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Summer 2012

For real-time news on business, politics and economic development in the South, go to www.RandleReport.com. For even more economic development news in the South, including all project announcements, go to www.SB-D.com. For more information on the automotive industry in the South, including all project announcements, go to www.SouthernAutoCorridor.com. And for complete coverage of economic development in the rural South, go to www.SmallTownSouth.com. EDITOR'S NOTE: On August 31, 2012, The Randle Report launched www.RandleSportsReport.com.

Editorial: Is reshoring bringing Chinese investment to the South with it?

Ever since China joined the WTO in 2001, economic developers in the South have been waiting. They have been waiting on Chinese companies to invest in their town, county or state. It’s been a long wait because not much has happened in terms of Chinese FDI in this country. It’s not like we haven’t tried, considering all of the trade trips – 18 grueling hours on a plane non-stop – officials have taken to China since WTO admission more than a decade ago. Funny thing, some hold the belief that Chinese investments are all over this country. I easily refute that statement with this statement: name a Chinese brand operating in the U.S. tick…tick…tick, you can’t can you?

Well, there are a couple; there’s Lenovo in North Carolina. That Chinese-owned computer maker that purchased IBM’s computer unit did the unthinkable recently. Lenovo is bringing computer manufacturing and assembly to North Carolina for its U.S. buyers. What? A Chinese computer maker is making computers in the U.S.? Okay, so hell has frozen over while the earth is frying.

There is also China’s Haier Group, a maker of home appliances that was founded in Qingdao in 1984. They have a nice plant in Kershaw County, S.C. Let’s see, it’s hard to think of anyone else, but I know there are a few more Chinese companies out there in the South. A few.

The point is this: the Japanese and the Germans are all over the South in every conceivable industry sector imaginable. If you look, Japanese and German investments in the region go miles deeper than just the automotive sector. And the Koreans are getting in on the action, too. They love the South – Samsung, Kia, Hyundai – but the Koreans are 30 years behind the Japanese and Germans in FDI in the South. That makes the Chinese 50 years behind our Japanese and German friends.

In 2005, Chinese companies invested less than $500 million in the South. That’s severe chump change. Then again, why would China invest anywhere considering all of the hundreds of billions being invested in their country by U.S.-based companies each year over the last decade? But, guess what: FDI in China has dropped every month this year. That’s what reshoring to the U.S. is doing to China right now. And guess what again: That trend is just starting and China knows it.

So, SB&D believes – like the tiny Lenovo deal – that China is following the money, which is coming back to the U.S., more specifically to the South and Mexico. Look for a spike – the first ever in this country – in investments made by Chinese companies over the next ten years in the South simply because a mega-shift has occurred. If, of course, the Chinese can learn the American business culture as the aforementioned countries have perfected.

The shift is this: it was a herd mentality to go to China to manufacture and export. It is now a herd mentality to go to the U.S. and Mexico to manufacture and export. And it looks like, finally, China is running with the herd.

mike@sb-d.com

Third automotive plant shifts can only go so far

Since the recession and the natural disasters in Asia that disrupted supply chains, there have been no new assembly plants announced in the South, although Mexico has seen three. Japan's three largest automakers -- Toyota, Honda and Nissan -- are all localizing production for the U.S. market to hedge against the high value of the yen as well as disruptions in the supply lines. To do this without the aid of new facilities, many automakers, including GM, Mercedes-Benz, Hyundai and BMW in the South, have announced something they have rarely done; add a third shift to existing plants.

Adding a third shift is a sign that automakers are concentrating on increased production for now by improving efficiencies and worker productivity. And exports are at the forefront. For example, Honda expects to export 200,000 units from its North American plants in 2013, up from 55,000 in 2011. In short, many foreign automakers are now outsourcing production to the Southern Auto Corridor and Mexico with a special emphasis on exporting. By and large, adding third shifts at existing plants is a temporary move. When the U.S. market returns to pre-recession sales levels of 16 million units – about 14 to 15 million U.S. sales are expected this year -- look for automakers to begin sniffing around the Southern Auto Corridor for new facilities.

mike@sb-d.com

Nissan's Mississippi plant finally gets some footing

When Mississippi landed its first automotive assembly plant more than 10 years ago, it wasn't a secret that Nissan had trouble finding qualified workers for the facility. In fact, I talked to Jimmy Heidel, the former state-level economic development director in Mississippi about the situation and he said to me, "Mike, what did they expect? We have very few people in Mississippi who have ever operated robots." Well, that was then and this is now.

Nissan's Canton, Miss., plant is really gaining some footing in the Southern Auto Corridor as the Japanese automaker has positioned the facility as a hub for its domestic production of large vehicles. Three new models will roll off the lines at Canton as Nissan moves Frontier pickup and Xterra SUV assembly from its plant in Smyrna, Tenn., to Mississippi. The plant already produces the Titan pickup, Armada SUV and the NV commercial van in Canton. As a result of the new lines, employment at Nissan's Mississippi plant is expected to top 5,000 at the end of the year. Nissan currently employs about 6,000 in Smyrna.

mike@sb-d.com

Editorial: Fear driving worker productivity in the South

One of the best things that has come out of the Great Recession is worker productivity in the U.S., specifically in the South. Some have said that today it takes eight Chinese workers to do the job of one worker in the American South. I am sure that can be measured in exact ways, but more inexact accounting can do the job just as well.

Near the end of my current presentation to groups, I ask how many in the audience are doing the jobs of two of their former coworkers who lost their jobs during the recession. Usually about 20 percent raise their hands. I then ask, "At first, you didn't think you could do it, did you? But now you are just used to it, right?" And then I add, "It's bullshit, I know. But you still have your jobs."

In the summer quarter, Michael Feroli, chief U.S. economist at JPMorgan, said in an article in Bloomberg BusinessWeek, "If you don't like it (your job), you're probably sticking around anyway, as evidenced by the tiny number of workers who are leaving their jobs voluntarily. Workers are still scared, and so probably could be induced to work harder or longer than usual out of fear of losing their jobs," Feroli said. Feroli asked the writer, who was doing the interview at 8:00 pm, if he was being paid after hours for the work. He wasn't.

I also mention in my current speech that technology is taking boots, pumps and loafers off the factory and office floors. Combine the fact that workers are putting in many more hours than they are getting paid for out of fear of losing their jobs, and you now have – unscientifically – a huge reason why unemployment is still almost double what it should be based on numbers we are seeing on the economic development front.

mike@sb-d.com

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