Economic Development

Job Jot: Alabama's Winner of a Car Deal

Now that Mercedes-Benz has been assembling vehicles in Alabama for 10 years, the state can crow about the wisdom of its 1993 decision to woo the company with tax breaks.
by | September 2007

Now that Mercedes-Benz has been assembling vehicles in Alabama for 10 years, the state can crow about the wisdom of its 1993 decision to woo the company with tax breaks.

The deal has had a $7 billion per year impact on the economy. That includes the addition of 41,000 jobs from the auto plant itself as well as from 18 of the automaker's suppliers. There's also been a boost to the state's business image, according to a study by the Center for Business and Economic Research at the University of Alabama.

But to get where it is today, the state had to rise above critics who had a negative opinion about the offer of $250 million in tax abatements to the company for workforce training and site infrastructure improvements. One study in 1995 predicted that the plant, then under construction, would "create fewer than half of the 14,000 spin-off jobs originally predicted," and the analyst quoted didn't think the state's policy was "particularly good or well-thought out."

He wasn't entirely incorrect. The early years were problematic. Alabama had to borrow money to meet its obligations to Mercedes-Benz. And after the legislature rushed through the deal to keep the German automaker from going to another state, dozens of companies hurried to get similar tax breaks, even though the incentives didn't necessarily influence their decision to come to the state.

But now Mercedes-Benz calls Alabama home, and the state has emerged stronger economically than it was a decade ago. "It became harder to find the detractors after Mercedes-Benz expanded," says Steve Sewell, executive vice president of Economic Development Partnership of Alabama, a business-funded group. "It's a major economic engine, and there's been a transformation in our economy with the emergence of a new industry."

Ellen Perlman
Ellen Perlman  |  Former columnist
mailbox@governing.com  | 

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