CONTINUES THE DRIVE TO. The South continues to be a hotbed for the auto. industry. It might have something to do with the

Transcription

1 AUTOMOTVE THE DRVE TO CONTNUES The South continues to be a hotbed for the auto industry. t might have something to do with the ability for the industry to build lean manufacturing facilities from the ground up, accessibility to a reg,i onal cluster and compelling incentive packages to support investments. T he current state of America's automobile industry is a study in stark contrasts. l On the one hand, you have the Big Three (General Motors Corp., DaimlerChrysler and Ford Motor Co.), the major domestic automakers domiciled mostly in the Midwest hemorrhaging vast amounts of cash and battling a range of structural problems and, on the other hand, you have an increasing roster of foreign auto makers located mostly in the South thriving financially and generating a panoply of positive economic benefits, locally and regionally The fundamental transformation of the American automobile industry, a process that has been in play for about two decades, continues primarily at two levels: one, the percentage of vehicles manufactured and sold by the Big Three as a proportion of total vehicles continues to shrink: and two, the emergence of the South as the locus of automotive activity in the United States with a host of foreign automakers establishing manufacturing plants in several Southern states. By Sujit M. CanagaRetna

2 Table 1 Natio nal Name plate! ~ Number Ameri can 10,76 1 Ge rm an Japanese 3,564 '~o Share 2005 % Share N umber 'Yo Share 65.4% 9, % 4.9% % 4, % 5, % % % Number 71.3% 11, % % Korean % Other % % % Total 15,087 17,332 16, online.c om The first part of this radical transformation is demonstrated in Table 1) which presents information on new car and light truck sales in the United States by national nameplate between 1997 and As documented, in the 1997 to 2005 period, the proportion of new cars and light trucks captured by the Big Three American automakers declined from 71.3 percent in 1997, to 65.4 percent in 2000, to 56.8 percent in 2005; in contrast, the proportion of sales by the foreign automakers zoomed from 28.7 percent to 34.5 percent to 42.8 percent in the corresponding years. Further evidence of this transformation involves the fact that this year and General Motors will be vying for the title of the world's biggest carmaker. forecasted that in 2006 it planned to produce 9.06 million cars worldwide, a 10 percent increase, while General Motors built 9.1 million cars in 2005, (General Motors had not announced its 2006 forecast by late 2005 though it did announce that it would close all or part of 12 plants by 2008). A few decades ago, this dramatic transformation of the American auto industry would have been unfathomable. The second component of this fundamental transformation involves the emergence of the South as the hotbed of automotive activity in the country with an increasing number of foreign automakers establishing assembly plants in the region. (See Table 2.) Tennessee and Kentucky rank among the Southern states that were at the forefront of this drive by foreign automakers to locate manufac. turing facilities in the South. Nissan began production at its Smyrna, Tenn., plant in 1983 and began production at its Georgetown, Ky, plant in 1988, Signaling the beginning of a wave of foreign automakers to the South. More recently, established another plant in San Antonio and Nissan established a second plant in Canton, Miss. n subsequent years, Mercedes, BMW, Honda, Hyundai and the latest addition, Kia, have established manufacturing facilities across the South. From employing a fo rmidable percentage of the South's workforce, numbering hundreds of thousands in direct, indirect and dependent employees, at assembly plants, auto parts producers, service facilities and dealerships, the industry generates billions in wages and annual sales. There has been a great deal of research exploring the reason for this drive by foreign automakers to establish plants in the South. Among the reasons proffered are the fact that these auto makers can create groundup manufacturing facilities, incorporating the latest technologies, more efficiently and effectively as opposed to reconfiguring older assembly plants in the Midwest and Northeast. The cluster effect, created by the presence of a growing number of automobile assembly plants and thousands of auto parts suppliers in proximity to each other, is another major advantage available to automobile industry players locating in the South. For instance, even though 0 0UTH Table 2 StateCity Company Alabama Vance Mercedes Lincoln Honda Huntsv ille Mon tgo mery Hyulldai Wes t Point Kia Georgia Kentucky Georgetown Mis iss ipp i Canton Fenton Daiml erchrys ler North Carolina does not have an automobile assembly plant, the state had (in April 2005) 279 auto parts manufacturers, a number that elevated it to 12th among all auto producing states in the country Southern states also offer these automakers compelling incentive packages including tax breaks, state funding for programs to train workers, an abundant labor pool at a relatively lower cost, low rates of unionization and the ability to train a workforce that has not worked in the auto industry previously Yet another reason driving the move down South involves the highly efficient intermodal transportation CAROll NA is the perfect place to drive growth, with the nternational Center for Automotive Research, an established network of autorelated manufacturers, and Charleston the largest container port in the South. The SC Power Team will connect you with strategically located sites and buildings, state and local incentives, workforce training, and the largest electric power system in the state. Let us drive your next faci lity location! issan Mi oul'i South Caro lina Spartanburg BMW Te nnessee Smyrn a Nissan Nashvil le Nissan North Ameri ca Headquarte rs Texas San Antonio Dub lin Volvo Buffa lo Virgini a Wes t Virginia Main St., Suite 1710, Columbia, SC (803) Representing the Electric Cooperatives & Santee Cooper Spring

3 helped lure Kia Motor Corp. to announce plans for its networks in the region, spanning highways, airports and, first American manufacturing facility in West Point, Ga., most importantly, ports. Given the fact that a number of near the Alabama border. The $1.2 billion plant, schedthe nations busiest and most efficient ports are located in the South, such as the Ports of Jacksonville, Fla.; uled to open in 2008, will employ 2,500 and produce up to 300,000 cars annually by Baltimore; Brunswick, Ga.; and Charleston, S.c., and that all Southern ports handle more automobiles than Twenty years after breaking ground in Georgetown, any other set of ports in the Ky., remains an economic powerhouse in the state. country, remains a decisive While this plant employs 7,000 factor in the location calcula.the DOMESTC AUTOMOBLE people and has an annual paytions of automakers. n addition, the benefits roll of $500 million, last year it NDUSTRY N AMERCA flowing from such general produced nearly 510,000 cars, features as the weather, cli39 percent of all the cars WLL CONTNUE TO mate, cost of living, lower or sold in the United States. (Since no personal income taxes, 1988, the facility has rolled out CONFRONT A SERES OF free or inexpensive property more than 6.5 million cars). costs to build assembly ncluding all the UNPRECEDENTED CHAllENGES plants, and attractive quality employees in the state, 23 of life features remain some of dealerships and some N THE UPCOMNG YEARS. the other positive attributes 80 automotive suppliers that driving these automakers to ship directly to, the locate in the South. company's supplier network A sampling of some of the exciting new ventures that has created 35,000 jobs in Kentucky. were announced in the last few years helps illustrate the n December 2005, DaimlerChrysler announced that rising importance of the South as a magnet for foreign it would invest $1 billion to modernize and retool its assembly plants, automotive parts suppliers and related Fenton, Mo., plant, which directly employ 5,500 people. operations. The caravan of cars, vans and sports utility vehicles n March 2006, a $410 million incentive package rolling from Nissans Canton, Miss., facility to foreign i We have it ALL. Plus the BEST LOCATON in the SOUTHEAST. Looking to Relocate or Expand? Check out these great opportunities: Macon ~ Charl/~ 16 NTERSTATE 95 CE~*. GEORGA Jac ksonville Experience smoll town chorm, friendly people ond community pride with 011 the omenities of big city living! l nterstate Centre for Business and ndustry located on 116 & U.S. 280 interchange immediate access to minutes to minutes to Port of Savannah 21 minutes to SavannahHilton Head nternational Airport 30 minutes to major state university strong partnership with government and business leaders dedicated to industrial development Available Land acres at nterstate Centre 25 miles east of Savannah at the 116 and U.S. Highway 280 interchange Visit us online at or call

4 ! countries helped propel Mississippi's export revenues to exceed $4 billion in 2005, its highest amount ever. Last year, Mississippi's vehicle exports amounted to $ 738 million, the state's top export. n November 2005, Nissan announced that it was moving its North American headquarters from Gardena, Calif., to Nashville, Tenn. While the company stands to secure an incentive package from Tennessee totaling $197 million during 20 years, the Nissan operation in Nashville will generate nearly 1,300 direct jobs and an additional 1,200 indirect jobs. Johnson offers access to the DFWNorth Texas marketplace with a range of business incentives and sites while maintaining a rural character with metropolitan advantages n November 2005, DaimlerChrysler announced that it had selected North Charleston, S.c., as the site for its new Dodge Sprinter van assembly plant. The threephase project will create 1,800 new jobs and involve a $435 million investment upon completion. n an example of the automotive industry leading to highend research and mirroring Clemson University's nternational Center for Automotive Research in South Carolina, in mid200s, there was a huge push in North Carolina to establish the Advanced Vehicle Research Center in Northampton. The center, which carries a price tag of $115 million, is expected to spur a total of 6,000 new jobs for eastern North Carolina, and will focus on latestage automotive development in contrast to the facility at Clemson, which focuses on automotive design. Hyundai, whose first American manufacturing facility began operations in Montgomery, Ala., in May 2005 at a $1.1 billion plant, will produce up to 300,000 Sonatas and Santa Fe SUVs pinning its U.S. fortunes on this Alabama facility. n September 2004, Honda introduced the acclaimed Odyssey minivan built entirely at its $1 billion Lincoln, Ala., facility. At that time, the plant employed 3,500 people while 23 Honda suppliers had moved to the state since the Honda facility opened in November 200l. n addition, the South has been the scene of numerous auto parts suppliers either establishing new operations or expanding their current ones. This includes: Aisin Automotive Casting, a Japanese auto parts manufacturer that opened a $67 million plant in Anderson, Tenn., in September to make oil pumps, water pumps, pistons and cylinder head covers for, Honda and General Motors. t expects to employ more than 300 people by Last May, Honda opened a $100 million plant in Tallapoosa, Ga., with an employee count of 400 people to build up to 1 million automatic transmissions. Last April, AW North Carolina, the Japaneseowned company that makes transmissions, expanded its employee count to 900 and its total FOREMAN HOPE Hempstead TEXARKANA Miller MAGNOLA Columbia Mnl""M'luMS WATER DSTRCT.! ~, =.:..:.::.;:.,... ====

5 plant investment to $390 million, all in about five years. Hino Motors, a subsidiary of, opened a 400,000squarefoot, $160 million facility in Marion, Ark., in July 2004 to build differentials, rearaxle and suspension related parts that will create 280 new jobs. The domestic automobile industry in America will continue to confront a series of unprecedented challenges in the upcoming years. The Big Three will grapple with slashing capacity to meet slumping sales, while simultaneously revitalizing product development to lure new customers. The exorbitant rise in employee and retiree health care costs along with exploding pension costs, pose additional challenges to the Big Three. The presence of China, looming as the next leading automobile and auto parts exporter remains another variable with the potential to roil the structure of the industry. During these turbulent times, the foreign automakers, with an increasing number of them establishing their operations in the South, appear to have navigated rather choppy economic waters more efficiently The presence of a Mercedes plant in Alabama, a BMW plant in South Carolina and Nissan's North American headquarters relocating to Tennessee from California, certainly has eased in a sea change in both the perception and structure of these Southern state economies. Furthermore, these foreign automakers and the cascade of auto parts suppliers and related operations that have set up operations in their wake remain a dominant feature of the new Souths economic landscape. n addition to contributing Significantly to the states' gross product, these auto plants and parts suppliers provide employment to tens of thousands, generate billions in diverse forms of revenue and create myriad other benefits. A number of economic impact studies conducted on the overall impact of the industry clearly demonstrates that their Significant positive effects far exceed the economic incentive packages provided by the states. Sujit M. CanagaRetna is a senior fiscal analyst for The Council of State Governments' Southern office, Southern Legislative Conference. Visit the council at End Note 1n Nove mber 2003, The Council of State Governments' Southern office, the Southern Legislative Conference, released a report entitled "The Drive to Move South: The GrO\'1i.ng Role of the Automobile ndustry in the Southern Legislative Conference Economies." This 148page report carried out an indepth review of the automobile industry in the South. For a copy of the report, visit wwwslcatlanta.org. Fayetteville, NC Has t All! COME JON THE CTY ON THE MOVE > Warwick delivers the development, support and cuttingedge infrastructure needed to propel compan ies beyond their local ambitions, to global success. Our focus on intermodal transportation means easy access to the world; the convergence of air, road and rail travel in one place brings unparalleled convenience to businesses on the move. Located on Narragansett Bay, the City of Warwick offers its residents a quality of life and cost of living unmatched in the region. f you are starting a business, expanding or relocating, look into Warwick. We know how to get companies moving. > T.F. Green Airport is a worldclass transportation hub serving millions of passengers every year. > A proposed Amtrak train station will provide nationwide rail access. > Relocation specialists are available to assist businesses by providing informational support and planning services. $Warwlclc:r~~g~a Scott Avedisian, Mayor ) 32 o nline. com ~ On nterstate 95, minutes from 140./ Cost: Up to 32% below national average*./ Workforce: 6,000 Skilled, Educated, exmilitary Available Annually./ Buildings and Sites: Certified, Shovel Ready./ nfrastructure: Ready to Serve Room to Grow *nformation and Feasibility Studies: Call: or info@ccbusinesscouncil.org today! Department of Tourism, Culture and Development 3275 Post Road, WarWick, R Karen Jedson, Director x ~~./ Location: CUMBERLAND COUNTY BUSNESS COUNCL P.O. 'BOX 9, Fayetteville, North Carolina 28302