Abstract:
In 1982, faced with serious financial difficulties, International Harvester recognized a need to reduce costs at their Fort Wayne, Indiana and Springfield, Ohio truck assembly operations. That same year, the firm began negotiations with both cities, and before long the talks escalated into a bidding war between the two communities. The case focuses on Fort Wayne's efforts to keep its Harvester plant open by offering the company financial assistance. It outlines what was known of Harvester's financial difficulties and then traces Fort Wayne's negotiations with both Harvester and the Indiana state government. In the end, Harvester decided to consolidate its domestic trucking operations in Springfield--which had a more modern facility--and eliminate operations in Fort Wayne.
Learning Objective:
This case may be used as a vehicle to discuss the kind of localized industrial policy Fort Wayne employed. Most specifically, the case outlines the options available to communities trying to attract or retain industry, including waivers in city fees, reductions in taxes, sale-leaseback agreements, and loan guarantees. More generally, it illustrates the leverage industry possesses by virtue of the fact that government officials have no access to accurate information on an industry. This allows industry to play one locality off another, resulting in a gain for the industry, but an overall loss for the country.
