Southern Auto Corridor > Issues > Summer 2009

Summer 2009

After Two Awful Years, Activity in the Southern Automotive Corridor is Picking Up

In the summer quarter, Nissan, Toyota and V-Vehicle were original equipment manufacturers to announce new jobs in the Southern Automotive Corridor (www.SouthernAutoCorridor.com). In addition, a slight increase in parts supplier jobs occurred in the South in the summer quarter. Without including the Volkswagen announcement last summer, the job generating announcements were the first significant ones we’ve seen from the automotive sector in the Southern Automotive Corridor since the summer of 2007.

V-Vehicle Meets Equity Goal for Prospective Louisiana Plant

V-Vehicle Co. (VVC) has met the second obligation of its contract with the State of Louisiana that allows the company to access another portion of the $67 million committed by the state as part of its incentive package, said Louisiana Economic Development Secretary Stephen Moret in late August. The company, which plans to begin assembling a new mystery car in the former Guide Corp. plant near Monroe, La. by the end of 2010, has provided confirmation to the state that it has raised more than $50 million in equity. Moret said that the threshold entitles the company $10 million in state money, as well as office space in the state-owned former State Farm Operations Center. It also triggers a deal for the state to begin a Louisiana Fast Start program for VVC. Fast Start is a program designed to deliver a turnkey work force to the company. Moret said that "only a handful" of U.S. venture capital projects this year have matched V-Vehicle's level of capital raised, pointing to seven such projects reported by PricewaterhouseCoopers' National Venture Capital Association MoneyTree Report. VVC chief executive Frank Varasano said he hoped the startup automaker would raise about $100 million by the fall quarter.

Nissan Unveils Zero Emission Hatchback

In what is a preview of the electric vehicle Nissan will assemble at its plant in Tennessee, Nissan Motor Co. CEO Carlos Ghosn unveiled the first commercial model of the Japanese automaker's new zero emissions car. The Nissan Leaf was shown to a crowd at a ceremony in early August in Yokohama, Japan. Earlier in the summer quarter, Nissan was granted a $1.6 billion loan from the U.S. Department of Energy and the automaker is using the money to make improvements at its plant in Smyrna, Tenn. in order to create capacity of up to 200,000 electric vehicles annually for the U.S. market by 2013. The expansion will create about 1,300 jobs at the Smyrna plant.

Toyota Engine Plants in the South Adding Production, Employees

Toyota officials announced in late August that four-cylinder engine production is being added to the Japanese automaker's Huntsville, Ala. plant. The $147 million expansion will allow Toyota Motor Manufacturing Alabama to produce 216,000 four-cylinder engines annually once production begins next summer. The Alabama facility currently makes both V8 and V6 engines. The expansion in Alabama will result in 240 new employees, bringing that plant's total employment to over 1,000. Toyota will continue to build four-cylinder engines at its Kentucky plant and Toyota's Bodine Aluminum castings facility in Jackson, Tenn. that manufactures cylinder heads will increase capacity in response to the new four-cylinder production. Also, Toyota Motor Manufacturing West Virginia in Buffalo will begin producing engines for the Highlander mid-size SUV beginning late this year. Currently, the Buffalo plant makes four and six-cylinder engines for Toyota and Lexus.

What to do with a Vacant GM Plant?

With GM out of bankruptcy but still facing a cloudy future, we can only speculate on what will happen to the six General Motors plants that are still in operation in the Southern Automotive Corridor. Those plants, located in Kansas City, Kan., Wentzville, Mo., Bowling Green, Ky., Spring Hill, Tenn., Shreveport, La., and Arlington, Tex., could end up like another GM plant that closed in the South three years ago; Vacant. And in an economy like this, there's not much of a market for multi-million-square-foot former automotive factories. Or is there?

In 2006, GM closed its 3.8 million-square-foot Oklahoma City assembly plant leaving local and state officials wondering what to do with the monster facility that sits on 430 acres.

Through the leadership of the Greater Oklahoma City Chamber of Commerce, the city, county and state rallied to purchase the plant and repurpose it to support the community's thriving aerospace industry, or more specifically for use by the Tinker Air Force Base. Tinker is the Air Force's largest base due to its emphasis on maintenance, repair and overhaul of military aircraft and engines. The base employs 26,000 workers.

Now called the Tinker Aerospace Complex, the former GM plant now houses about 100 workers and that figure is projected to increase to 800 by the end of the year. Oklahoma City Mayor Mick Cornett said, "The officials at Tinker are enthused, the Pentagon is impressed and it helps solidify our relationship with the most important economic driver we have."

Shortly after GM's announcement to close the plant, Oklahoma City voters approved a $55 million bond issue to buy the property and lease it back to the Air Force for $1 a year in exchange for retrofitting the plant and using it to replace aging maintenance buildings at Tinker.

VW Activating FTZ Status, May Build Other Models in Chattanooga

In a request this summer to activate Volkswagen's plant site in Chattanooga as a foreign trade zone, VW officials estimated that about 20 percent of the vehicles that will be assembled at the facility will eventually be exported. April Wortham, VW's community relations director, said that the 20 percent figure is just a starting point and that it was part of the application with the FTZ Board. The two other German automakers operating assembly plants in the Southern Automotive Corridor -- BMW in South Carolina and Mercedes-Benz in Alabama -- export vehicles worldwide from those plants. As part of the FTZ filing process, VW was required to identify the type of product it intends to produce. VW used the category of "light-duty vehicles," which would include the mid-sized sedan slated to be built, but also could include other models. Stefan Jacoby, VW of America's CEO, said recently that the automaker is investigating a second product to be assembled in Chattanooga. The plant is expected to open in 2011.

Volkswagen Opening Distribution Center

In the summer, Volkswagen of America president and CEO Stefan Jacoby attended the opening of the company's new 240,000-square-foot, $30 million distribution center in Jacksonville, Fla. The new center, which will serve 115 VW and Audi dealerships in the Southeast, houses 40 workers. The center is part of VW's efforts to triple car sales in the U.S. by 2018. The Jacksonville project, the company's new assembly plant in Tennessee and its relocation of its North American headquarters to Virginia two years ago are all part of that effort.

New Car Assembly Plant Announced in Louisiana

In June, V-Vehicle Company (VVC) announced it will build its first car at a former automotive parts facility located in Monroe, La. The San Diego-based startup company will produce what is expected to be a high-mileage, gas-powered car specifically for the U.S. market. In the spring quarter we speculated that California-based venture capital firm KPCB (Kleiner Perkins Caufield and Byers) was the company centered on rumors of a new assembly plant coming to the Southern Automotive Corridor. KPCB, along with other investors including oil magnate T. Boone Pickens, are investing in the new car venture. KPCB is also an investor in California-based Fisker Automotive, which is working to produce a green, EV sports car model. VVC's northeast Louisiana plant will house 1,400 workers and represents an investment of $248 million.

BMW Offers Buyouts to S.C. Employees

In the midst of a $750 million expansion, German automaker BMW announced in mid-summer voluntary separation packages to workers at its facilities in Greer, S.C. The buyouts are part of the company's plan to cut its worldwide workforce by about 8,000 employees. More than 5,000 employees work at the Greer assembly plant.

Mercedes-Benz Expansion in Alabama Underway

A $290 million, 225,000-square-foot expansion of the body shop at the Mercedes assembly plant in Vance, Ala. has begun. The expansion will include upgrading the existing body shop and new high-technology machinery and equipment such as improved robotics and tooling. The new body shop is expected to be operational by October of 2011. The expansion will not result in additional jobs at the plant, but helps secure current jobs at the plant.

Honda Rolls Out First Accords at Alabama Plant

In the summer Honda began mass producing the popular V-6 Accord model at its plant in Lincoln, Ala. The Accord is the fourth Honda model to be built at the east Alabama facility, joining the Ridgeline pickup, Odyssey minivan and Pilot SUV. Honda announced last gall that it would move most production of the V-6 Accord to Alabama from Marysville, Ohio.

GM Seeks Highest Bidder for Proposed Plant

In June, officials representing states bidding for GM's first assembly plant post bankruptcy were surprised to learn that up-front cash incentives to the automaker apparently are the No. 1 factor in the site search. In fact, up front cash may be the only factor. Currently, GM is looking at existing facilities in Orion, Mich., Janesville, Wis. and Spring Hill, Tenn. to build a new small car. In a story published in the Chicago Tribune, Tennessee Gov. Phil Bredesen said that GM is looking for a large cash payment from the Volunteer State to pick Spring Hill over Orion or Janesville. Bredesen said he doubted his state could afford what amounted to hundreds of millions in cash to help the Michigan automaker build the plant. What's interesting about that is in the last two years GM spent more than $600 million on the Spring Hill facility to move from producing Saturns to Chevrolets.

If not GM, Some Automaker will continue Power Train and Stamping Operations in Tennessee

It really doesn't make much sense but it is what it is. In the last 18 months General Motors has spent more than $600 million gutting and then retooling its plant (the former Saturn facility) in Spring Hill, Tenn. The company has been assembling the Chevy Traverse model for less than a year at the facility. Now, GM says the plant is closing and it looks like the company may walk away from the tremendous investment it has in Spring Hill. Even if the plant does close, GM or some other automaker will continue to operate at least part of the plant. Located in the plant is the largest stamping operation in the U.S. While it might not have plans for Spring Hill for auto assembly, it would be unlikely that GM will walk away from the significant stamping and power train operations that are located in the facility.

Carbon Motors Selects Indiana for Plant

On July 29, Atlanta-based Carbon Motors officially selected Connersville, Ind. for its proposed headquarters and manufacturing operations. The Atlanta-based startup manufacturer of high-tech police cars plans to invest $350 million to locate its production headquarters at a vacant, 1.8-million-square-foot facility formerly used by parts maker Visteon. Carbon, which plans to produce a cruiser that runs on clean diesel and biodiesel technology, chose Indiana over locations in Georgia and South Carolina.

Nissan to Hire 1,300 in Tennessee for Production of Zero-Emission Vehicle

In late June, Nissan accepted a $1.6 billion loan from the U.S. Energy Department to make batteries and retool its factory in Smyrna, Tenn. in advance of the assembly of its first zero-emission car. Nissan expects to begin production of the electric vehicle in 2012. The Japanese automaker plans to assemble 100,000 electric cars in the first year at its Smyrna facility. About 1,300 jobs will be created in the project.

Volkswagen Shooting for 85% N.A. Parts Content

An aerial view this summer of Volkswagen Group of America’s new plant being built near Chattanooga, Tenn. In June, Volkswagen officials announced that it plans to use North American suppliers for 85 percent of the parts and components that will be used in the assembly of its new sedan it plans to build at its Chattanooga plant that is now under construction. The news is good for areas around Chattanooga as it indicates a large supply chain will be developed in the area. VW has set up a 75-member purchasing group in Chattanooga to find suppliers to the plant. The group is operating independently from the one VW oversees in Puebla, Mexico, which is the only other place in North America where Volkswagen assembles vehicles. The big question we would like answered is where are the engines and drive trains for the new VW sedan going to come from? VW has a large engine plant in Mexico, but that facility is hard-pressed to produce enough engines for the Puebla assembly plant. If Volkswagen has plans for 85 percent of the parts to come from North America and the company's engine plant in Mexico has no more capacity, well, the German automaker has to find engines somewhere. The Chattanooga site is large enough to accommodate a separate engine plant, but no announcement has been made as of yet.

Assembly Plant Total in the South Dropping to 16 - Chrysler Closing St. Louis North Plant, GM Closing Tennessee Factory

As part of its plan for a quick restructuring under Chapter 11 protection, Chrysler announced it is closing one of its plants in the Southern Automotive Corridor. The Michigan-based automaker will close the St. Louis North assembly plant in Missouri in 2010. The plant builds Dodge Ram models and houses about 1,200 workers. Also, in early June, GM filed for bankruptcy and announced it will close its Spring Hill, Tenn. (the old Saturn plant) facility in the fall quarter. That plant (2,500 employees) began making the Chevrolet Traverse last year after undergoing a $950 million retooling. Production of the Traverse is moving to Lansing, Mich. GM officials said the Tennessee plant will remain on "standby" and could reopen later. The closures, the first in the South since two domestic plants closed in Georgia in 2006 and 2008 (GM and Ford), means that there will soon be just 16 major auto assembly plants operating in the South. In addition, there are two that are being built (Kia in Georgia and Volkswagen in Tennessee) and one completed plant (Toyota in Mississippi) that is either waiting on economic conditions to improve before it opens or it is being shelved and sold to another user or to the State of Mississippi.

Volkswagen Expects Six Figure Application Total

To date VW has received about 20,000 applications for jobs at its plant in Chattanooga, which will begin producing cars in 2011. In an article published in the Chattanooga Times Free Press recently, VW officials expect that total to reach six figures, or over 100,000 applicants for jobs at the plant.

Seven-Hundred Kia Workers Hired in Georgia

The Southern Automotive Corridor's newest automotive assembly plant is scheduled to go into full production in December. Korean automaker Kia has already hired about 700 workers for its new plant in West Point, Ga., located near LaGrange. When production begins the plant is expected to house about 1,200 workers and if all goes well, as many as 2,500 could be working at the facility by the end of 2010. The new generation Sorento model will be the first vehicle produced at the plant.

Mercedes Using Downtime to Train Suppliers

Since February, Mercedes-Benz has used downtime at its plant in Vance, Ala. to train plant managers from approximately 35 parts suppliers in the automaker's supply chain. The suppliers have been brought in every Friday while Mercedes had its plant down. Between mid-May and June 22, the plant was also shut down, and about a dozen workers on the Mercedes line trained more suppliers on the manufacturing processes. The training was done in an effort to help suppliers save on manufacturing costs, improve quality and to improve communications between the supply chain and the OEM.

Penske Buying Saturn

Michigan-based Penske Automotive announced in early June that it will buy the Saturn brand, which used to be assembled in the Southern Automotive Corridor, from bankrupt GM. According to the MOU, Penske will purchase the rights to the brand, parts inventories and the right to distribute vehicles and parts through existing Saturn dealerships. GM will continue to assemble Saturns on a contract, interim basis. Penske operates over 300 retail automotive franchises.

Silver Eagle Bus Relocating to Tennessee

Tour bus manufacturer Silver Eagle Bus announced in late June it plans to move from Brownsville, Tex. to Gallatin, Tenn. The deal is expected to result in 100 new jobs once production begins later this year.