At a time when many U.S. manufacturers are moving overseas for cheap labor and less stringent environmental codes, a giant German steelmaker is heading in the other direction. ThyssenKrupp is planning the largest steel mill project the United States has seen in nearly two decades.
The company says it's narrowed the choice to two sites: one in Mobile, Alabama, the other one near New Orleans, Louisiana. Both states are offering incentive packages believed to be worth more than $1 billion in a bid to close the deal, and the stakes are high.
Foreign automakers like Hyundai have flocked to the Gulf South to construct manufacturing plants. ThyssenKrupp wants to be near the action, so it plans to build a massive steel mill that will employ nearly 3,000 workers. It is one of the biggest economic development deals of the decade.
That's why, as political scientist Natalie Davis of Birmingham-Southern College notes, state officials are working overtime to court the German company. "Anytime you have a $3-billion project you have to sit up straight and say this could be very big for whichever state ends up being able to have this steel mill."
Both Alabama Governor Bob Riley and Louisiana Governor Kathleen Blanco have traveled to Dusseldorf to try to sell their plans to company officials. Blanco says she told them, "Louisiana can compete. We want to compete. We can make them profitable.
If they give good paying jobs to our people, we know that their product can be marketable. We can create an environment, a good business environment for them to work in." She touts the mighty Mississippi River, which can easily accommodate the company's large cargo ships. Louisiana also has more than $5 billion in cash and low-cost hurricane recovery bonds to help ThyssenKrupp get settled in.
Alabama has less money to offer: just over $1 billion total, pending voter approval. But the state boasts what Governor Riley calls "the confluence of influence." Six U.S. senators and the governors of neighboring Florida and Mississippi have all endorsed Alabama.
Regardless of where the plant is located, economist and steel industry expert Peter Morici says critics are increasingly concerned that the battle for new jobs is driving economic incentive packages to astronomical heights. "And one has to wonder whether we're overbuilding … whether we're putting too much of our taxpayer dollars into these kinds of incentives." The University of Maryland business professor thinks taxpayers give too much for too little in return. He says the real beneficiaries are friends of the politicians, pointing to what he calls "a tight relationship" between politicians in both parties and the construction lobbies in every state.
Building the ThyssenKrupp steel mill could create 29,000 construction jobs. Another group that would make a lot of money off the deal is the lawyers who would handle the billion-dollar bonds to pay for that construction.
When Alabama lawmakers met in February to approve a bill to free up more bond money, state representative Alvin Holmes expressed his concerns. "I'm not going to be for it unless all the attorney [work] is competitively bid," he told his fellow lawmakers, " [and unless] all the underwriters are competitively bid, because when you start to deal with bond issues you are talking about a lot of money!"
ThyssenKrupp is expected to decide between Alabama and Louisiana in May. Plenty of other states are paying attention. Analyst Peter Morici says the German company will produce so much steel at its new plant that it would likely put workers at other mills across the country out of work. Morici says that's the dark side of economic courtship.