When Ford chairman, Bill Ford, admitted last year that he was worried about the growing demand for cheaper Asian cars in America, he was right to express concern. The growing domestic market prompted the South Korean car manufacturers, Hyundai to base an assembly and manufacturing plant in the US.

The company spent months looking for the right place to invest, and the competition was tough. In the end the winner was the site of Hope Hull, just south of Montgomery, Alabama. It’s a victory of which the state is extremely proud. “We have once again shown the world that Alabama is simply a great place to do business,” said its governor, Don Siegelman. “Hyundai and Alabama have forged a business partnership that will benefit Alabama families for generations to come.”

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The state is fast gaining a reputation as the “Detroit of the South”, despite being one of the poorest in the US. The investment is worth $1bn and will create around 2000 direct jobs and between 4000 and 5000 indirect ones. The plant, which plans to manufacture engines as well as build cars, will open in 2005 and aims to produce 300,000 automobiles a year.

It was announced at the end of last year that Hyundai was considering four states in the US in which to base the plant – Ohio, Alabama, Kentucky and Mississippi. Ohio state was originally considered the most aggressive bidder, as it houses component providers and is near states such as Indiana and Michigan, which have established auto supply chains. However, by February this year, the Koreans had narrowed their choice to Kentucky and Alabama.

The announcement prompted a bidding war between the two states, which Montgomery county commission chairman Bill Joseph saw as a delicate situation. “State and local governments had to balance what they could give to the assembly plant. Not enough and the plant goes to Kentucky; too much and the liabilities of the plant outweigh the local benefits,” he said.

In the end Alabama’s incentive package was worth $252.8m, too generous according to some critics, who were reported as pointing out it was impossible to gauge what the economic impact will be because Hyundai company officials had not officially announced a pay scale or a the concrete number of jobs that would be provided.

It is a risk that Alabama state is willing to take. Carrie Kurlander spokesperson for governor Siegelman, emphasised that no incentives were provided that did not have to be and the incentives were comparable to those offered to Mercedes and Honda in previous years. Mr Siegelman stated: “Hyundai were very prudent; it never asked for anything we couldn’t give.”

The package is made up of $234.6m from state and local incentives including $76.7m in various tax rebates. Alabama legislature put out a $118m bond issue to help raise funds and $18.2m was provided by electricity, natural gas, telecoms and local services.

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The deal is unique for the number of institutions involved in putting the package together. For six months, city and county officials along with the County of Montgomery Industrial Board, utility companies, the water and sewerage board and chamber of commerce worked to woo Hyundai, revising deals and incentives to win the investment. Negotiations dealing with local incentives were completed only hours before Hyundai president Kim Dong-jin called Mr Siegelman to tell him of Alabama’s success. Local government incentives account for 37% of the package offered to Hyundai.

Incentives that will benefit workers include a training facility worth $7m and a unique measure provided by the Alabama Housing Finance Authority, which is offering a $1000 rebate to any Hyundai homeowner who stays in a job for at least five years.

Mong Koo Chung, chairman of Hyundai, emphasised that Alabama had been extremely generous with tax allowances. It is on this attribute, as well as a low cost labour force and strictly-controlled unions, that the state has attracted four car manufacturers to invest there in the past 10 years.

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