Case Summary : Are We Ready for Automotive Plant

At the end of 2008, McAllen had a lower unemployment rate compared to other cities in the US, but
their economic not as good as the unemployment rate. The city of McAllen, Texas wanted to boost
their economic activity by attract automotive companies to build manufacturing/ assembly plant in
McAllen. They knew the need of automakers such as access to top-tier auto parts suppliers, lower
wages, a higher education system with automative programs and a convenient transportation system,
and they established the MEDC with the ultimate goal to prepare the Edinburg-McAllen-Misssion,
Texas MSA as a ready site for automakers. They have the advantage from the proximity to Reynosa,
Mexico with the NAFTA provisions, high availability of workforce, the low labour cost, strategic
geographic location with timely access to national and international markets, and proposed incentives
included the economic development grant and property tax reimbusement. But they also have the
disadvantage with the lack of skilled labour as a handicap in attracting the auto manufacturers. The
other potential sites Detroit, Michigan is equipped with abundant suppliers, offered a large financial
incentive and reduction of personal income taxes, had highly educated workers available, accessibility
to strategic transportation infrastructure, abundant and affordable energy and its proximity to Canada.
Norfolk, Virginia has the experience with Ford automotive assembly plant, strong labour pool with
good labour-management relations, sufficient infrastructure, had the availability of skilled workers and
inclusive logistic, offered worker training and site preparation. Louisville, Kentucky lying in the centreof
America’s “Automotive Alley” which enabled the JIT delivery, had an logistical advantage with the
UPS hub for the US, utilized the lowest industrial power rates and possessed abundant coal reserves,
the workforce productivity had surpassed the national average, the fourth lowest cost of operating
business in the nation, provided tax credits and incentives : a sales tax refund on construction
materials and building equioments, lower housing, land and living cost than the national average, very
cooperative people.

The key factors for an automotive company to choosing a site : Labour cost, union activity, financial
incentive, workforce availability, supplier availability, and living cost.

Compared to the other potential sites, McAllen has the lowest cost of labour cost (exhibit 3). Their
union activity about 4 to 5% of total workers (exhibit 4). McAllen had the second biggest financial
incentinve about 166 million from the other potential sites (exhibit 5). Had the lowest workforce
availability from the other potential sites (exhibit 6). The supplier in McAllen are limited compared to
the other potential sites (exhibit 7). For living cost, almost the cost of living in McAllen below the US
except for the healthcare and miscellaneous (exhibit 8).