentives -- some $160,000 for every job the automaker promised to bring to the state.

"Jobs are important in Georgia," said Gov. Sonny Perdue during a news conference Tuesday. "We have focused on jobs ever since we came in."

Perdue is running for re-election this year and has faced a fairly bleak picture in the area of job creation during his tenure. Ford and General Motors recently announced plant closures in the Atlanta area, which will lead to about 5,200 pink slips as voters go to the polls.

So critics charge that Tuesday's announcement -- and the relatively large bundle of incentives -- is politically motivated corporate welfare.

Jobs Don't Always Follow the Money, Though

But Georgia is not the only state giving big business big bucks for opening new plants. Nearly every state has similar programs. According to consulting firm TaxAdvantageGroup, there are more than 2,500 programs across the country that offer tax breaks and low-cost public financing, for example, for a new plant.

Mississippi was in the running for the Kia plant, and it had reportedly offered about $1 billion in incentives.

So why would Kia choose Georgia over the richer offer in Mississippi? Analysts say the big dollars are only part of the site-selection process. Companies have to locate plants near their suppliers, transportation networks and skilled labor. "Incentives matter, especially when you're trying to lower costs, but right now, with the federal trade policies forcing low-skill jobs overseas, we can't compete with low costs," Gov. Michael Easley, D-N.C., told SiteSelection Magazine last year. "So we have to compete on high skills."

The question of smokestack-chasing incentives is now before the Supreme Court.

In the case of Cuno v. DaimlerChrysler, the Court is deciding whether state incentives are a protectionist barrier to interstate commerce. Ohio taxpayers sued after the state gave Chrysler tax credits to keep a Toledo Jeep plant from closing down.

The plantiffs contend that giving away taxpayer dollars to big business does nothing but reward decisions the companies would have likely already made.

Defenders say the practice is not illegal, because it does not restrict the free flow of commerce among the states.

The Court heard arguments March 2, and a decision is expected by summer.