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 Southern Auto Corridor News

March 7, 2008

Editorial

Toyota's Dennis Cuneo: "Second Wave" of Suppliers Expected in the Southern Auto Corridor

We spoke with Toyota's Dennis Cuneo in early March to get an update on what he was currently up to. Cuneo has headed up the site search for several Toyota facilities, including the new Toyota assembly plant being built near Tupelo, Miss., and the San Antonio pickup truck facility. Cuneo was working for the law firm Arent Fox in Washington, D.C. and had retired from Toyota. He is now back in the Cincinnati area (Toyota's North American headquarters is based in the Cincinnati suburb of Erlanger, Ky.) and is back working with Toyota, Toyota Boshoku, the fastest-growing auto parts company in the world, and was recently elected to the Board of AK Steel, which is also headquartered in the Cincinnati area.

We asked Cuneo what if anything was behind an increase in lead activity on our Web site, www.SouthernAutoCorridor.com. We have seen a dramatic increase in not only the number of inquiries on our site, but also a significant increase in the quality of the leads.

In response, Cuneo said, "I expect to see continued migration of parts companies to the Southern Auto Corridor to serve the cluster of assembly plants that has built up in the Georgia/Alabama/Mississippi/Tennessee area. We've seen the first wave of mostly JIT plants that need to be located close to the assembly plants. We are starting to see the second wave -- companies who want to serve more than one assembly plant."

The Southern Automotive Corridor is growing up

The Southern Automotive Corridor is known for attracting billions in manufacturing-based capital investments over the years. Automotive manufacturing in the form of original equipment manufacturers and the parts suppliers that follow are now events that occur every year in the South and have simply become news that is considered legendary in the news media.

But what has occurred recently is that non-manufacturing sectors of the automotive industry are popping up all over the South. Nissan recently moved its headquarters from California to Williamson County, Tenn., in the Nashville metro area and VW recently announced it is moving its headquarters from Michigan to Herndon, Va.

R&D continues to increase in the region, particularly in the next-generation sector. The Center for Hydrogen Research (CHR), located in Aiken, S.C., just produced its first hydrogen-powered vehicle and other automotive R&D efforts are in full swing from Texas to the Carolinas. Universities are many times at the center of the research and development. Mississippi State, Clemson and the University of Alabama are prime examples of that work.

Further evidence that automotive-related white collar jobs are increasing in the South came in the form of Daimler Financial, which announced a 750-job project in the winter quarter in Fort Worth, Tex.

Mazda Opening Plant in Virginia

Mazda Motor Corp. announced in late winter it will open an engine and transmission remanufacturing facility in Chesterfield County, Va., which is located in the Richmond area. The facility will also include a dealer training center and call center. Mazda is leasing 133,000 square feet of space in the Walthall Enterprise Zone. Mazda will invest about $1.6 million in the deal and hire about 20 workers initially.

Editorial

South Carolina for Volkswagen? We don't think so.

Speculation continues about Volkswagen and where it will place its new assembly plant in the U.S. VW could place its prospective plant somewhere in South Carolina reports indicate. But, considering the lack of available super sites in the Palmetto State, the chances of that happening are slim. But that's not the real reason we believe VW is not going to select South Carolina whenever they make their decision, if they do.

The two reasons we believe South Carolina will be shut out of the VW site search have nothing to do with sites/product, quality of life, labor availability or any other site selection factor you can think of. Like most Southern states, South Carolina is incredibly competitive in what it offers locating industry and the Palmetto State is an outstanding place to live and work.

Nope, our reasons on why we believe South Carolina will not land the proposed 2,500-employee VW plant (if there is one) center on two people: BMW CEO Norbert Reithofer, who administers the German automaker and its only U.S. plant, which is located in Greer, S.C., and South Carolina Gov. Mark Sanford.

Gov. Sanford, now well into his second term, has been critical of large incentive packages given out to major corporations, such as an automaker. Last year, Gov. Sanford vetoed a bill that included incentives for Michelin, which announced it would expand its already massive operations in the Upstate region of South Carolina by another $350 million. The South Carolina Legislature overrode Sanford's veto, so Michelin received its incentives to expand in the Palmetto State.

Reports have surfaced that Anderson County, S.C., which is located in the Greenville-Spartanburg metropolitan area, has made VW's short list. Greer, S.C., which is where BMW operates its plant, is also located in the Greenville-Spartanburg metro. Having two German automakers, two that compete for buyers, operating major automobile assembly plants in one market is just something that has never been done before in the history of the Southern Auto Corridor.

Will BMW CEO Norbert Reithofer let VW into his own backyard? It's our opinion that would be highly unlikely. Will Gov. Sanford pony up an incentive package for VW that will likely be close to $300 million after publicly saying last year, "Does it make sense to eliminate essentially all taxes for large corporations and not do the same for small businesses?" That, in our opinion, would be highly unlikely, too.

Nope, look for the prospective VW plant to land in either North Carolina, Georgia or Southside Virginia.

Michael C. Randle
mike@sb-d.com

Center for Hydrogen Research Rolls-Out First Hydrogen Vehicle in South Carolina

The Center for Hydrogen Research (CHR), located in Aiken, S.C., rolled out its first new hydrogen vehicle in late February. The model, a Chevrolet 1500 pickup truck, is the first hydrogen powered on-road vehicle to be registered in South Carolina. Roush Industries of Livonia, Mich., and eTec of Phoenix modified the vehicle to run on hydrogen fuel. The CHR is located at Aiken County's Savannah River Research Campus.

German Supplier Locates in Upstate S.C.

Stuttgart, Germany-based Richard Fritz Group, an auto parts supplier of glass and plastic molding products, has picked Duncan, S.C. for a $6 million manufacturing facility. The plant is the company's first in the U.S. Production has already begun at the facility, which is expected to eventually house about 60 workers. Currently, the plant will supply the Mercedes plant in Alabama, however, Duncan is located just three miles from the BMW assembly plant in Greer, S.C. Fritz already supplies BMW with parts in Europe and expects to do business with that German automaker in the near future in the Palmetto State.

Kia Applications Top 40,000

Kia Motors Manufacturing of Georgia plans to hire about 2,500 workers in the next couple of years as it focuses on opening its new assembly plant in West Point, Ga. in late 2009. To date, about 46,000 applications for those 2,500 jobs have been received by the Korean automaker, virtually all of which have been submitted online. The plant, being built in West Georgia on Interstate 85 is expected to produce over 300,000 vehicles each year.

Another Kia Supplier Picks LaGrange, Ga.

Daegu, Korea-based Sewon Precision has chosen LaGrange, Ga., for a $170 million, 700-employee stamping facility. The plant will supply Kia's new assembly plant in nearby West Point, Ga. Sewon will produce stamped chassis and body components as well as decorative trim parts for Kia. The 420,000-square-foot facility is expected to open in fall of 2009.

Alabama Automotive Production: From 68,000 to 738,000 in 10 Years

In calendar year 2007, Alabama's automobile production topped 738,000 vehicles. Exactly 10 years ago, automobile production stood at 68,000 vehicles in Alabama, Mercedes first full year of assembling the M-Class. The increase in vehicles produced places Alabama as the fifth largest state in automobile production in the U.S.

Toyota Builds Millionth Engine in Huntsville

In the winter quarter, Toyota built its one millionth engine at its engine plant in Huntsville, Ala. The plant manufactures 4.7-liter and 5.7-liter V8 engines for the Tundra full size pickup and Sequoia full size SUV that are assembled in Indiana and Texas. It also builds V8 engines for Tundras and Tacoma pickups that are made in California and Mexico.

Honda Adding New Model in Alabama

Japanese automaker Honda announced in the winter quarter that it will assemble the Ridgeline pickup truck at its plant in Lincoln, Ala. Honda currently produces the Pilot SUV and Odyssey minivan at the east Alabama auto works. About 4,500 workers are housed at the Lincoln facility, which assembled over 300,000 vehicles last year.

Daimler Financial Hiring 750 in Fort Worth

Daimler Financial Services Americas, formed when Chrysler split from Daimler Benz, is hiring 750 new employees in Fort Worth. The project will include a new 160,000-square-foot office building in Fort Worth’s Alliance development. Daimler will close a similar facility in Chicago and more about 180 workers there will relocate to Fort Worth. Daimler Financial's headquarters will remain in the Detroit area.

"Smart Car" Plant Rumors

Spreading throughout the South are rumors that Toyota and other automakers are considering "smart car" plants in the South. We've received several emails regarding automakers looking at sites in Northeast Louisiana (the Franklin Farms megasite), in Hutto, Tex., Aiken, S.C. and in Linwood, N.C. for a site to build next generation automobiles. Time will tell if those rumors are just that. But, other than the emails about prospective plant sites, most of which come from land owners themselves, we cannot give you any more information at this time.

Hyundai Production Shifts in Alabama

Korean automaker Hyundai reported a major shift in its production at its assembly facility in Montgomery, Ala. Two models are produced at the plant, the Sonata sedan and the Sante Fe SUV. In 2007, Hyundai made 31 percent less Sonatas, but 47 percent more of the Sante Fe model than it produced in 2006. A redesigned Sonata this year should increase the number of Sonatas built in Montgomery in 2008.

Toyota Adding New Model at Kentucky Plant

In the winter quarter, Toyota introduced a new model that will be built at its assembly plant in Georgetown, Ky. Called the Venza, the new crossover vehicle will be available in 2009. Toyota is investing $413 million at its Georgetown plant, which encompasses 7.5 million square feet, making it the Japanese automaker’s largest facility in North America. Currently Toyota produces the Camry, Camry Hybrid, the Avalon and Solara coupe in Georgetown along with V6 and four-cylinder engines.

GM Adding 300 New Jobs at Kansas Plant

General Motors plans to hire about 300 new workers at its Fairfax assembly plant, located in Kansas City, Kan. The new hires are in response to stronger sales of the Chevrolet Malibu model, which is assembled at the plant. Most of the hires will come from workers who lost jobs at other GM or Delphi plants that have closed recently. The new hires will bring employment at the Fairfax facility to about 2,900 workers.

Toyota Boshoku Starts Construction in Mississippi

One of Toyota's biggest suppliers to the Japanese automaker's new plant now under construction near Tupelo, Miss., has also begun construction of its 386,000-square-foot facility. Toyota Boshoku started building its plant in Itawamba County, Miss., in the winter quarter. The facility will be completed in 2010 and will house about 500 workers initially. The plant will produce seats, carpet and door panels for Toyota's Highlander model plant in Tupelo.

Mercedes-Benz to Produce First Hybrid in Alabama

German automaker Mercedes-Benz will introduce its first hybrid vehicle next year, an M-Class SUV that will be made at its Vance, Ala., plant. The M-Class will have a V-6 engine and two electronic motors. The model will be called the ML450 Hybrid.

Suzuki Pickup to be manufactured by Nissan in Smyrna

American Suzuki Motor Corp. announced in the winter quarter it will produce a midsize pickup truck at Nissan's massive assembly complex in Smyrna, Tenn. The truck will be based on Nissan's Frontier model, but will be marketed exclusively by Suzuki. The first Suzuki pickup is expected to roll off Nissan's line in Smyrna in the fall of this year.

South Carolina-Based Supplier Sets up Shop in Alabama

Returnable Packaging Resource, based in Simpsonville, S.C., has set up shop near the Talladega Superspeedway. The company, which provides packaging for automotive parts suppliers, will hire about 30 employees in the deal.

Intellitec Breaks Ground in Deland, Fla.

In the winter quarter, NSI Intellitec broke ground on a new 63,000-square-foot manufacturing facility in DeLand, Fla. The new facility will house about 110 workers when completed. Intellitec produces battery and power devices for specialty vehicles, RVs and ambulances.

Editorial

Alabama and Georgia: The Korean Yin and Yang

On January 3, 2006, Southern Business & Development was the first media outlet to predict that Korean automaker Kia would build its first U.S. assembly plant in West Point, Ga. We wrote that the "pup (Kia) will not venture far from its mother, which is Hyundai."  Two months later, in March, Kia announced its plans to build its assembly plant in West Point.

Since then we have predicted that with Hyundai assembling its vehicles in Montgomery, Ala., and Kia about to produce its vehicles 80 miles away in West Point, there could be some unique, cost-saving collaborations between the two Korean automakers that would give them an advantage unseen in the Southern Automotive Corridor.

A large number of Korean auto parts suppliers have been in production for over three years now in Alabama. It was obvious that those same suppliers would supply the new Kia plant currently under construction across the state line in West Georgia. Georgia is benefiting as well, landing several Korean suppliers in West Georgia in the last year.

Last year when Hyundai announced it would build an engine facility at the site of its plant in Montgomery, we wrote that those engines would be used in Kia vehicles once that facility opens in Georgia. That has become a reality as well.

Now we hear that Kia will add a transmission facility at its new auto works in West Point. The transmissions that will be produced in West Point by Kia will be used by Hyundai for its two models in Montgomery.

Our latest prediction regarding the developing yin and yang relationship between Georgia and Alabama and Hyundai and Kia is an easy one. The two Korean automakers will have a decided advantage over some of their Japanese rivals when it comes to producing high quality vehicles at lower costs here in the Southern Auto Corridor.

Michael C. Randle
mike@sb-d.com
  

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