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 Southern Auto Corridor News

November 2, 2009

Editorial

Is Volkswagen Tightening its Labor Noose?

It's Official: Adjacent VW Supplier Park Earns Approval

Communities in and around Volkswagen's assembly plant under construction near Chattanooga have anxiously awaited news on parts supplier announcements. In fact, over the last six or eight months SB&D has received dozens of phone calls and emails asking if we had information about where prospective VW suppliers will likely locate. Those calls eventually evolved into a different refrain: "Where are the suppliers" to the VW plant? That's because, to date, there have only been a few suppliers chosen by VW and with a window now of just over a year before production begins, there isn't much time left if suppliers must build new facilities to serve the plant.

County governments in Tennessee and neighboring Alabama and Georgia have invested much time and money to land parts suppliers to the VW plant. And when it is all said and done, some will. But on October 28, after months of negotiation, Volkswagen officials announced that a large supplier park that could accommodate 15 or more parts suppliers will be developed next to the German automaker's assembly facility. The news is great for Chattanooga, but not so great for other markets within 100 miles of the VW factory.

A supplier park located next to a vehicle assembly plant has its advantages and disadvantages. The advantages are clear: a location next to an assembly facility redefines the phrase "just in time” or the delivery of parts at the very hour or even minute of assembly as opposed to storing and shipping. The close proximity of the supply chain obviously reduces costs, both in shipping and in timeliness of delivery.

But there are also disadvantages to supplier parks and most of those are centered on labor issues. With a supplier park, you usually concentrate fifty-percent or more of the supply chain next to the assembly plant's total labor force. That means more labor must come from a smaller geographic area, which translates into fewer skill sets to choose from and a smaller labor shed. 

But then again, since we began covering the automotive industry closely in 1992, there has never been an assembly plant built in the Southern Automotive Corridor when the unemployment rate was in double digits. Even more, applicants for the 1,200 jobs VW is currently advertising will most likely come from a much larger area than ever before because of the 22-month recession. That written, labor issues, or finding enough quality candidates in and around Chattanooga may not be an issue at all. But when you concentrate so much labor "in the gate," or in one spot, sometimes labor can be an issue.

While Toyota officials will not admit it publicly, labor issues have cropped up from time to time at its San Antonio pickup truck plant, which opened in 2006. Toyota's Texas facility was the last assembly plant in the Southern Automotive Corridor that built a supplier park onsite, or "in the gate." Many of those labor issues have been solved and Toyota is about to ramp up hiring at that facility as it brings in another model and more production in from California.

Today, there are as many workers (2,100 at 11 parts supplier facilities, located on 200 acres adjacent to the plant) at the supplier park in San Antonio as there are at Toyota's assembly facility. In fact, we estimate that Toyota's supplier park in San Antonio is the largest in North America. We know it is the largest in the Southern Automotive Corridor.

So, with VW's announcement that as many as 15 or more suppliers may locate next to its plant in Chattanooga, the German automaker will be rewriting the history books when it comes to the number of automotive workers placed "in the gate." While the poor economy may give VW and its suppliers "pick of the labor litter" for now, the automaker’s supplier park decision could create labor availability issues in the future if unemployment rates seen earlier this decade return.

For more information on the South’s automotive industry, go to www.SouthernAutoCorridor.com.

Mike Randle
mike@sb-d.com

New Kia Plant Rolling out Vehicles

In March of 2006 Korean automaker Kia announced its first U.S. assembly plant would be built in West Point, Ga. Even though the 2011 Sorento model has been rolling off the automaker's line in West Point for weeks now, the official "Job 1" isn't expected debut for another 10 days or so.

KEMET to Expand in South Carolina

KEMET Corp. announced in October it is expanding its facility in Greenville Co., S.C. to support manufacturing of capacitors for electric drive vehicles and alternative energy markets. The company is adding 113 new jobs at its Simpsonville facility in order to produce enough capacitors to make 100,000 electric drive vehicles.

Hummer Sale Official, Vehicle Assembly to Remain in Louisiana

A definitive purchase agreement has been reached for the sale of Hummer from GM to China-based Sichuan Tengzhong Heavy Industrial Machinery Co. The acquisition is expected to ensure that Hummer vehicles will continue to be manufactured at the former GM facility in Shreveport, La., through at least June 2011.

GreenTech Automotive Announces Plans for Plant in Mississippi

In October, GreenTech Automotive Inc., a Mississippi company, announced plans to develop and manufacture automobiles on 1,500 acres in Tunica County Miss.’s Metro-Mega-site, with an option to purchase more land as needed. The initial phase of the project is estimated to cost $1 billion and provide 1,500 jobs. The plant is expected to assemble 150,000 vehicles annually. GreenTech's proprietary, mass producible technology will ensure that its vehicles will already meet the lower emissions and fuel consumption standards that the Obama administration has set for 2016. In addition to strategic investments, the investments made through Gulf Coast Automotive Fund (GCAF) in the project are an integrated part of GreenTech's overall funding strategy. GCAF is an USCIS-approved regional center and professional investment firm. GCAF has committed to working with GreenTech Automotive through the EB-5 immigration investment program and supporting the hybrid car project in Tunica.

Cooper Tire Expands in Texarkana

Ohio-based Cooper Tire & Rubber announced in the fall quarter it will add 200 jobs at its Texarkana, Ark. operation and start running the plant around the clock, seven days a week. In September, Cooper announced a $6 million expansion of its Tupelo, Miss. plant.

Goodyear to Close South Carolina Plant

Goodyear officials announced in the fall quarter they plan to close the Spartanburg, S.C. plant by the end of the year. The plant houses about 90 workers and makes retread materials for commercial truck tires.

Volkswagen Accepting Applications at Tennessee Plant

In October, VW began accepting applications for production team members at its Tennessee assembly plant. Beginning in November and continuing through 2010, Volkswagen will select candidates to move to the assessment process, including practical hands-on testing. VW plans to hire about 1,200 production team members and the initial hiring will begin in the first quarter of 2010. Starting wages will be $14.50 per hour, gradually increasing to $19.50 per hour after 36 months. Team members will also be eligible for a comprehensive benefits package, including medical and dental plans, life insurance and retirement savings. The plant is expected to begin full production in 2011.

Great Dane Trailers Temporarily Shutting Down Arkansas Factory

Layoffs began October 15 at Great Dane Trailers' Jonesboro, Ark. plant, one of seven the company operates. The company cited a "significant, continued downturn in trailer orders" as the reason to temporarily close the facility. Last year about 150 workers were housed at the plant.

Two Sites in the South Still in Running for Harley Plant

Harley-Davidson has eliminated one site in the running for a new plant to replace the one it operates in York, Pa. In the early fall quarter, the motorcycle manufacturer decided against Kansas City. That leaves Murfreesboro, Tenn., Shelbyville, Ky. and Shelbyville, Ind. as the sites left on Harley's short list.

GM Adds Third Shift at Kansas City, Kan. Plant

In the fall quarter, General Motors added a third shift at its Fairfax Assembly Plant in Kansas City, Kan. The new shift is scheduled to start January 20 as part of an effort to boost production of the Buick LaCrosse and Chevrolet Malibu, both of which are manufactured at the Fairfax factory. The new shift will put 900 employees back to work at the facility.

Florida Developer Converting Old GM Site near Atlanta

Florida-based New Broad Street Company and DeKalb Co., Ga. will jointly acquire and develop the old General Motors plant site in Doraville into an urban center that will include residential, retail and office space. Redevelopment of the 165-acre property, one of the largest tracts left in the Atlanta urban market, has been debated by government officials since GM announced it would close the factory in 2007.

Hino Supplier Opening Facility in W.Va.

Fontaine Modifications announced plans in October to open a truck modification center dedicated to supporting Hino Motor's truck assembly plant in Williamstown, W.Va. The company will move Hino support work currently performed in Ohio to the new facility in West Virginia. Based in North Carolina, Fontaine modifies medium and heavy-duty commercial trucks.

Tire Company Building 1.1-Million-Square-Foot Distribution Center in S.C.

TBC Corp., one of the largest marketers of automotive replacement tires announced in October that it had chosen a site in Berkeley County, S.C. for a 1.1-million-square-foot distribution center. The company will build the center at the 400-acre Rockefeller Group Foreign Trade Zone/Charleston. Once built, the center will become the S.C. State Port Authority's fourth-largest business customer with tires being imported and exported both internationally and domestically.

Parts Supplier Grows in South Alabama

Alto Products, an Atmore, Ala.-based manufacturer of automotive clutch plates and automatic transmission parts, announced in October it is undergoing a $3 million expansion that will create at least 10 new jobs. The company will also add 40,000 square feet to its Atmore facility.

Tennessee Approves Land Purchase for Megasite

The Tennessee State Building Commission has approved $40 million in state funds to purchase more than 3,800 acres of land for the West Tennessee megasite. The TVA certified site will now undergo an engineering assessment to determine further infrastructure improvements. The megasite is located in Haywood County, Tenn. between Jackson and Memphis.

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