Folsom uses Mercedes as reason to vote for him

By Brian Lyman
Star Capitol Correspondent


MONTGOMERY — If Jim Folsom Jr. isn't talking about the heat he's packing, he's talking about bringing Mercedes-Benz to Alabama .

The former governor has made a point of talking about his four shotguns and how he brought the German automaker to Alabama in 1993, helping spark the growth of Alabama 's automotive industry. In fact, it's so important to Folsom that he uses it in all three of his television ads.

“I've spent the last 12 years in business, bringing economic growth to Alabama, just like I brought Mercedes,” Folsom says in an ad titled “Roots.”

“They said it couldn't be done,” Folsom says in an ad titled “We Will.” “But I got Mercedes for Alabama

Mercedes gets a whole ad to itself in the Folsom campaign, where Folsom's former Alabama Development Office director Billy Joe Camp, Tuscaloosa County Commissioner Bobby Miller and Mercedes employees praise and thank Folsom for bringing Mercedes-Benz of America to Alabama.

As the advertisements say, Folsom worked diligently to bring the German manufacturer to Alabama . Folsom called a special session of the Legislature in August 1993 in part to pass an incentives bill for Mercedes-Benz, flew to Germany to plead Alabama's case and got the company to commit to Alabama in September 1993.

The company helped lure other firms to the state and became a catalyst for the growth of the state's automotive industry. (In the Mercedes ad, Camp exaggerates when saying that Mercedes brought “50,000 good-paying jobs” to Alabama . The plant opened with about 1,500 workers.)

“The playing field has changed quite a bit,” said James Cashman, a professor at the University of Alabama who studies the automotive industry. “For example, to get Honda or Hyundai, the advantage has not just been the tax incentives, but also the fact that there's an infrastructure here that makes it easier for them to go in on their own.”

But getting Mercedes required approval of a package of tax incentives totaling $253 million, including pledges by Folsom to pick up $140 million in equipment and training bills with no way to pay for them. The incentives law led to threats of lawsuits from teachers' unions and a few municipalities who feared they might lose jobs to larger companies. Folsom, moreover, did not announce the details of the deal — including provisions for the state to buy Mercedes-Benz vehicles — for a month.

The resulting furor very nearly made Mercedes-Benz a liability for Folsom in his 1994 campaign for governor, but Chip Hill, a spokesman for the former governor, said he would not do anything differently.

“Our incentives package was in line with what other states were offering that were competing with the project,” he said. “We simply outworked them for the project.”

The state, to be sure, was a wallflower when Mercedes-Benz announced it planned to build a $300 million manufacturing plant in North America on April 5, 1993. The German automaker had its pick of suitors and more or less forced interested states to outbid one another's tax incentives.

“Mercedes had the luxury of saying, 'Here are some spots that would work for us,'” Cashman said. “There were a variety of factors in play, one of which was the friendliness of the political environment as evidenced by the incentives.”

Alabama had some other attractions, including cheap land, a good transportation network and a deepwater port in Mobile . But it had some significant minuses, including the lack of a major hub airport, and the poor educational environment. General Motors rebuffed the state for Tennessee when looking for a place for its Saturn plant in 1985.

Hence, the “Mercedes-Benz bill,” as it was popularly known, was passed in haste. It allowed Mercedes-Benz to use the money it would otherwise pay in state income taxes toward construction of the plant, and withhold 5 percent of its employees' salaries in exchange for the same tax credit.

Mercedes announced that September it would build its plant in Tuscaloosa County . However, Folsom did not release the details of the agreement immediately. Those details emerged slowly, nearly killing the initial good will for the plant. Folsom committed to work to get state and local agencies to purchase 2,500 vehicles from the plant when it opened, which would have cost somewhere in the $75 million range.

Things got worse in January, when the Alabama National Guard began clearing trees for the new plant. The Pentagon complained, and the Guard was removed.

After Folsom left office in 1995, the state struggled to pay a $42.6 million IOU to Mercedes-Benz. The Alabama Education Association threatened to sue the state, citing the lost income tax revenues, as did cities that had industries that could not qualify for the incentives, fearing they would lose their industrial base. The Legislature rewrote the law to broaden the qualifications for companies.

Hill said the company “will pay for itself for years to come,” and Alabama has seen its automotive industry grow since Mercedes came. But Cashman, who said he's a “lover” of the industry, worries that the state has become too dependent on the automotive industry. That could hurt if the whole sector encounters a downturn, or if the state becomes sluggish in attracting high-tech or “conceptual” jobs.

“We in Alabama don't have anything the size of Atlanta , which could handle job losses better than we could,” he said. “If we believe, as I do, that we're entering this new conceptual age, we're beginning to be heavily involved in yesterday's jobs. And maybe we've gotten too complacent in attracting tomorrow's jobs.”


About Brian Lyman


Brian Lyman is the Star's capitol correspondent. He reports from Montgomery .

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