[OPE] industrial capital is shifting to ....

[A senior executive at Fiat, the Italian industrial conglomerate,
said: "With the amount of money US states are willing to throw at
you, you would be stupid to turn them down at the moment. It is one
of the low-cost locations to be in at the moment."]

This story supports the perspective that relocation of industrial
capital is often complex and concerns not only transportation costs
and relative wages and benefits internationally, but also state
policy (including corporate subsidies, taxation, industrial policy,
regulatory policy, labor law, etc.) It also shows the rivalry that
exists by regions and cities within nations for industry and what
these local gvernments are willing to offer in the way of incentives
to capital for relocation (or to stay put).

In solidarity, Jerry

++++

Manufacturers turn to US
By Richard Milne in London
Financial Times, September 7 2008

The latest cheap manufacturing site for European companies is not in
Asia or eastern Europe but the United States, say top executives from
some of the continent's biggest companies.

"It may sound like a joke but it can be cheaper than you imagine to
manufacture there," the chairman of one of Germany's largest
automobile groups told the Financial Times.

The reason is less the level of the dollar, which remains relatively
low in spite of the euro's recent plunge, but rather the huge level
of incentives some US states are offering companies to set up
factories in their region.

Tennessee, for instance, has just disclosed that it agreed to give
German carmaker Volkswagen $577m in incentives for its $1bn plant in
Chattanooga.

A senior executive at Fiat, the Italian industrial conglomerate,
said: "With the amount of money US states are willing to throw at
you, you would be stupid to turn them down at the moment. It is one
of the low-cost locations to be in at the moment."

ThyssenKrupp, the German steelmaker and industrial group, is
receiving more than $811m to build a new steel mill in Alabama. It
turned down even more from Louisiana, which reportedly offered as
much as $2bn, as well as an additional $900m in cheap debt from
Alabama, which it declined as it wished to remain debt-free.

Incentives are not new but their increasing size, plus the relative
weakness of the dollar and increasing wages in China and eastern
Europe, makes the US more attractive.

A VW official suggested the US also had a competitive advantage
because European Union state aid rules made support for factories
difficult. "It is more difficult in Europe."

"States are willing to pay for new roads, re-train workers and offer
huge tax breaks – that is a competitive package that not many parts
of the world can match when you look at how productive US workers are
and where the dollar is," said the chairman of a large Swiss group.

Matt Kisber, the Tennessee commissioner of economic and community
development who helped attract VW with the $577m, said the state was
in global competition and had fought against sites in the Middle East
and South America for projects. "It is a shopper's paradise at the
moment," he said.

But he also said the move meant extra revenue of $500m a year and a
net $1bn in new tax revenues and "that sounds like a pretty good
business proposition to me".

Copyright The Financial Times Limited 2008

<http://www.ft.com/cms/s/0/155285ca-7d00-11dd-8d59-000077b07658.html?
nclick_check=1>

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Received on Wed Sep 10 09:44:01 2008