The Southern Automotive Corridor Shifts Into High Gear
The South offers an abundant work force and open land for auto manufacturers and suppliers.
By Trisha Ostrowski
A map of the world turned upside down puts everything in a very different perspective.
International auto manufacturers and their suppliers in search of a North American location may very well be looking at that upside down map. These companies are not constrained by the idea that automobiles should be manufactured in the Great Lakes region. Instead, they are seeking the place with the highest number of available, skilled employees and a well-designed infrastructure.
In the last two decades North American newcomers, largely international companies, have discovered the benefits of a southern location.
Why the South? As the Mid-South Bureau Chief for Automotive News Magazine Lindsay Chappell explained, "Only people in Detroit ask that question. International automakers look at a big map of North America and see the congestion, shortage of workers and multi-generational brand loyalty that are prevalent in the northern United States. The "big three" (Ford, Chrysler and General Motors) are loyal to the Great Lakes area, but increasingly other auto companies are looking at the South as a land of opportunity. In contrast to the North, they are finding wide open spaces, abundant skilled labor and positive relationships with government to get things done."
This southern automotive phenomenon began in the early 1980s. Prior to that time, Ford was manufacturing in Atlanta, Norfolk, Louisville and St. Louis and GM operated plants in Shreveport, La., Arlington, Tex., Oklahoma City, Baltimore, Missouri and Kansas. But those plants were definitely an exception to the Great Lakes-rule.
At the time, the import market was growing so fast that it became necessary for major international auto manufacturers to establish North American operations. In quick secession, Nissan, Toyota, Saturn, BMW, Mercedes, Honda, Hyundai and numerous suppliers chose locations in the South. The result is a second U.S. automotive industry based in the Southern Auto Corridor.
"The 'big three' believe that the Great Lakes region is the center of the map. As other automakers have entered the U.S. market, they simply don't see things that way. In the South, they see access to suppliers, warm weather to speed production, and a freedom from constraints and attitudes they will still find in the North. In other words, they can come to the southern states and do business in a way that makes sense without having unions dictate how they hire workers and local government dictate how they get permits," said Chappell.
One of the most recent, and definitely one of the most impressive announcements for the Southern Automotive Corridor has been Nissan's choice of Mississippi for a $930 million vehicle manufacturing plant. The plant opened in May of 2003 with the announcement that it will essentially double in size. It is located 15 miles north of Jackson. When fully operational in 2004, the massive facility will employ up to 5,000 people and produce five different Nissan models, from sedans to minivans to SUVs.
"The factors that led Nissan to select Mississippi include an available, high quality work force, an excellent site with appropriate infrastructure, a supportive business climate, and excellent cooperation from state and local officials. Overall, the state offered a comfortable package for our company to begin a new business venture," said Tom Groom, Nissan's director of human resources.
As Director of Communications for the Mississippi Development Authority Sherry Vance explained, "We were able to show Nissan that we were serious about their needs and willing to cut through red tape to keep the project on the fast track. Also, Mississippi demonstrated an overall spirit of cooperation and partnership, along with a commitment to say 'we want you here.'"
With the selection of Mississippi, Nissan chose to keep all of its U.S. manufacturing operations in the Southern Auto Corridor, a decision that began 25 years ago when the company selected Tennessee for its North American headquarters.
"Many of the same factors that made Tennessee so appealing and that continue to make it a great place for our operations were also present in Mississippi. We have had tremendous success in Tennessee and now we are duplicating that success in Mississippi," Groom said.
Nissan's confidence in Tennessee is still so strong that the company announced in 2001 a $500 million expansion of its engine operations in Decherd, Tenn. to maximize its vehicle production capacity utilization. General Motor's Saturn Corporation, also Tennessee-based, invested an additional $1 billion in the state in 2001, improving its current plant and adding a $500 million engine facility.
Not to be outdone by its southern neighbors, states such as Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Oklahoma, South Carolina, Texas, Virginia and West Virginia have also become extremely attractive to auto manufacturers and suppliers. Alabama, for example is home to three massive assembly plants -- Honda, Mercedes and Hyundai as well as a Toyota engine plant. All of that action has been secured just in the last 10 years.
In 1993, Mercedes-Benz determined that Alabama offered the best location for its first passenger vehicle plant outside of Germany. And in October of 2002, the company offered the strongest evidence of its satisfaction with the Southern Auto Corridor when it announced a $600 million expansion that will double both production capacity and employment at the Tuscaloosa facility.
"The Alabama plant has established itself as a world-class production facility for Mercedes-Benz," said Helmut Petri, head of worldwide production for Mercedes-Benz.
Another European automaker known for the highest quality, BMW, chose South Carolina for its North American operations in 1992. Before choosing Spartanburg County, BMW, like any good German car company, approached the site selection process with the rigor you would expect. After a three and a half year process, during which they investigated 250 locations worldwide, the company made the strategic decision to build "Ultimate Driving Machines" for the global market in South Carolina. Today, the company has found a home in the Southern Auto Corridor, investing more than $1.8 billion and employing more than 4,000 people.
Considering how important the "Made in Germany" image is to BMW, the No. 1 issue the company faced was: Could they find a skilled labor force to provide the premium quality on which the company had build its impeccable reputation?
As Vice President for Community and Corporate Relations, Carl Flesher explained, "The secret to our success in South Carolina is the people. My chairman would tell you that he came here incognito for about six months and drove through neighborhoods, he went into restaurants and went to the movies and he said, 'I spent time looking into people's faces trying to find out: could we build BMW products here?' And he came to the conclusion that with the obvious sense of pride and the friendliness, we could. Our success has proven that."
In addition to the quality work force, BMW also attributes its success to a state government that listens and is willing to provide the infrastructure that business needs to be profitable and successful. In fact, with the ready-to-work attitude the company found in South Carolina, BMW set a new world record for the fastest start-up in automotive history-just 23 months.
"The freedom and lack of constraints that originally brought these companies to the South is still here and exists to an even greater extent than it did 20 years ago," Chappell said. "For example, in the mid 80s, South Carolina, Alabama and Mississippi were not even on the map in terms of attracting major auto companies, but today they have learned the value of partnering with a plant to ensure success. Increasingly, automotive companies are recognizing this benefit and taking a closer look at these states. BMW, for instance, went to South Carolina because the state said, 'we're committed to doing everything we can to make your operation viable'-in other words, service after the sale.
"Alabama has also extended itself in many ways to help automotive companies succeed. The proof is that the state is attracting competitors," Chappell said. "Alabama-and states across the South-- are even attracting companies competing for employees (such as Mercedes-Benz, Honda and Toyota) because the business climate is so favorable. The future for the Southern Auto Corridor should bring continued growth."
The most recent auto plant to call the South home is Toyota's Tundra pickup truck plant in south San Antonio that broke ground in October of 2003. The announcement, made in the winter of 2003, widened the modern Southern Auto Corridor by about 1,000 miles. Today, foreign automakers, the most active manufacturers in the region, are located as far west as San Antonio and as far east as South Carolina. The most northern Southern assembly plant is Toyota in Kentucky and the most southern plant in the South is the Hyundai facility currently being built in Montgomery, Ala.
Suppliers Flock to the South
As more international auto manufacturers choose the South for new facilities, the area is also becoming a land of prosperity for parts manufacturers and suppliers. Thousands of suppliers now employ tens of thousands of people across the South. Gravitating to where customers are, these companies are recognizing the key benefits of freedom from constraints and availability of land. Automotive suppliers are now scattered throughout the South with a presence in virtually every state, even Florida.
In addition to state efforts within the Southern Auto Corridor, individual communities are also stepping-up efforts to attract auto-related industries, in particular suppliers. In Alabama for example, a dozen counties have formed the Automotive Corridor Alliance, designed to unify efforts. The northernmost county in the Alliance, Cullman County, has already been successful at attracting 11 companies that make parts for the automotive industry.
Why are companies choosing the Southern Automotive Corridor?
-Available, skilled work force to accommodate needs both now and for the future
-State-funded or state-supplemented worker training initiatives
- Well-designed infrastructure to get product to market
- Lack of constraints
- State governments committed to helping automotive companies succeed
- Predominance of right to work
- Favorable incentives to offset costs and reward growth