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April 16, 2009

New Automotive Assembly Plant Rumors Emerge Again

Two new automotive assembly plants are under construction in the Southern Automotive Corridor presently, with at least one expected to open this year. KIA is still on target to begin production in November at its new West Point, Ga. plant. Volkswagen is full steam ahead on its Chattanooga, Tenn. assembly plant. In fact, that facility is on the fastest track we have ever seen compared to other assembly plants built in the Southern Automotive Corridor since the early 1990s.

Of course Toyota, which announced its newest facility in 2007, has put the brakes on its new facility in Blue Springs, Miss. even though construction is essentially complete. There are all kinds of rumors floating around about the Toyota plant. We've heard the Japanese automaker is reevaluating the opening of the facility each month. We've also heard that the plant is for sale.

Now we hear news that one or more alternative automotive plants are in the works. There’s news in the Rio Grande Valley that a European automaker is close to making a decision on building a small plant in McAllen, Tex. at the Sharyland Plantation. The name of the "green" auto manufacturer has not been revealed, but some information related to it has.

Recent reports indicate the project involves building a next-generation, fuel-efficient vehicle. As of this writing, one Texas lawmaker (Rep. Veronica Gonzales) has prompted legislation that would allow a statewide deal closing fund to provide up to $50 million to the city of McAllen to help lure the unnamed automaker. Gonzales has told Texas lawmakers that the European automaker would produce "green," low-emission vehicles that would initially be for sale primarily in Europe.

Other news regarding the project indicate the plant is small (400,000 square feet) compared to traditional assembly plants and that to be profitable the facility would only need to produce about 18,000 vehicles annually. The deal could represent a $500 million investment and nearly 500 new jobs. McAllen officials are saying that the plant represents a new trend in auto manufacturing where assembly plants are smaller and "more agile." 

If the prospective plant in South Texas is a deal and not a dog, what European automaker could that be in an economy like this? BMW? Mercedes? Fiat? Volkswagen? Fiat and Volkswagen would be the only two European automakers looking to add North American production. The thing that throws us off is the news that it is a European automaker wanting to assemble vehicles in the U.S. for sale in Europe. Why?

We believe the project being worked in South Texas could be more in line with something like Fisker Automotive. That startup, backed by KPCB (Kleiner Perkins Caufield & Byers), is a green (plug-in) American premium sports car company. It should be noted that Menlo Park, Calif.-based KPCB is the same venture capital firm that helped Google become what it is. Former Vice-President Al Gore is a partner with KPCB. There are also rumors flying that KPCB is directing a site search for a "green" car plant in the South.

Michael C. Randle
mike@sb-d.com

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