The automaker Toyota announced Thursday major new investments in facilities in Kentucky and West Virginia to increase production of hybrid vehicles. Toyota plans to invest about $750 million in facilities in five states with almost half of that going to its plants in Kentucky and West Virginia.
Toyota’s plant in Georgetown, Kentucky, already the largest Toyota facility in the world, will get a $238 million boost.
“It gives me much pleasure to announce that beginning in May, TMMK will begin producing the Lexus ES 300 Hybrid,” said Susan Elkington, president of Toyota Motor Manufacturing Kentucky.
The facility will also increase production of the hybrid RAV4.
At the same time Elkington made her announcement, her colleague in Putnam County, West Virginia, shared news of an expansion there. Toyota Motor Manufacturing West Virginia President Leah Curry said her facility will double production of the transaxles used in hybrid vehicles.
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WVPB
Toyota West Virginia President Leah Curry announces a $111M expansion.
“And I’m also excited to announce that to meet these production needs we are going to add another 123 jobs,” she said.
The West Virginia facility will expand with a $111 million investment.
The announcements come on the heels of another Toyota investment in the region that reflects a shift to cleaner vehicles and greener operations. Toyota will purchase power from a large solar array to be constructed on a former surface coal mine in eastern Kentucky.
Presidential Opinion
Shortly after Toyota’s announcements President Donald Trump took to Twitter to weigh in.
Congratulations @Toyota! BIG NEWS for U.S. Auto Workers! The USMCA is already fixing the broken NAFTA deal. https://t.co/f9iHprPk5B
“The USMCA is already fixing the broken NAFTA deal,” Trump wrote in his tweet, a reference to the U.S. Mexico Canada Agreement. That agreement includes a provision that 75 percent of an auto’s components be manufactured in one of the three countries in order to avoid tariffs. NAFTA has a similar requirement set at 62 percent of auto components.
Trump and leaders of Mexico and Canada signed that agreement in November, however it has not been ratified by Congress, so NAFTA remains in effect. It is not clear how USMCA would have influenced or affected Toyota’s investment decision, as Trump claims, given that it is not yet in effect. Toyota representatives declined to comment on Trump’s tweet.
Other automakers in the region have been sharply critical of the Trump administration‘s trade policies, including tariffs on aluminum and steel. Misti Rice directs government affairs for Magna International, an automotive supplier with about 19 locations in the Ohio Valley region. She said last year that Magna has lost tens of millions of dollars due to the steel and aluminum tariffs.
“We believe that this is an industry under siege,” she said.
Automakers are anxious about another Trump proposal to impose tariffs on vehicle imports on the basis of protecting national security. Automakers warn that could sharply increase prices and push down consumer demand.
With reporting from: Eric Douglas, WVPB; Becca Schimmel, WKYU; Sydney Boles, WMMT; and Mary Meehan, WEKU.
West Kentucky Farmer Barry Alexander doesn’t have an answer on when the Trump administration will reach a trade deal with China, now a year into tariffs that have hamstrung some Ohio Valley industries.
Alexander is optimistic these continued negotiations will be worth it, but his plan in the meantime lies in massive, silver storage bins on Cundiff Farms, the 13,000-acre operation he manages.
He pulls a lever, and out tumbles a downpour of pale yellow soybeans.
“These beans have been in here since Halloween day,” Alexander said. “The large bin on the right, that’s 350,000 bushels. The next-size bins down, that’s 180,000 bushels. To give reference, a thousand bushels is one semi-truck load.”
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Ohio Valley ReSource
Soybeans at Cundiff Farms.
He’s been trying to hold onto about half of his soybean and corn bushels, waiting to see if he can sell for a better price before he’s forced to start planting again in early April.
Crop prices have crashed partly because of Chinese tariffs, and the losses have put a strain on some farmers he knows.
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Ohio Valley ReSource
Massive, steel storage bins, half-full with grain, on Cundiff Farms in west Kentucky.
“There are farmers that have decided to retire because they didn’t want to work through these things now. We’re to that point,” Alexander said.
Alexander said he’s survived in part because his sprawling farm has resources to work with: eight full-time employees, two new $550,000 combines he traded up for, and the storage bins to help ride out bad crop prices.
“Our large structures are not cheap, but financially for our farming operation, they’re a necessity for us to do what we do,” Alexander said.
Farmers like Alexander are coping with losses from tariffs and a continuing trade war, and it’s not clear when it will end. A March 1 deadline for negotiations with China was delayed indefinitely by President Trump, and an agreement with Mexico and Canada that Trump signed in November has yet to be ratified by Congress. The retaliatory tariffs on U.S. crops and dairy remain, compounding problems caused by overproduction and low crop prices, and small farmers are suffering the most.
Credit Liam Niemeyer / Ohio Valley ReSource
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Ohio Valley ReSource
Barry Alexander, a lifelong west Kentucky farmer, in his small office.
Size Matters
“If you look at all the large farmers, these guys have the storage facilities to wait out bad prices,” Kent State University-Tuscarawas Agribusiness Professor Sankalp Sharma said. “For a lot of these small guys…they couldn’t actually store their commodity, they still had to deal with those lower prices.”
Sharma and others argue grain prices have been low for five years because farmers are overproducing, and tariffs are only making the situation worse.
“The United States soybean harvest this year in general was just crazy. There was a bumper crop, and prices were down because of that,” Sharma said. “This was just your classic demand and supply situation.”
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Ohio Valley ReSource
Both Ohio and Kentucky set records for soybean harvests in 2018: 289 million bushels and 103 million bushels, respectively. This is up significantly compared to two decades ago, when Ohio harvested 162 million bushels and Kentucky harvested a little over 24 million bushels in 1999.
Farmers are also becoming more efficient than ever before — Ohio set records in 2018 for most corn and soybean bushels produced per acre.
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Ohio Valley ReSource
Oversupply problems haven’t been limited to grains, though. Small dairy farmers are also dealing with excess supply and tariffs, with hundreds of cases of extra milk being dumped at Ohio Valley food banks.
Farms At Risk
Greg Gibson’s operation is small, but his family has made it work for decades. He milks 80 cows at his dairy farm in Bruceton Mills, West Virginia, and he took over the operation in 2002. The past year of tariffs hasn’t been easy.
“Everything’s down. Historically, if milk price is down you can sell some corn or you could sell some replacement animals are something,” Gibson said. “But nothing has a lot of value to sell right now, so it’s really hard to generate any additional revenue. And a lot of that is because of the trade problems we’re having.”
Like many Ohio Valley farmers, Gibson is receiving payments from the $12 billion in federal relief from the Market Facilitation Program intended to to help those who suffer losses from tariffs.
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Ohio Valley ReSource
Small farms are squeezed by the dairy crisis.
Gibson appreciates Trump’s efforts to renegotiate trade deals, and like Alexander, is cautiously hopeful about the prospects of new trade deals.
But he said he’s also disappointed in Trump because the payments are not nearly enough to recoup his losses. He says milk’s price has plummeted nearly a dollar per hundred pounds of milk sold and the payments only reimburse 12 cents of that.
“I would have rather him said ‘I got to do this. You’re going to take the hit. Sorry.’ Don’t promise me you’re going to take care of me and then don’t,” Gibson said.
Gibson’s squeezed budget has had him extend paying off his farm loans and put off paying several repair bills. He’s also had to put up his 150-year-old family farm as collateral for his loans.
Farm lenders say Gibson’s situation isn’t unique right now. Senior Vice President of Agricultural Lending Mark Barker helps oversee lending for Farm Credit Mid-America, which serves most of Ohio and Kentucky.
“Are we doing things differently? Well, sure,” Barker said. “Because we have customers coming in now and telling us ‘I’m struggling at this point. I’m challenged.’”
Barker said while most people are making their loan payments right now, the rapidly increasing amount of debt farmers are taking on to deal with depressed prices is concerning, especially for smaller operations.
“It seems like the larger producers, you think about their equipment and everything else, they’ve got some added advantages,” Barker said. “It doesn’t mean the smaller producer is necessarily ‘out,’ but I do think they got more challenges in this current environment.”
U.S. Department of Agriculture economists predict nationwide farm debt will reach $263.7 billion in 2019, levels of debt not seen since the 1980s farm crisis, when thousands of farm families defaulted on their loans amidst a trade embargo with the Soviet Union and high loan interest rates.
He said one solution for small farmers to withstand these depressed prices is to switch to crops that bring a higher value, like vegetables. But those can be more labor-intensive, and the transition can be difficult.
“If you’ve been in a family that has milked cows or grown row crops for three generations, and I suggest you grow three acres of sweet corn and five acres of snap beans, there will be some resistance to that,” McConnell said.
McConnell said it might take a new generation to redefine what a successful small farmer business model can look like.
One of those younger small farmers is Joseph Monroe, who moved from Indiana to central Kentucky to raise beef cattle and grow tomatoes and greens. Monroe believes a way forward for smaller farms is to find ways to work together to sell products and have a greater market impact.
“I think there needs to be some pioneers and some examples out there of how to draw up a contract to work together,” Monroe said. “I think we need to throw all the darts and see what hits.”
West Kentucky Soybean Farmer Jed Clark, like many Ohio Valley farmers, is in a tighter financial situation because tariffs from the trade war and market forces have depressed crop prices.
“We’ve had a collapse in our grain markets,” Clark said. “We’re seeing some of the lowest commodity prices for wheat we’ve seen in a long time.”
The Trump administration’s budget proposal for fiscal year 2020 would cut U.S. Department of Agriculture funding by 15 percent. That includes a proposal to reduce the amount of subsidies farmers receive to afford crop insurance, which can cost thousands of dollars depending on the crop. Farmers would have to pay for 52 percent of their crop insurance instead of 38 percent.
“Taking that subsidy away and having a ten percent increase [in insurance cost] over quite a few acres has to be quite a bit of money,” Clark said. “Anytime we start increasing and putting more burden on the family farms to do this, it hurts the family farms.”
USDA data show farmers in Ohio, Kentucky and West Virginia in 2018 received more than $240 million dollars total in crop insurance subsidies.
University of Kentucky Department of Agricultural Economics Dean Barry Barnett said the cut in crop insurance subsidies is surprising to him given Trump’s vocal support for farmers, but it isn’t anything new.
“This really isn’t a partisan thing,” Barnett said. “It’s really been more of a situation where administrations have been proposing these budget cuts for several years now, and Congressional appropriators have refused to go along with those proposed cuts.”
Also earmarked for elimination is the Rural Economic Development Loan and Grant Program, also known as REDLG. The program gives up to $300,000 grants to local utility companies that then use the funding to give loans to rural businesses and communities to help them expand.
Loan recipients then pay back the low-interest loans to the utility, which the utility can then use to give out more loans, what’s known as a “revolving loan fund.”
Midwest Electric Cooperative CEO Matt Berry in northwest Ohio said they’ve received three grants from REDLG over the past 20 years worth $750,000 dollars.
He said the money has helped jump-start businesses including a local brewery, an ice cream shop and a company that makes standing desks. He estimates more than 300 jobs have been created from funded projects and that the program is a “no-brainer.”
“I hope it’s just a lack of understanding on the administration’s part because they may be just looking at the initial cost and not the full impact of the program,” Berry said. “It’s a huge benefit.”
Berry said because this is just a proposal, he hopes Congress will reject the elimination later this year.
The Trump Administration released on Monday details of a 2020 federal budget proposal that includes cutting funds allotted for a new federal prison in eastern Kentucky. The funds would be redirected to other law-enforcement or natural security priorities, potentially including a wall at the southern U.S. border.
The proposed cut rebukes arguments made by Congressman Hal Rogers, the powerful Kentucky Republican who has promoted federal prisons as economic development for communities struggling with high unemployment.
Rogers sits on the powerful House Appropriations Committee. In a written statement to the Ohio Valley ReSource, Rogers called the Trump administration’s reduction in funding a “gimmick.”
“The bottom line is that the Letcher County Prison remains on track for completion and I plan to continue advocating for it, along with other critical programs and agencies that have been proposed for reduction or elimination,” Rogers said in the statement.
The $510-million facility has faced serious opposition from local and national activists who say the prison is not necessary and would not bring significant economic benefits to the struggling region.
“Prisons don’t bring the kind of economic development that Hal Rogers and others suggest that they will,” said Judah Schept, a professor of justice studies at Eastern Kentucky University and one of the prison project’s vocal critics. “The necessary and just transition that Appalachia needs and deserves won’t come from building prisons.”
The administration’s budget proposal echoes many of the activists’ arguments, saying the prison is costly compared to other facilities. It also points out that Rogers’ claims that prisons bring economic development are not founded in fact. “Prison construction largely does not provide economic growth in rural counties, and in fact, may impede it,” the proposal said.
The arguments in the budget proposal may bolster a lawsuit filed on behalf of federal prisoners against the Bureau of Prisons alleging that the agency was pursuing the project “without a reasonable and legal justification.”
“Federal legislation indicates a downward trend in prison population,” said Emily Posner, an attorney in the suit, in a 2018 press release. “My clients are in agreement with local residents who feel that there are much better ways to generate federal support in Appalachian communities than wasting hundreds of millions on an unnecessary prison.”
The 2020 budget proposal also includes sharp cuts to education, housing and urban development, and international spending.
The cut to USP Letcher’s funding will likely face opposition in the Congress, which controls federal spending levels.
The Ohio Valley’s auto manufacturing industry is growing increasingly nervous about the Trump administration’s trade policy. First came tariffs on steel and aluminum imports, key materials for vehicle makers. Now the Commerce Department is looking into taxes on imported automobiles and automotive parts. Both are ominous signs for an industry that employs more than 1.5 million people in the region. Ohio and Kentucky are the nation’s second and third biggest auto-making states, respectively.
President Trump has threatened to impose a 20 percent tariff on imported cars. But some industry leaders say today’s auto industry depends on a global supply chain that makes it hard to draw a firm line between foreign and domestic. Many auto manufacturers in the Ohio Valley depend on foreign markets and material, making them highly sensitive to import taxes.
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Ohio Valley ReSource
A worker at Trace Die Cast in Bowling Green, Kentucky.
Dave Tatman, Executive Director for the Kentucky Automotive Industry Association is warning about trouble down the road for the region’s industry.
“We’re concerned it’s actually going to cause a loss of American jobs,”
Congressional Concerns
When Commerce Secretary Wilbur Ross testified in late June before the Senate Finance Committee he defended the administration’s trade policy and explained what he’s contemplating next. He said after a conversation with President Trump he initiated an investigation to determine whether imports of automobiles and automotive parts are a threat to national security.
“This administration is standing up for American families, American businesses and American workers by taking action to reduce imports that threaten our national security,” Ross said.
Senators at the hearing questioned Secretary Ross about a possible trade war, retaliatory tariffs and the economic effect of tariffs on automobiles and parts.
Republican Senator Rob Portman of Ohio was among several lawmakers expressing concerns about the Trump approach to trade policy. Portman said the national security rationale for tariffs should be used with caution.
“Frankly my concern is the way we’re using it now it’s both misusing it and having negative economic impacts in certain sectors but also I think it risks us not having this tool in the future,” Portman said.
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Ohio Valley ReSource
Last year the Ohio Valley imported more than $13 billion worth of automobiles and automotive parts,. Whatever form the auto tariffs might take they would likely have a big effect in the region.
United Auto Workers former president Dennis Williams, who was replaced in June, addressed tariffs during his last press conference in May. He stopped short of endorsing the idea but said he is glad to see the administration investigating.
“I think that we ought to evaluate, are they dumping?” Williams said. “Are they saturating the market to the point that it’s a detriment to our industries? I think that’s very important to us as a nation for our own sovereignty and our own economics.”
Most “American” Car
Many auto manufacturers use foreign markets and materials in their production.
“The most American car, the car with the highest amount of American content built in America, is a Toyota Camry in Georgetown, Kentucky,” the Kentucky Automotive Industry Association’s Tatman said. “The reality is that the Camry still has 30 percent foreign content.”
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Ohio Valley ReSource
The first Toyota Camry produced at the Georgetown, KY, facility.
Tatman said the Camry is a prime example of how today’s auto industry’s complex supply chain works and how parts move across the border. That means taxes could make cars a lot more expensive.
“The design, build and manufacture of a car today is a global enterprise and there’s no way to change the supply chain such that it would only be built in one country,” Tatman said.
The International Trade Administration said if an auto part crosses the border multiple times in different stages of production and is determined to be of foreign origin it could be subject to a tariff at every stage.
“So for instance the parts that I speak of that cross the border six and seven times. They’re going to get tariffs every time?” Tatman said. “I mean think about the implications of that. So now suddenly, say it’s a 20 percent tariff, all of a sudden you just talked about a 140 percent tariff on the same part.”
Tatman said the potential for tariffs is causing uncertainty in the market and manufacturers are already holding off on capital investment or additional job investment.
“Kentucky is the third largest state in the country with respect to automotive production. We make more cars and trucks in this state than any other state in the country except Michigan and Ohio,” Tatman said.
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Ohio Valley ReSource
American Jobs
The Peterson Institute for International Economics, a private non-profit think tank, estimates the cost of a vehicle could increase by anywhere from $1,500 to $7,000 and the U.S. could lose 195,000 jobs if tariffs are applied on all countries for automobiles and parts. That doesn’t take into account the cost of if a tariff is applied more than once.
Toyota, which makes the Toyota Camry in Georgetown, Kentucky employs 137,000 of those people. In a statement, the company said, “the only plausible outcome of this investigation is to reject the notion that automotive imports threaten national security.”
Dave Tatman shares those concerns. He said while the administration is trying to level the playing field tariffs don’t allow the free market to do what it should be doing.
“I think the administration made a lot of promises about American jobs and I think this is perhaps a well-intentioned effort but, we think, perhaps misguided,” Tatman said.
The Commerce Department has until February to issue recommendations on the auto tariffs but a report is expected to come before the midterm elections.
West Virginia Public Broadcasting (WVPB) will provide extensive coverage of President-Elect Donald Trump’s press conference on our statewide radio networks and online and wvpublic.org. Coverage begins Wednesday, January 11 at 11 a.m. EST.
SCROLL DOWN FOR LIVE AUDIO AND ANNOTATIONS
On Radio – All Things Considered’s Robert Siegel will host special coverage of the press conference as well as post-address analysis and fact-checking. You can also listen at 11 a.m. EST via our online radio stream.
Online – NPR’s politics team will be live annotating the farewell address, adding fact-checks and background to President-Elect Donald Trump’s comments in regards to his legacy, national security, health care and foreign policy, among other topics.
The live annotations will be available below; visit wvpublic.org for additional coverage of the debate.
