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Post by deovindice on May 31, 2007 7:49:55 GMT -5
The news that Krupp chose Alabama for it's new steel plant brought forth cheers from most everyone. Everyone except Mo Brooks, that is.
How is it that a Republican politician could resist the subsidy package that clenched a deal to bring thousands of jobs and increased economic activity to the state? Is it the threat of competition to a steel facility in his district? I thought Republicans, especially Republicans, believed in the notion that competition is good for business.
A $4.2 billion investment that will bring in 29,000 jobs during construction and 2,700 jobs paying an average of $50,000 to $65,000 annually can only be good for the state. The competition fostered by the new facility will be good for the steel business, which will in turn be good for the state's growing auto industry.
...............And it cost us nothing! That's right. Nothing! The $350 million in tax abatements is merely a promise not to collect taxes that wouldn't have been collected without the facility in place anyway.
The $461 million in incentive money is money that would have been squandered by the state legislature in one way or another and wouldn't have generated any jobs other than more government positions that would have squandered even more money.
Anything that will add to our manufacturing base, in the face of NAFTA/CAFTA/SHAFTA sending so much of said overseas, is a positive.
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Post by killer on May 31, 2007 15:06:25 GMT -5
What if this money were to be used to help small businesses already in Alabama to grow? Wonder what would happen if they actually got a little help (rather than harassment?)
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Post by Dale Jackson on May 31, 2007 15:41:52 GMT -5
Brooks is right, that plant has an unfair advantage in competition with US plants. I am voting no. We are talking about potentially billions in advantages over domestic plants.
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Post by kevin on May 31, 2007 19:07:07 GMT -5
Are you trying to say that 30 years of no state income tax is not an unfair advantage? Are you trying to say that 10 years of no utility taxes is not an unfair advantage? Are you trying so say a twenty-year exemption from payment of non-education property taxes is not an unfair advantage? Sounds just short of foreign steel companies receiving subsidies to me.
The steel industry has just come to a point where it is no longer over capacity domestically. That was accomplished through acquisitions, mergers, and the closing of archaic, non-competitive mills. Do we need to repeat this cycle again because someone else forgets the very near past?
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Post by deovindice on Jun 1, 2007 7:39:24 GMT -5
Brooks is right, that plant has an unfair advantage in competition with US plants. I am voting no. We are talking about potentially billions in advantages over domestic plants. What competitive advantage? The American steel industry has proven time and time again that it can't compete. Why? A major reason is that it has been ravaged by the unions. "Legacy costs" have sent producer after producer into bankruptcy. The arrival of Krupp can only provide the impetus to foster a competitive environment. The industry has moved away from integrated mills that produce steel from ore and toward the mini-mill concept that basically reprocesses scrap metal. We don't really produce that much steel anymore. The Krupp plant is a reprocessing facility that will produce usable metal from steel that would have been imported anyway. This company has its roots deep in the steel industry. The founder, Alfried Krupp, was the inventor of cast steel, the first industrial replacement for iron. Krupp has produced the finest grades of steel in the world. They have an engineering background that rivals that of firms such as Bechtel and Brown and Root..............and a fact lost to history, they do indeed have roots in the American steel industry. The great American railroad expansion rolled along on Krupp wheels. Literally. Earlier plans that didn't come to fruition: building mills in Alabama in the 1800's. Folks, this is a good thing. Once again, the monies being fronted are much better used in promoting this facility than in being squandered on such things as fire colleges, legislator pay raises, Paul Hubbert, and the like. The Legislature has proven time and time again that such would be the case. To the criticisms of the tax abatements, remember that corporations don't pay taxes anyway. They pass those costs along to customers. This is a solid German company with an incredible history. They invest heavily in their facilities, keeping them up to date and competitive with the newest technologies. Again, this is a good thing.
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Post by deovindice on Jun 1, 2007 8:18:29 GMT -5
I suppose you think it more prudent to put this money into domestic producers, and thus more money into union coffers to perpetuate more of the conditions that has brought the US steel industry to its knees? Let's see.......doing the same thing over and over and expecting a different result. The definition of what? The Germans are pulling out of Chrysler. Why? Unions. The government bailed out Chrysler in 1979, then under the leadership of Lee Iacocca, for what reason? Unions. The steel industry in this country is virtually non-existent. Why? Unions. Our auto industry is losing market share to the Japanese. Why? Unions. GM went from the largest, by far the largest, automaker in the world to number 2. Why? Unions. To be fair, management in this country is as well a part of the problem, with it's exorbitant executive pay packages and short-term focuses on providing shareholders with the highest returns possible, rather than focusing long-term on the health of the companies they manage. Yet to expect a company to honor legacy costs that have one worker supporting the retirements of three others is an impossible situation, one brought about and defended by the unions. The question should be, "Should we perpetuate the cycle of steel industry decline and the erosion of good paying jobs to foreign manufacturers? My position regarding this facility may seem at odds with my typical protectionist, isolationist views, but the fact of the matter is that until we see a change in the management, governmental, and union practices that are responsible for the decline of our domestic steel industry, we must do whatever necessary to not only protect, but to foster the creation of good-paying manufacturing sector jobs to replace those lost to the ravages of NAFTA/CAFTA/SHAFTA. Having the foreign automakers in the state has worked well for us. This will, too. ............and again, having public monies tied up in the creation of those jobs rather than available to the legislature to squander is but a grand bonus.
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Post by kevin on Jun 1, 2007 15:29:11 GMT -5
I agree that unions put many companies at a disadvantage. But, that being said, why offer one steel company all of these multi-decade tax breaks while leaving the others high-and-dry? Forget about the union factor. ThyssenKrupp has already been analyzed for their ability to compete cost wise and it was revealed that US Steel in particular would have a lower cost per ton to make similar products. However, this was before the multi-decade tax incentives were figured in. In other words, Alabama has just ensured that a company that would be less competitive from the start would be more so by subsidizing their operations. The exact same thing that foreign governments do for their steel mills.
So, yes, all things considered, and with the existing union, US Steel was going to be more competive. The government of Alabama just took that away. And all ThyssenKrupp had to do was say "thanks".
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Post by deovindice on Jun 2, 2007 8:06:22 GMT -5
You can't simply just forget about the union factor. One oft-used tactic of the unions is waiting for a big contract to strike with their next round of demands. Again, more workers hired by US Steel to service the demands of the current market will simply mean more future retirees to support. The current cost means little. One has to factor in what the company will have to charge for their products in the future to meet the increased demands of the union. That is a fact. Respectfully, that is a ridiculous assertion. The state of Alabama isn't buying this steel. Other companies are. If US Steel was so competitive, they would be buying their steel now. They would plan to buy their steel in the future. We also have to look at what the construction phase of the project will mean, and not just the facility operations itself. Krupp wanted to expand its operations. They were going to locate somewhere, if not in Alabama. Had Krupp located in Louisiana, the steel they processed would have had the same net effect on our domestic steel industry. Additionally, we get the positive effects of the construction phase. Let's look at this from another angle. ThyssenKrupp Steel North America, Inc., a ThyssenKrupp Steel Company, headquartered in Detroit MI, is a leader in the marketing, processing and just in time distribution of automotive high-grade flat steel in North America. This company has been operating in this country for decades. Perhaps Krupp has a business strategy to relocate its operations from higher-cost Michigan to the lower-cost, relatively union-free South. Perhaps the entire auto industry is anticipating such a relocation. If US Steel is so competitive, they have nothing to worry about. Are you aware that since the 1980's the U.S. government guaranteed subsidies of $30 BILLION to our domestic steel industry? Are you further aware that the government, over the last decade, guaranteed subsidies of $3.7 billion for steel industry pension plans and another $1 billion for bankruptcy protection? Competitive? I think not. That's not an impressive business model to carry to the market. Another point. The auto industry isn't the same as it was years ago. The entire assembly process is based on just-in-time delivery of components. Those components aren't even manufactured, with the exception of a small buffer inventory, without a build order from the vehicle assembly plant, and a vehicle isn't assembled until a customer or dealer orders one. A delivery of the wrong parts or a missed shipment can shut down an assembly line for hours, and the fines imposed by the assembly plants on suppliers are steep. In the hundreds of thousands of dollars per hour. I know of at least one occasion where a supplier air-freighted and couriered some $300 parts, at a cost of $20,000, to an assembly plant to avoid line-stoppage penalties. I know how this works. I've been in this business for the last 8 years. All in all, there's probably a lot more going on here than what you read in the headlines. If this is the direction that the industry taking, the state would be stupid not to go there with it. Final point. Krupp invited the state to the dance and the state RSVP'd. If US Steel could actually fox trot, they would have done the asking. If I knew I had to rely on a union shop to supply my stuff, with the union's propensity to strike regardless of the costs suffered, I'd want to find another source, too.
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Post by kevin on Jun 2, 2007 8:56:53 GMT -5
You can't simply just forget about the union factor. One oft-used tactic of the unions is waiting for a big contract to strike with their next round of demands. Again, more workers hired by US Steel to service the demands of the current market will simply mean more future retirees to support. The current cost means little. One has to factor in what the company will have to charge for their products in the future to meet the increased demands of the union. That is a fact. I can understand what you are saying, but I'm referring to actual numbers, not speculative numbers based on what "could" happen. As it stands right now, if ThyssenKrupp competed with the Fairfield facility (which it will not supposedly according to their proposed product mix), they would not be able to produce a final product for less than Fairfield does. That is before the subsidies. I don't know if they have recalculated with the subsidies in place. Based on analysis of their costs (pre-subsidies), ThyssenKrupp won't be that competitive with the suppliers that the auto plants in the area are using now. Have you seen anything that says that TK has even received any "promises" from the auto makers in the area? US Steel is not all that concerned about TK because they will have to overcome the costs they have in the way they make steel. The concern is that the state is supplying such a lucrative package that has not been afforded to other companies. No disagreements here. It all came down to who was willing to give them more $$. Alabama ponied up. At this time, they aren't worried. The concern is not about the competitiveness, but the subsidies afforded to the new mill. I didn't agree with any of these things either. Many of these companies were poorly managed. The steel industry in the US was over capacity with many smaller companies that were inefficient. However, there is no new need for extra steel production in the US right now. Any new companies just recreate the problem we faced before the recent years of bankruptcies and plant closures. US Steel is not in the business of creating over capacity. At best, they will purchase other existing facilities or companies that are already running. This does not create an over capacity situation. Therefore, Alabama would ignore them as they would not be building new plants.
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Post by deovindice on Jun 2, 2007 10:34:22 GMT -5
You can't simply just forget about the union factor. One oft-used tactic of the unions is waiting for a big contract to strike with their next round of demands. Again, more workers hired by US Steel to service the demands of the current market will simply mean more future retirees to support. The current cost means little. One has to factor in what the company will have to charge for their products in the future to meet the increased demands of the union. That is a fact. Friend, speculative numbers based on what could happen is called contingency planning. Speculation. Looking ahead. Planning for the future..........Exactly what many companies HAVE NOT been doing. Again, perhaps Krupp is entertaining a complete relocation of their business, not limited to what industry in this area requires? If not, this area is definitely where business is going. Krupp is going there with it. You don't really believe that Krupp, or any other company for that matter, would build a multi-billion dollar facility in an area in which it didn't intend to do a lot of business, do you? The high cost of fuel and its effect on transportation would render that notion impossible. Once again, whatever threat the Krupp deal poses to producers in this state would exist regardless of whether the facility located in Louisiana, Alabama, or one of the 20 other states that were considered. What you keep focusing on is that the state of Alabama put up money. It makes no difference. Krupp is coming here because this is where the business is. Better for us to get it than another state, unless of course you are a citizen of a state that didn't get it. As it is with every other company that has recently located here. The monies invested in bringing industry here will reap many more benefits than if those monies had remained in state coffers under the auspices of greedy and corrupt politicians. If they aren't worried, then why are they crying? They receive far more in subsidies just to remain afloat, and they sure as hell aren't investing in new facilities. Krupp won't be producing steel here. They will be processing it. What? They will expand while collecting billions in subsidies just to keep the doors open? Not likely. Exactly. They would not be building new, efficient plants equipped with the latest technology. Krupp has engineering and research/development expertise that US Steel could never hope to match. Please understand. All evidence to the contrary, I do not work for Krupp. I am not a fanatical fan of Krupp, nor an I opposed to US Steel. My grandfather spent his entire career at a US Steel subsidiary. The company has a rich history in this area, and is responsible for much of what we have in this state. I only wish that a revival of sorts could take place with US Steel at the head of the pack. Yet, the reality is, it is outmatched by Krupp, and the power of the union within the home-grown steel industry renders those companies as less-than-favorable entities with which to do business. Again, I see what is happening as a union-busting and cost-saving relocation.
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Post by W.O.M.I on Jun 2, 2007 20:07:00 GMT -5
We >COULD< just implement the Fair Tax and then ALL international companies would flock to the US to gain a competitive edge....
Utopia ideals aside.....(hey, one can dream, right?):
My initial reaction was to side with the folks who said that we ought to extend the same sort of benefits to companies already located here before we did so to 'outsider' companies- take care of our own first.
Deo caused me to re-evaluate that opinion very quickly.
What good will it do companies already here if 90% of the breaks they are given go to unions, unions having done nothing positive for workers or the country since the 1930s?
I think I read that the cost of unions to GM add better than $7000 to the price of a car; pensions, health insurance, benefits, unconscionably inflated wages, etc. If one wonders why American carmakers are falling behind- there's your answer.
Also, the tax breaks do not 'cost' the state anything. If the plant was not located here, we would have collected no taxes from the nonexistant plant nor from its nonexistant workers.
In fact, the tax base will increase dramatically. Not only will the workers pay taxes on their salaries, but related industries and suppliers will sprout up in the area, creating more jobs and thus more taxes. Workers will have to live somewhere, so construction will boom and those workers (had damn well better) pay taxes too. They'll have to shop somewhere- more jobs, more taxes.
I see this as a win-win, much as I didn't think I would.
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