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 Southern Auto Corridor News

April 28, 2008

Editorial

Michigan for Volkswagen? Right.

Volkswagen Group of America's president and CEO, Stefan Jacoby, said on April 23 that Alabama, Michigan and Tennessee were on the short list of states that could land VW's plant, if one is built in the U.S. Since we don't cover Michigan we cannot comment on possible sites in that state for VW. Yet, we can comment on the issues in Michigan. Let's just say we would be shocked if the German automaker chose Michigan.

Surely VW officials have watched with interest Honda's decision in 2006 to build its latest North American assembly plant in southeastern Indiana (Greensburg, Ind.) and the developments that occurred later concerning labor with that project.

To skirt union labor, Honda did something extraordinary when hiring employees for the new Indiana facility. In August of last year, Honda announced that only people living in 20 of Indiana's 92 counties could apply for jobs at the new auto works. In 16 years of covering economic development issues, we have never heard of anything such as that. To say that is a fair hiring practice would be a stretch. If Honda didn't want to face the prospects of hiring union labor, why then would they locate in Indiana, a non-right-to-work state?

Honda's job limitations based on where job hunting prospects lived, excluded most of Indiana's thousands of laid-off unionized auto workers. Does Volkswagen really want to nestle into the biggest of nests of union labor in Michigan after such extreme hiring measures set forth by Honda in Indiana? Indiana's automotive-related union membership pales in comparison to Michigan's.

We believe VW will not make another bad choice again in the U.S. After all, VW's first U.S. plant was built in the 1980s near Pittsburgh in Westmoreland County, an area that even today is a union stronghold. That plant failed in 1988 after only a few years of assembling vehicles. So, will VW's proposed plant land in Michigan? We doubt it. No, scratch that. There will be no VW plant coming to Michigan. But if there is, chalk it up to insanity. After all, VW relocated its U.S. headquarters last year from Auburn Hills, Mich. to Herndon, Va.

So, according to Jacoby, that leaves Alabama and Tennessee, two states we do know well. Where would VW choose to locate its plant in Alabama or Tennessee if Michigan is indeed a German political smoke screen for the project? Well, you would have to start with Chattanooga and its very attractive Enterprise South site. If you read SB&D regularly, then you remember the stink that came about regarding SB&D writing during the last Toyota assembly plant site search something to the effect of "Toyota will not pick Chattanooga's Enterprise South site because it is a former brownfield. History has shown that not a single new automotive assembly plant has ever picked a former brownfield as a site to build a new automotive assembly plant." That statement struck more than one nerve.

The statement made it all the way to newspapers in Japan; dozens of them. You see, Toyota is an incredibly environmentally sensitive company. They put Chattanooga's Enterprise South site on their shortlist and when we said they would not choose it because of environmental concerns, well, let's just say I spent many hours being interviewed by Japanese newspapers, received a few death threats and eventually hired me a body guard as a result. But, ultimately, I was right in that Toyota did not choose Chattanooga and eventually picked a site near Tupelo for its new plant, which is now under construction.

But I was wrong about the site in Chattanooga. Charlie Giffen, a good friend of mine for years in the economic development business and who was working with the Chattanooga Chamber of Commerce at the time Toyota was conducting its search in 2006 and 2007, (he has now moved back to the Tennessee Department of Economic & Community Development) invited me up to Chattanooga in February of 2007. That was shortly after I had predicted Toyota would pass on Chattanooga.

Charlie escorted Shelly Jacobs (a SB&D employee) and me to the Enterprise South site to walk it, view it and see it first hand. Shelly and I were amazed. The site is such a pretty site, it looks like a state park.

Other sites in Tennessee suitable for an automaker would be other TVA certified sites that are located in the western part of the state east of Memphis and northwest of Nashville. In fact, the VW site search now smells like another TVA certified site search, which is what occurred with Toyota. That Japanese automaker chose one of the nine current TVA certified sites when it picked Tupelo last year.

Available properties that have been certified by TVA in Tennessee include Chattanooga, Haywood County, Tenn. (near Memphis) and Clarksville-Montgomery County, Tenn. (northwest of Nashville). Also, Hopkinsville, Ky. (located just across the border from Clarksville) is a TVA certified site and a big patch of land on Interstate 65 in Limestone County, Ala., located right at the Alabama/Tennessee state line near Huntsville is also certified by TVA. In Limestone County, Ala., it is interesting to note that the city of Huntsville is currently annexing all kinds of land in adjoining Limestone County.

There are other available sites in the two states, but none that are as visible and prepared as the Chattanooga, Clarksville or Limestone County sites. It should be noted that VW's Jacoby also said this week that key factors in the site selection decision center on how prepared the sites are and "We must focus more narrowly on just those few sites that best meet our particular needs."

While Volkswagen maintains there are three states still in the hunt for the new German assembly plant, we believe it’s really just two: Alabama and Tennessee. And we also believe that Chattanooga and Clarksville in Tennessee and Limestone County, Ala. are the three sites at the top of VW's list.

Michael C. Randle
mike@sb-d.com

German Supplier to Build Plant in Alabama

Germany-based Selzer Automotive announced in late April that it will build its first North American plant this year in Auburn, Ala. Selzer supplies parts in Europe for Volkswagen, Audi, Daimler, GM, Ford, Jaguar and BMW. The new $22 million Alabama plant will make transmission components for dual-clutch systems. About 80 jobs are expected to be created in the deal.

Toyota Supplier Adding 170 Jobs in Kentucky

Toyota Boshoku announced in late April it is adding 170 jobs and 25,000 square feet at its North American headquarters in Erlanger, Ky. Toyota Boshoku relocated to Erlanger from Michigan in 2007. Toyota Boshoku supplies Toyota with parts and is one of the fastest growing automotive parts suppliers in the world.

Cosmo Buying Ogihara Stamping Plant

Cosmo International, a subsidiary of Canada's Magna International, is expanding into the Southern Automotive Corridor with its purchase of Ogihara America's Birmingham, Ala. plant. The facility was one of the first to open to supply the Vance. Ala., Mercedes-Benz plant back in the mid-1990s. The 460,000-square-foot facility houses 280 workers.

Magna Steyr Project Still Around

Austria-based Magna Steyr is still considering building a low-volume niche vehicle plant in the Southern Auto Corridor. In mid-April the Financial Post of Canada reported that Alabama is still in the running for the facility, which is expected to employ over 1,000 workers.

Kentucky, Missouri, Alabama, Tennessee and Texas Make Top 10 Automaking State List

Which state in the South produces more vehicles than any other? It's Kentucky, with 1.05 million vehicles assembled in 2007. Following Kentucky is Missouri, Alabama, Tennessee and Texas. The five Southern states all made the top 10 automaking states in the U.S. in 2007.

The Top Automobile and Light Truck Producing States in 2007

State

1. Michigan
2. Ohio
3. Kentucky
4. Missouri
5. Alabama
6. Indiana
7. Illinois
8. Tennessee
9. California
10. Texas

Vehicles

2.33 million
1.75 million
1.05 million
906,270
739,019
692,899
542,368
455,422
407,890
324,089

Source: Automotive News

BMW Investing $750 Million in South Carolina

BMW Manufacturing announced in the spring it is investing $750 million at its plant in Greer, S.C. The expansion will add 1.5 million square feet of new space, enabling the German automaker to produce almost 100,000 more vehicles at the plant, located in the Greenville/Spartanburg metro area. Last year, BMW's assembly plant in South Carolina assembled 157,530 vehicles. The expansion will accommodate the production of the next-generation X3 sports-activity vehicle. The deal is expected to create about 500 new jobs. Currently, the BMW plant houses approximately 5,400 workers.

Parts Supplier Closing in Texas

Germany-based Behr Climate Systems, a manufacturer of refrigeration and heating equipment for the automotive industry, plans to layoff 55 employees at its facility in Fort Worth. The company will eventually close its facility in August of 2008.

GM's Texas Plant Still at Full Production

Despite GM's losses and a strike at American Axle, GM reported in April that its Arlington, Tex., assembly plant continues to run at full production. In the early spring quarter, GM reported it is closing one of its Detroit area assembly plants and stopping work until further notice at a transmission plant in Toledo, Ohio. GM reported that it has shifted production on certain models in Arlington since the strike by American Axle, but that total vehicle output has not dropped.

Nissan, Chrysler Teaming Up

In mid-April, Nissan and Chrysler announced a new joint venture that would have both automakers assemble vehicles for each other. The deal is this: Nissan's slow selling Titan full-size pickup truck, which is assembled in the Southern Auto Corridor at the Japanese automaker's auto works in Canton, Miss., will be replaced in 2011 by a new full-size pickup that Chrysler will build at its Saltillo, Mexico assembly facility. In turn, Carlos Ghosn, Nissan's CEO, said that Nissan will produce a subcompact based on the Versa model's frame for Chrysler. That production will be done at one of Nissan's plants in Japan. Earlier this year Nissan announced it would manufacture a version of the subcompact Versa for Chrysler with South America the target of sales by 2009. That earlier pact has apparently expanded, with Nissan making small cars for Chrysler in Japan for sale in the U.S. and elsewhere in the world by 2010. There's one more item that's part of the partnership between Nissan and Chrysler. In exchange for Chrysler assembling a new pickup truck in Mexico for Nissan, Chrysler will move some of its production from Mexico to its north Fenton, Mo., pickup truck plant. That plant currently produces Dodge Ram models and the Fenton south plant assembles Chrysler Town & Country and Dodge Grand Caravan minivan models. This is not the first time Nissan CEO Carlos Ghosn has reached out to a domestic automaker to make a deal. Two years ago, Nissan approached General Motors to work a deal out between the Japanese automaker and GM. Nothing came from those talks.

Nissan's Mississippi Plant to Build Light-Duty Commercial Trucks

In April, Nissan officials announced that the Quest minivan, Nissan Armada and Infiniti QX56, two full sized SUVs, will no longer be assembled at the Japanese automaker's plant in Canton, Miss. beyond next year. The plant will continue, however, the assembly of the Altima sedan and the Titan pickup in Mississippi. Replacing the three lines will be three light commercial truck models that will be in production in Canton by 2010. Nissan will use Cummins diesel engines in the commercial vehicles, which will be marketed to the U.S. market. Nissan will spend $118 million to change the lines at its plant, which is located just north of Jackson, Miss. In addition to Cummins, Nissan has formed a partnership with ZF Friedrichshafen to deliver transmissions for the three new light truck models.

Nissan Cuts Work Week at Plants in Tennessee and Mississippi

On April 7, Nissan cut shifts at its two plants in the U.S. from five eight-hour days to four nine-hour days. The cuts at Nissan's plants in Smyrna, Tenn., and Canton, Miss., are a temporary measure to adjust inventory levels the company announced.

No Production Cuts Expected by Hyundai in Alabama this Year

In 2007, because of slow sales, Korean automaker Hyundai cut production of its Sonata model at its plant in Montgomery, Ala. Hyundai also produces the Sante Fe SUV in Montgomery. Hyundai Vice Chairman Kim Dong-jin said in April that he does not expect the automaker to cut back production at its plant in Alabama. At the end of last year, Hyundai closed the auto works for 10 days to adjust inventory.

Redesigned Honda Pilot Rolls off Line

In the spring quarter, Honda rolled off "Job One" of its newly designed Pilot SUV amid the cheers of workers and guests, all competing with the Guns  N' Roses song "Sweet Child O' Mine" blaring from speakers in the plant. The 2009 model is larger than its predecessor, which was first built at Honda's Lincoln, Ala. plant in 2002. Honda has spent years redesigning the Pilot. But in a unique twist, the Japanese automaker let the company's Alabama plant workers have a say in how the new Pilot was manufactured and designed. The other vehicle assembled at Honda's Alabama plant, the Odyssey minivan, was redesigned in 2004.

Honda Sets 2009 Date for New Line of Pickup Trucks

The Ridgeline pickup truck will be produced at Honda's Lincoln, Ala. plant in early 2009, officials with the Japanese automaker reported in the spring quarter. Honda officials did not say in the spring whether the Pilot SUV or the Odyssey minivan would see a drop in production to make room for the new Honda pickup truck, the Japanese automaker's first ever pickup model. Honda officials did say, however, that significant new hiring at the 4,500-employee plant in Lincoln, Ala., is not expected.

Honda to Export Alabama-Made Pilots to Russia

Honda Motor Co. announced in the spring it will export its Pilot SUV model to Russia for sale. The vehicles, assembled at the company's Lincoln, Ala. plant, are expected to be shipped to Russia late this year. Honda celebrated the rollout of the first 2009 Pilot model in April.

Honda’s History in Lincoln, Ala.

May 1999 - Honda announces its plant in Lincoln, Ala., the first for the Japanese automaker in the Southern Auto Corridor.

2000-2001 - Expansions at the plant result in an investment of $180 million. The investment allows the plant to produce 30,000 more vehicles annually.

November 2001 - "Job One" of the Odyssey minivan rolls off the line.

July 2002 - Honda invests $450 million to add the Pilot SUV line in Lincoln.

November 2004 - Honda spends $70 million to produce parts for its vehicles on site, particularly crankshafts.

March 2008 - Honda announces it is building its first pickup truck model at the Lincoln autoworks. 

2008 Study Names Top Pro Business States

The Pollina Corporate Top 10 Pro-Business States study examines 29 factors relative to states' efforts to be pro-business. The annual study is limited to factors over which state governments have control (whatever that means) over economic matters. We have not always agreed with the annual Pollina state ranking indicating "pro-business" states, but here is their list for 2008. Note that seven of the top 10 states are located in the South.

2008 Top 10 Pro Business State Rankings

1. North Carolina
2. Florida
3. Virginia
4. South Carolina
5. Wyoming
6. South Dakota
7. Georgia
8. Alabama
9. Utah
10. Kansas

The Ups and Downs of Large Truck Manufacturing

Over the years we have written about added employment and layoffs so many times with Freightliner's heavy duty truck plants in North Carolina that it is getting very predictable. Fuel prices rise, the economy struggles, therefore heavy duty truck sales drop and you can bet Freightliner is working on a layoff. The economy improves, gas prices drop, sales increase and you can bet Freightliner adds jobs. Of course, the former has occurred. In response, the German-based heavy truck manufacturer announced it is ditching 1,500 workers at its Cleveland, N.C. plant. In 2006 that was not the case as sales of heavy duty trucks set new records. Expect the jobs to come back in North Carolina as sales of heavy duty trucks are expected to surge in 2009 and 2010.

Mercedes Supplier Sets Up Shop in Alabama

Stankiewicz International, a Spartanburg, S.C. parts supplier, announced in April it is locating in Tuscaloosa County. The company produces acoustical components, flooring systems and wheel wells. The deal is expected to create 180 jobs.

Harman Becker Adding 150 Jobs in Kentucky

Harman Becker, a producer of audio equipment for the automotive industry, is expanding its plant in Franklin, Ky. The deal includes an investment of $8.6 million and adds 150 jobs to the company's employment base, which is currently at 425 in Franklin. Harman Becker is expanding its production of audio systems that are used in Toyota's Lexus brand. The company also manufactures JBL brand audio systems for Toyota and Harman/Kardon systems for Mercedes-Benz.

Kia Training Center Opens in Georgia

In the spring quarter, Kia Motors celebrated the opening of its $15 million, 70,000-square-foot training center in West Point, Ga. The center will provide pre-employment assessment training and job training for Kia employees. South Korea-based Kia will open its $1.2 billion assembly plant in west Georgia next year.

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