Rural Virginia Vies for Automotive Manufacturers

Major initiatives and incentives help rural Virginia compete for global auto manufacturing plants.

By Jennifer LeClaire

As global auto manufacturers begin to settle in the South, the state of Virginia-and its most rural communities-are revving up their competitive engines with 21st century initiatives designed to attract large-scale automotive projects.

Of course, Virginia is no stranger to the automotive industry. The Ford Motor Company began construction of the Norfolk Ford Assembly Plant in 1925. The facility has since cranked out more than 7 million vehicles and in 2001 the automotive giant increased its production capabilities with a $375 million plant expansion to manufacture its popular F150 truck.

The state has announced $2.1 billion worth of automotive investments that have led to 117 automotive plant expansions and new facilities to create more than 10,000 jobs in the last 12 years. Overall, the automotive industry in Virginia employs more than 25,000, with nearly half of those workers added in the past decade.

More recently, Governor Mark Warner in July announced four new automotive expansions - Teleflex Automotive, Standard Motor, Siemens VDO Automotive, and Schrader Bridgeport International Inc. - that total more than 400 new jobs and $58 million in capital investment across the state.

Today there are more than 30 automotive manufacturers and suppliers with operations in Virginia. State economic development officials, however, are still hungry for more. In particular, Gov. Warner is targeting the rural Southside as an automotive manufacturing hub with a unique strategy that leverages tobacco settlement funds to build the necessary utility infrastructure for industry.

"As we retool for the 21st century jobs, we are launching broadband initiatives to get our rural communities connected," explained David Hudgins, director of economic development at Old Dominion Electric Cooperative (ODEC), a wholesale electric supplier serving nearly a half million customers in some of the Mid-Atlantic's fastest-growing areas. "This initiative prepares us for 21st century companies that are very service-oriented as our manufacturing sector is in decline."

Broadband Initiatives

With tobacco fields under attack by health lobbies, coalmines in jeopardy from environmentalists and manufacturing job losses in apparel, textiles and furniture, Virginia's strategy to attract automotive manufacturers is a must.

Indeed, the E-58 Initiative, one of several broadband campaigns across the state, was birthed out of necessity. The state is building a high capacity, high-speed data-voice-video system along U.S. 58. The goal is to link rural areas along the highway with high-tech telecom services in urban areas and to revitalize poor regions that suffer high unemployment rates by gaining new high-paying jobs.

The Tobacco Indemnification and Community Revitalization Commission is largely funding the project. The commission was created in 1999 by the state's General Assembly to distribute the Commonwealth's $4.1 billion share of the national tobacco settlement, some of which the governor has earmarked for stimulating the local economies in southern Virginia.

"High speed, low cost broadband is a necessity in today's economy and, for rural business in Virginia, is as important as rural electrification was in the '30s and '40s," Virginia's Secretary of Commerce and Trade Michael Schewel told the Southside Economic Development Summit in a recent speech. "Better infrastructure will increase the productivity of private businesses located in Southside. It will also affect the location decisions of companies considering Southside as a place to do business."

Moreover, the Mid-Atlantic Broadband Cooperative, a strategic partnership with AT&T, the Virginia Tobacco Commission and the Economic Development Administration, is also working to build an advanced, open-access fiber optic network to provide rural communities access to competitive broadband telecommunication providers. With its various broadband initiatives, Virginia will offer manufacturers a reliable telecom network from one end of the state to the other.

"Automotive manufacturing is one of the few active industries that has a proven record of locating in rural America," said Hudgins. "How can you attract automotive manufacturers if you don't have the communications capability of moving engineering files and design files effortlessly in a timely manner? Rural Virginia communities couldn't offer this service before, but we can now."

Incentives for Auto Manufacturers

The E-58 initiative should bear fruit within the next 12 months, according to economic development consultant Glynn Loope. In the meantime, ODEC's Hudgins is working to assemble incentive packages, provide technical assistance and marketing support, and facilitate interagency cooperation at the state level so that electric co-op-served areas can compete for the type of automotive projects that have been so successful in other portions of the South.

Existing incentives in Virginia include six general purpose Foreign Trade Zones and subzones designed to encourage global auto manufacturers to participate in international trade by effectively eliminating or reducing customs duties. Numerous subzones are designed to enhance the trade capabilities of specific companies. The state also features a streamlined environmental permitting process using federal minimum standards.

Virginia offers some of the broadest sales and use tax exemptions in the country with a stable, competitive corporate tax rate of 6 percent that has not increased in 30 years. Furthermore, Virginia does not tax intangible property, manufacturers' inventory, manufacturers' furniture, fixtures, or corporate aircraft.

Reliable energy sources at competitive rates are also attractive to automotive manufacturers. The average industrial electric rate is less than 4 cents per kilowatt-hour. The state is also home to the Virginia International Raceway, the Langley Full Scale Wind Tunnel and the Smart Road project at Virginia Tech.

Loope said Southside is one of the most prime locations because it is in the heart of rural Virginia, yet is still within 60 miles of Richmond and Norfolk labor markets. "Virginia's transportation system links the state to the northeastern and "Rust Belt" States where the auto industry has traditionally flourished," Loope noted. "Companies in those states can now look to Virginia to maintain their easy access to the heart of the automotive industry, while avoiding the premium costs of doing business in the Northeast."

An Auto-Ready Labor Force

Virginia is known for its hardworking labor force, which is considered one of the state's greatest business assets. More than 375,000 Virginians are currently enrolled in more than 100 institutions of higher education and nearly 20,000 doctoral scientists and engineers reside there. The Virginia Community College System, through its 23 colleges, provides occupational and technical training programs, many of which have been designed specifically to meet the needs of the automotive industry.

"The labor force in rural Virginia is very acclimated to the manufacturing environment," said Loope. "Just because you are a coal miner doesn't mean that mining coals is all you know how to do. Mining coals requires skills that are applicable across multiple disciplines. The Virginia labor force has proven itself to be very adaptable to change."

Virginia features "at will" and "right-to-work" employment practices and offers nationally recognized state-funded customized technical training and recruitment programs to meet labor needs and timelines of the automotive industry. The average worker's compensation insurance premium is the fifth lowest in the nation and the average unemployment insurance cost is the lowest in the nation.

With high unemployment, rural communities in the state have a readily available and trained work force. According to a recent report by Chmura Economics and Analytics of Richmond, southern Virginia is still trying to recover from the loss of more than half its 13,000 coal mining jobs over the past decade. The region also has lost more than 10,000 manufacturing jobs over the past 10 years, mainly due to the demise of sewing factories and mining manufacturing plants.

"It's an interesting commentary that as manufacturing has declined in so many Southern communities, projects in the automotive sector continue to flourish," said Hudgins. "The scale spans from the major projects that cover a bumper to bumper assembly, and those projects that focus on production of critical components. Rural Virginia is ready to offer the right sites with the right amenities and the right incentive packages to serve automotive manufacturers."