Montgomery AL Opportunities & Challenges

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1 Montgomery AL Opportunities & Challenges Observations From a Veteran Site Selector Dennis Cuneo Fisher & Phillips LLP Former SVP, Toyota

2 Experience 25+ years Site Selection Insider (SVP Toyota) Consultant Board Member (2 Fortune 500 companies; several Chambers) Projects > $12 billion/ 20,000 jobs Auto.heavy industry.r&d high tech

3 1 st Project in Alabama Toyota Huntsville Plant Established 2001 Expanded 4 times since start-up $850,000,000 investment 1200 jobs

4 Montgomery s Strengths Business friendly Strong Job Training Revitalized downtown Focus on entrepreneurial development Diversified economy with robust industrial base

5 Montgomery s Industrial Base

6 Other Opportunities: Re-shoring - Wages on the rise in China & developing countries - Lower energy costs in U.S. - Advanced manufacturing techniques McKinsey: 2/3 of manufacturing occurs close to demand

7 CEO Magazine Best States For Business State 2014 rank 2010 rank Change Texas Florida Tennessee North Carolina South Carolina Indiana Arizona Nevada Louisiana Georgia Alabama

8 CEO Magazine Evaluation of Workforce Skills TX FL NC TN IN AR VA SC GA LA AL Workforce Quality CEO Magazine: Best & Worst States for Business 2013

9 Improving Worker Skills New Montgomery Workforce Center

10 Site Selection: Key Factors Forum Analytics Land Labor Logistics Utilities Business Climate/Regulatory Cost

11 Case Study: Steel Tube Mill $1B investment 675 Jobs Key site selection criteria acre site: excellent load bearing characteristics 2. Cheap & reliable electricity 3. Labor skills 4. Logistics: Highway access Direct rail service Barge service 5. Incentives

12 Process of Elimination Reviewed 100 sites in 13 states Key elimination factors: Site characteristics Insufficient electricity infrastructure No direct rail No barge Narrowed down to 3 sites

13 Montgomery Was Leading Site Company was positive about Site Labor Utilities Business Climate/Regulatory But: Incentive package not as robust as other states Lack of year-round barge access

14 Finalist Site Competitive on all key factors Strong Training Package Logistics advantage w barge access Robust incentives to address tax disadvantage

15 Auto Assembly Plant the slam dunk, the hole-in-one, the royal flush and the grand slam of economic development all rolled into one. Picture: Automotive News

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17 Economic Impact: Hyundai Motor Manufacturing, Alabama 2010 Employment Wages Hyundai 2760 $218.5M Suppliers 8953 $231.3M Total 11,613 $449.8M Total Economic Impact Hyundai $2.4B Suppliers $1B Total $3.4B Source: M. Keivan Deravi, Ph.D., Professor of economics, Auburn University Montgomery, 2010

18 Auto Industry Strong Hub of Auto Production in the South But There Are New Challenges As Well As New Opportunities 2 decades of For the Investment Southern by States Foreign Automakers Source: Thomas Klier, Federal Reserve Bank of Chicago

19 Past 20 years Alabama Automotive Powerhouse 4th in U.S. vehicle production 4 th in vehicle exports: $6.6 billion in /4 of all passenger vehicles built in the South made in Alabama Source: amazing alabama.com

20 But the South & Alabama face new challenges & new opportunities as auto industry restructures

21 North American Automaker Investments Source: CAR Research, Book of Deals Canada $3.2 B Total $51.7 B United States $35.8 B Great Lakes $23.9B South $8.2 B Mexico $12.7B U.S. Great Lakes includes: IL, IN, KY, MI, MO, and OH South includes: AL, FL, GA, MS, SC, TN, and TX

22 Competition From Mexico 7 new auto assembly plants announced over past 2 years Source: automotivemeetings.com

23 Southern Automotive Research Alliance (SARA) 1. Alabama 2. Kentucky 3. Louisiana 4. Mississippi 5. South Carolina 6. Tennessee Duke Energy CU-ICAR University of Alabama AAMA MAMA SCMA TAMA GAMA How Can the South Meet The Mexican Challenge?

24 Another Challenge: Labor Climate Is Changing Michigan & Indiana Now RTW UAW actively campaigning in South Volkswagen TN Mercedes AL Nissan MS

25 UAW Campaign at Volkswagen UAW narrowly lost vote in February Set up Local; claims majority have joined Strong support from German Union

26 UAW Campaign At Nissan Letter of Support from Japanese Union Civil Rights Leaders have joined in Hollywood Celebrities Support from Nissan s international unions

27 UAW Campaign at Mercedes "It should be normal that we have a union at each of our plants " Michael Brecht, Head Labor Official Daimler AG Supervisory Board Employees of the Mercedes-Benz plant in Vance, Ala. sign up to be the first members of a new, local UAW union at the Hotel Capstone in Tuscaloosa. Source: AL.com. Oct. 3, 2014

28 Union Affiliation % represented by unions: 2013 Alabama 11.7% (10.3% in 2012) Indiana 10.3% Tennessee 7.4% Georgia 6.3% South Carolina 4.7% Mississippi 4.2% Source: U.S. Bureau of Labor Statistics.

29 Union Affiliation % all employees % private employees Montgomery 8.5% 1.5% Birmingham 12.7% 10.2% Indianapolis, IN 7.5% 5.2% Holland, MI 10.2% 3.3% Dayton, OH 9.5% 2.5% Source: Unionstats.com

30 Opportunities»Expand Auto Supply Base»New Auto Technologies

31 Supply Base 70% of car s value 7.9 X multiplier

32 Auto Parts Suppliers Still Concentrated In Great Lakes States Thomas Klier, Federal Reserve Bank of Chicago

33 Assembly Tier 1 Southern States Have Fewer Lower Tier Suppliers Tier 2 Opportunity Tier 3 Tier 4

34 New Automotive Technology Brings NewOpportunities Safety Connectivity/ Automation Electronics Lightweighting Bio-Based Materials/ Fuels Powertrain Source: CAR 2013

35 Electronics: 40% Vehicle Content Average vehicle: 50 microprocessors 4X a decade ago. 100 million lines of software.

36 Auto industry transformation Mechanical-base Transportation focus software-base technology focus Opportunity for Montgomery s Growing IT Sector?

37 Source: Fortune Magazine Automakers in Silicon Valley

38 New Opportunities in Auto Materials and Processes Powertrain and Fuels Connected Vehicles High strength steels Foamed metals Aluminum and magnesium alloys Corrosion protection Bio-based materials Advanced plastics and composites Mold in color/films/plastics Alternative automotive trim cover insert and/or bolster fabrics Recycled low cost filler materials Coating technology Non-destructive testing methods Robotics simulation software Forming high strength steels New laser technology for trimming, piercing and cutting New joining technologies Tool rapid heating and cooling Low cost fine blanking alternatives Source: CAR 2013 Gasoline direct injection Turbochargers and superchargers Dual-clutch transmissions Higher-speed automatic transmissions (8- or 9-speed) Continuously variable transmissions Alternative fuels: natural gas, biofuels & hydrogen Vehicle electrification: motor assist, hybrid electric vehicles, plug in hybrid electric vehicles, extended range electric vehicles, or battery electric vehicles Advanced Driver Assistance Radar, light detection and ranging & cameras Forward collision warning systems Automatic emergency braking and steering Back-up and rear-view assistance systems Lane departure and lane-keeping assistance systems Adaptive cruise control and adaptive cruise control with lane-keeping Blind spot and pedestrian detection systems Parking assistance and automated parking systems Adaptive headlights and adaptive high beams Dedicated Short Range Communications (DSRC); 3G, 4G, LTE Cellular; Wi-Fi; Bluetooth; and Global Positioning System Infotainment (e.g. Sync, Uconnect, and Cue) Human machine interface Collision warning and avoidance Lane departure warning Road condition and event notification Adaptive route guidance with realtime traffic information Signal phase and timing Tolling and E-payment Location-based services Efficiency monitoring and carbon footprint accounting Infrastructure investment planning and condition monitoring Fleet management Prognostics and diagnostics

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40 Tesla Gigafactory $5 billion investment 10,000,000 sq. ft jobs Average wage: $26/ hr.

41 Next Big Thing in Transportation? 1900 New England Electric Electric Vehicle Co, Boston, MA Source: EarlyAmericanAutomobiles.com

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