Hyundai To Test the Waters

Building on the momentum established by its $24-million design facility in Irvine and its recent $1-billion blockbuster announcement in Montgomery, Alabama, Korean car maker Hyundai Motor Co. is investing $50 million in an automotive proving ground on a 4,300-acre (1,720-hectare) site near California City. The testing facility will support the 2005 launch of the Montgomery plant, which is scheduled to begin initial production tests in June 2004.
        Hyundai selected the site in the Mojave Desert because of the area's solid track record in supported other auto proving-ground and R&D operations. Honda North America, for example, built its North American proving ground center in the Mojave Desert near Torrance, Calif., the same area in which Toyota also has vehicle-evaluation operations.
        An added benefit to the area came in December, when California City received approval for a Foreign Trade Zone at its 40-acre (16.2-hectare) Airport Industrial Park, an extension of the FTZ already in place in nearby Palmdale. The new FTZ area should be operational by summer 2003.
        The area's overall climate is ideal for such operations, but whether the business climate relaxes for the larger region is still the larger question.
        "I think it's energy that's really hurting California," says Kosmont. "We just are more expensive because of the state energy crisis, and we're not going to be less expensive for a while. The conclusion is 'I want to be here, but I want to diminish my presence to the lowest common denominator.' On an operational basis, that's what's happening. The only thing saving California is low property taxes."
        Corporate location expert Jim Renzas, who has overseen some 200 such projects in his 22 years in the business, says the overall state business climate will continue to favor the retail distribution, plastics, insurance and banking industries, who need to retain a presence close to their markets. Larger companies, because of the tax implications, may not be similarly inclined.
        "I compare it to the forest," he says. "The big trees are falling, but the smaller ones are growing up underneath. The larger a company gets, the less likely it is to put down long-term roots in the state."