Winter 2010

Editorial

Toyota's Problems Not Good News for Mississippi

Toyota's multiple issues over quality control of its vehicles is not good news for the state of Mississippi where the Japanese automaker built an assembly plant in the northeast portion of the state that has never opened for business. In mid-February, Toyota announced it was cutting back production at its two other assembly plants in the Southern Automotive Corridor, one in San Antonio, Tex. and the other in Georgetown, Ky., because of a drop in sales related to the recall of eight million vehicles worldwide.

In early 2007, Toyota chose to build the plant near Tupelo, Miss. to produce the Highlander SUV model. When the SUV market collapsed, the Japanese automaker announced that the fuel-saving Prius model would be assembled at the plant. Then, on December 15, 2008, the company decided to idle the finished, but unequipped facility.

Toyota officials have said there is no timetable on when or if the plant will open. There were rumors prior to Toyota's giant recall that the company would start to assemble the Corolla model in 2011 at the Mississippi plant.

It is believed that incentive agreements made between state and local governments and Toyota require that the company invest $500 million in the project by the end of 2012. So far, Toyota has invested about $300 million in the plant. If the plant was equipped, reaching the $500 million investment threshold wouldn't be a problem. But, even if Toyota decided today to go ahead and start production at the plant, it would take at least a year to ready the facility.

It has been reported by other sources that because of the delay in opening the plant, Toyota will make an interest payment of about $10 million on bonds of $293 million that were issued to the company as part of the incentive package Mississippi gave the automaker. In addition, this year Toyota will make annual payments of $5 million for 10 years to school districts in northeast Mississippi.

mike@sb-d.com

Editorial

Welcome to the World's Second-Largest Economy

Mike Randle, Editor

Whenever I speak to a group I always bring my standard statistics showing the South's rise in socio-economic standards over the last 50 years. I will usually present population figures from the 1950s that show the South growing from essentially the same population of the Midwest and the Northeast to a total today that surpasses the two regions combined. Typically, I will also present an argument that despite the perception that the South is an educational abyss, the region's residents actually have earned an 83 percent average high school graduation rate, compared to the U.S. rate of 84.5 percent. Furthermore, the South isn't far behind the U.S. average in residents with Bachelor's degrees or more. The U.S. average is 27.5 percent and the South's average is 25.5 percent.

But until now, I couldn't make the claim that the South is the world's second-largest economy. Using gross state product totals for calendar year 2008, the American South overtook Japan in total gross product making the region the second-largest economy in the world. SB&D's definition of the South includes 17 states from Texas in the west to Maryland in the east. The 2008 figures were recently released by the Bureau of Economy Analysis.

Total GDP 2008

Source: www.bea.gov

The South is poised to remain the world's second-largest economy for a few more years and maybe longer if the region's biggest contributor to its economy -- finance, insurance and real estate (FIRE) -- makes a strong comeback during the recovery. FIRE and manufacturing are far and away the South's biggest contributors to its economy.

But at some point in the near future experts say, China will transition from the world's fastest-growing economy to the world's second-largest economy. It should be noted that in 2008 the South produced a total gross product value that exceeded Japan's by a scant $4 billion and China's by a mere $22 billion. The South has followed Japan in third place for years. While the South out produced Japan for the first time, China is now poised to overtake Japan and the South in the next few years.

Regardless, for the South to rise to the world's second-largest economy for the first time in world economic history is cause for celebration. It is a huge testament to the region's popularity among the nation's private industry sectors that together account for almost 90 percent of U.S. GDP. We will proudly change our masthead to read "Corporate and Industrial Sites in the World's Second-Largest Economy" for now and hope that it stays that way for a while.

A Growing Player in the South's Economy

One part of the South's economy that is expanding rapidly is the aerospace sector. We are highlighting the aviation and aerospace industries in the South in a special bonus edition in May titled "The American South: The Center of the New Aerospace Universe." This issue will be the most comprehensive publication ever done on the region's aerospace industry. Every Southern state's largest aviation and aerospace employers will be identified as well as a database of sites in the region that fit particularly well for growing aerospace concerns. Also included will be feature articles on issues and companies surrounding the South's new-found success in aviation and aerospace.

If you would like a copy of this edition, go ahead and subscribe now so we can put you on the list. Go to www.sb-d.com to subscribe and go to www.sb-d.com/aerospace to view an e-card describing the special issue. If your business benefits from the aviation and aerospace industries, this bonus issue on opportunities for you in the South is a must read.

Other Sources of Information if Your Company Wishes to Expand to the World's Second-Largest Economy

Finally, in addition to www.SB-D.com, Southern Business & Development and our aerospace bonus issue, you can get more valuable information on moving or expanding your company to the world's second-largest economy by going to www.SouthernAutoCorridor.com (a must for those in the automotive industry), and www.SmallTownSouth.com, the only Web site profiling opportunities for your company in the Rural South.

Editorial

It's a Good Sign When the Financial Services Sector Starts to Hire

No industry has been punished more so than financial services in the South during this recession. The fine folks in North Carolina and Florida know that all too well, as do states throughout the region. Georgia and Florida are where more small banks have been snuffed out in the South. And let's not forget Alabama, where in Birmingham four of the nation's largest banks were headquartered there. That is just a memory now.

The media continues to focus on manufacturing as the industry sector that lost its legs in this recession. That may be the case nationally, but in the South manufacturing has been one of the few bright spots with large producers like Boeing, Hemlock Semiconductor, Volkswagen, Caterpillar and many others investing hundreds of millions of dollars in new plants in the region in 2008 and 2009.

In contrast, financials, which, with real estate and insurance (FIRE) make up the largest contributors to the South's gross regional product (second is manufacturing), have been a no show in job creation for almost three years now. Huge players that have created tens of thousands of jobs in the region over the last decade like Citigroup, Bank of America, Wachovia (Wells Fargo), Fidelity, Capital One, Washington Mutual (WAMU is no more), and Countrywide (ditto), haven't announced a large job generating project (500 jobs or more) in the South since 2006. Not one. That's a long time.

But if you turn to page 64 in this edition, you will see that financials are screaming back. Four of the South's ten largest job deals in the winter quarter came from the financial services sector. The last time that happened, Barack Obama was pretty much unknown to America and Nick Saban was coaching in the NFL. 

It's a good sign that financials are active on our job board because when banks make money, they are hiring machines in the South. Furthermore, for banks to make money, their larger clients must be making money, too. It's a good sign.

Which brings us to this: maybe one of the most important indicators from here on out regarding how fast the South recovers from this awful recession can simply be measured by how many jobs Citicorp, Capital One, Bank of America, Wells Fargo, Fidelity and other financials ring up this year and next. Also, watch USSA's activity in San Antonio. USSA seems to know the answer since they were the only financial services firm to add a significant number of jobs during this recession.

mike@sb-d.com

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