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Gov. Jennifer Granholm, with Toyota's Jim Press at the Detroit auto show, left, pushed a deal to sell land to Toyota.Granholm woos Toyota to Big 3 turf
Governor will head to Japan to court No. 2 automaker for Michigan plant.
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The battle for No. 1
A Detroit News examination of GM and Toyota's fight for worldwide supremacy.
On the evening of Sept. 9, Gov. Jennifer Granholm arrived at a diplomatic reception in Lansing in high spirits. At her urging, legislators had just salvaged a deal to sell state land to Toyota Motor Corp.
At the reception, David Cole, head of the Center for Automotive Research, was chatting with guests when someone tapped his shoulder. "There was the governor. She said, 'We did it -- and in a day.'"
Cho Granholm's swift maneuvers to rescue the high-stakes deal and allow Toyota to expand its technical center in the state sent a clear message: Michigan was eager to do business with the mighty Japanese automaker.
Four months later, Toyota President Fujio Cho said Michigan was under consideration, among other states, for a plant.
This summer, Granholm will travel to Japan, in the next step of an unlikely courtship between the U.S. auto industry's home state and Japan's biggest carmaker.
As the relationship grows, it could lead to the first Japanese-owned vehicle plant in Michigan.
"We have been aggressively letting them know that we want to be in the running," Granholm said. "We're going to Japan in July to make another run at it."
Toyota has just opened a fifth North American assembly plant in Mexico, and it is building a sixth one in San Antonio. With U.S. sales topping 2 million a year, the world's second-largest automaker has concluded that it needs at least one more assembly plant in the region.
"As our sales grow, we'll need to add more manufacturing capacity in the United States, and of course we'd look at Michigan," said Dennis Cuneo, senior vice president for Toyota Motor North America. "We have a favorable impression of Michigan and recognize its pivotal place in the auto industry."
Toyota already employs 7,000 people in Michigan through its design and engineering operations and affiliate firms, such as Denso Corp. and Aisin Seiki Co., two suppliers partly owned by Toyota. Denso is the largest private employer in Battle Creek.
Last year, Toyota's heavy-truck maker Hino Motors decided to move its North American headquarters from New York to Bloomfield Hills.
A prize catch
Most Toyota watchers and auto experts say Michigan is still a long shot for an auto plant. But the state appears to be climbing from the bottom of Toyota's long list of candidates to the bottom of its short list.
For years, Michigan has been red-lined by the Japanese. The state is the stronghold of the Big Three and of the powerful United Auto Workers union. "They previously thought they weren't welcome," Granholm said.
Some Michigan residents see the Japanese as the enemy, a sentiment that has been stoked by predictions that Toyota will overtake General Motors Corp. to become the world's largest automaker in a few years.
A Toyota plant also would challenge the UAW, which has not been able to organize workers at Toyota's U.S. plants. Toyota's only U.S. plant with a union is New United Motor Manufacturing Inc., its venture with GM in California. Denso's two plants in Battle Creek are nonunion.
It's a delicate balancing act for Granholm, a Democrat elected with union support. She says union leaders increasingly understand the pressures automakers face and their need for more flexible work rules.
With Detroit's automakers struggling to make money and shedding jobs, Granholm wants to preserve and enhance Michigan's economic ties to the global car industry by attracting any and all automotive investment.
"We're not playing favorites," she said. "We want to favor job-providers across the board. In a global economy, that means international investment but it also means supporting those who bring us to the dance, as we say, which are the domestic Big Three."
UAW officials declined to comment directly on the state's pitch for a Toyota assembly plant.
"Gov. Granholm appreciates the vital importance of the automotive industry to Michigan's economic future," UAW Vice President Richard Shoemaker said. "We are proud to be a partner in her efforts to attract job-creating investment in Michigan from European and Asian automakers and automotive parts suppliers as well as from U.S.-based companies."
Granholm's strategy is paying off. Nissan Motor Co. has opened a new design studio in Farmington Hills. Hyundai Motor Co. is building a technical center in Superior Charter Township after obtaining state and local tax credits. DaimlerChrysler AG's Chrysler Group, Hyundai and Mitsubishi Motors are partners in a $380 million engine plant in Dundee.
Detroit's automakers still account for the lion's share of factory investment in the state. Chrysler will spend half a billion dollars to renovate two factories in Sterling Heights, and GM is building a new assembly plant in Delta Township.
But Toyota, the world's richest automaker, would be a prize catch. On Aug. 4, Granholm and Cho met for the first time at a Traverse City automotive conference.
Toyota and state officials had laid out the groundwork. "It was typically Japanese, in that the staff is doing the homework and there's a lot of connection going on, and then the leaders meet in a casual way," Cole said.
In dealings with the Japanese, the soft-sell approach works best. "They don't like to be pressured," Cole said.
Too many choices
Toyota's senior managers are deluged with pitches from dozens of U.S. states, including California, which wants Toyota to assemble a hybrid vehicle in the state. Canadian officials are also lobbying for a plant.
Michael Robinet, vice president at auto consulting firm CSM Worldwide in Farmington Hills, says Arkansas will probably get the next Toyota plant. "Arkansas is right between their supply bases in Kentucky and Texas."
Toyota also may build more capacity in San Antonio. "There's a big possibility of expanding the Texas plant," said Art Niimi, Toyota's North American manufacturing chief.
Two regions of Michigan that might appeal to Toyota are the western part of the state, where Denso is based, and Port Huron, which is close to suppliers feeding the automaker's car plant in Cambridge, Ontario.
Michigan has lost more than 175,000 manufacturing jobs in the past four years as Detroit's automakers and their suppliers cut jobs, consolidate operations and close plants in line with their shrinking market share -- now below 60 percent.
Nationwide, foreign-based automakers have created more than 93,000 jobs -- and account for all of the industry's growth in the past decade, says Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor.
"The future of Michigan is automotive direct investment. We have to internationalize," he said. "The Big Three are hugely important but let's face it -- they're not going to increase their employment in Michigan. The rest of this decade, it's going to fall."
In Ohio, which has lost even more manufacturing jobs than Michigan, Honda Motor Co.'s manufacturing operations helped shield the central part of the state from hardship.
Toyota set up its North American manufacturing headquarters in Ohio, and it established the Toyota Technical Center in Ann Arbor in 1977. But when it came to plants, executives preferred Southern locales that evoked the rural region of Aichi, where farmers still till fields alongside Toyota's factories.
Speed bumps
But the automaker has responded enthusiastically to Granholm's strategy to form a high-tech automotive hub in southern Michigan. It opened a design studio last May on the grounds of the Toyota Technical Center.
Three months later, it bid $9 million for a 690-acre plot in nearby York Township to expand the technical center, as part of a strategy to shift more responsibility for vehicle development to its regional operations.
But the project ran into trouble after developer Diversified Property Group LLC complained that it had offered nearly three times as much money for the property.
With the deal starting to look like a fix, the state formally rejected both bids. But Granholm sprang into action, drafting legislation to authorize the state's management and budget department to negotiate the sale. By a wide margin, lawmakers agreed with her reasoning that the Toyota project would create better-paying jobs.
"We're very impressed with the amount of effort she put into it," said Cuneo. "That was noticed throughout Toyota."
A Michigan judge questioned the law in January, but an appeals court upheld the legislation.
"We're in the very final stages of our purchasing discussions," said Bruce Brownlee, general manager of corporate planning at the technical center.
State officials hope a deal will lead to discussions for bigger projects.
You can reach Christine Tierney at (313) 222-1463 or ctierney@detnews.com.
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