Summer 2011
For real-time news on economic development, business and politics in the American South, go to www.RandleReport.com. For more information on economic development in the South, go to www.SB-D.com and www.SmallTownSouth.com.
Editorial
Arkansas quietly goes about doing its business very well
By Mike Randle
Which states in the South avoided disaster during The Great Recession? There were really only five: Arkansas, Louisiana, Oklahoma, Texas and West Virginia. Unemployment rates in those five states never came closed to rising above the national average in the recession and continue to do the same. Collectively, the five states sported an unemployment rate of 7.5 percent in August, more than a point-and-a-half below the nation's unemployment rate in the same month.
What do those five states have in common that could have possibly shielded them from the worst economy in our generation? All five earn massive amounts of revenue from oil and gas or other mineral extraction. The other things they have in common are conservative budget processes.
Arkansas particularly stands out in that regard and that isn't a coincidence. Arkansas was the only U.S. state that defaulted on its debt during The Great Depression. When the default process ended in the 1940s, the state enacted what is called the fiscal stabilization act. That budgeting process has worked quite well even in the worst of times and it is incredibly simple.
Every two years Arkansas lawmakers divide funding requests into three categories; A, B and C. "A" represents essential programs such as education, Medicaid, transportation and corrections. "B" represents essential and non-essential items such as expansions of the previously mentioned programs and cost-of-living increases for state agencies. Category "C" makes up the implementation of new programs and for the most part, items in this category are rarely funded in an economic downturn.
After establishing the categories, selected members of the legislative and executive branches meet behind closed doors to match up the categories with state revenue projections. Category A is completely funded initially, then they move on to B and if anything is left, certain items in category C may receive funding. The process enables Arkansas lawmakers to approve the budget without political battles. But it doesn't end there. Revenues are monitored daily to make sure they meet projections and if they don't cuts begin with category "C" and then move up.
Arkansas may not be the South's biggest economic development dynamo. Yet, when it comes to fiscal health, Arkansas has few peers.
mike@sb-d.com
Editorial
Organize the VW plant? What's the point?
By Mike Randle
Bill Poovey, the great AP writer based in Tennessee who has interviewed me many times over the years, gave an ominous end-of-conversation send off during our last conversation. His story, about the possibility of the UAW organizing the new Volkswagen plant was a good one. Just Google "Bill Poovey Volkswagen" and you will find it.
Anyway, at the end of the interview, Bill said, "Mike, get out the rifles after this one." Well, I don't own a rifle. But from time to time, I have a body guard who straps a Mini-Uzi under her skirt and she is fully employed by SB&D. If you know me well, you know her as "The Elf" and she is one bad lady at about 5-foot and 115 lbs. She is also one of the talented editors that posts each day on The Randle Report (www.RandleReport.com).
Poovey was right. His story, published in the summer titled "New VW plant on UAW radar as friendly target" ran in hundreds of newspapers and other media outlets, including The Detroit Times (uh, oh), The Seattle Times (Boeing -- ditto), USA Today, Forbes, Yahoo, The Boston Globe, NPR, MSNBC, The Huffington Post, ABC News ... you name it, it ran in it. I have never received more response from a story that I have been quoted in. There were the typical near-death threats, but in this case, just a few dozen more.
In the story, Poovey asked me about what I thought of VW seemingly being perfectly fine with UAW organizing its plant in Chattanooga. My response was, "What's the point?" I also was quoted in the article as saying, "Organizing is a ’50s, ’60s and ’70s model. It’s outdated. They (auto workers) are already being paid higher than anybody else."
Bloomberg (I am sure Michael Bloomberg has more body guards than a single elf with a Mini-Uzi), backed up my claim in a recent article that labor unions are an outdated model, particularly in the highly paid automotive industry -- foreign or domestic. Here are some excerpts from that article:
"Hyundai's lower wages and benefits have given it hourly labor costs of about $44 to $48 an hour, compared to $52 an hour at Toyota Motor Corp.'s U.S. plants and about $58 an hour at the U.S. factories of General Motors (GM), Ford Motor Co. and Chrysler Group LLC, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor, Mich.
"While Hyundai officials declined to speak about specific pay, workers said the hourly rate is generous for the area" (Alabama). "Montgomery's median household income in 2009 was $42,346, about $9,000 less than the national median and $6,400 less than in Michigan, according to the U.S. Census 2009 American Community Survey.
"Wanda Carter, a Hyundai hourly worker, said she doesn't see a need for a union at the Alabama plant. ’Hyundai does the best they can do to work with the Hyundai employees,' said Carter, who declined to give her age.
"She wasn't alone," the Bloomberg article said. "Workers at another UAW target, Volkswagen AG's new plant in Chattanooga, Tenn., said they were excited just to have a job in the auto industry. There isn't any talk of forming a union, said Terry Young, a line worker. 'You don't want to look a gift horse in the mouth," said Young, 34.
So, if workers at foreign automotive plants in the Southern Automotive Corridor are making more than workers at unionized domestic plants in Michigan per hour when factoring in cost of living levels in Southern states, then "what's the point" in unionizing? There isn't one.
mike@SB-D.com
Editorial
What a comeback: the auto industry is driving the recovery
By Mike Randle
It didn't look good in 2009 as Chrysler and GM entered bankruptcy. Earlier, Toyota had delayed the opening of its Northeast Mississippi plant and assembly plants throughout the South suspended if not stopped production altogether. We heard reports that Volkswagen, which announced its new plant in 2008 right before the *&%# hit the fan, would also delay the opening of its new Chattanooga plant. The automotive industry was dead in the South and in Detroit. Inquiries about opportunities in the South on our SouthernAutoCorridor.com Web site didn't just trickle in, they stopped coming in for months. Auto sales had hit a 30-year low. Not good.
Today, Volkswagen, Nissan, Ford, Toyota, Mercedes, BMW, GM (the new version), Hyundai, Kia and Honda are all adding capacity and jobs by the thousands in the Southern Automotive Corridor. There are also three automakers that we know of that are possibly looking at building new auto works in the South -- Hyundai-Kia, Volvo and Audi. Now, if we can just save the GM plant in Shreveport and reopen the GM plant in Spring Hill, Tenn., all will be well.
mike@SB-D.com
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