Spring 2006

(From www.SouthernAutoCorridor.com)

QUIZ

How many automotive assembly plants do the "Big Japanese 3" (Toyota, Honda and Nissan) operate in North America and how many of those are located in the South?

(a) 21 and 5 (b) 17 and 7 (c) 27 and 18 (d) 12 and 9

(Scroll down for answer)

Editorial

All of a Sudden, the Midwest Becomes a Much Stronger Competitor to the Southern Auto Corridor

You'd think with the downsizing of Ford and GM, the Southern Automotive Corridor -- the region of choice in the U.S. for foreign automakers for 25 years now -- would be driving another nail into the Rust Belt automotive industry coffin. Well, that's not happening. When foreign automakers first came to the U.S. in the late 1970s and early '80s, the Midwest landed as many foreign automotive facilities as did the South. But when the Japanese and German-based automakers began their campaigns in the U.S. in the late '80s, all of the 1990s and the first six years of this decade, foreign-based automotive manufacturers opened plants in the South at a rate that more than tripled that found in the region where Ford and GM rule.

But instead of collapsing, all of a sudden the automotive industry in the Midwest is becoming a much stronger competitor to the South and the reason may be as simple as GM and Ford's recent downsizing. Say what? We don't think it's a coincidence that Toyota and Honda are looking at the Midwest to add U.S. capacity while Ford and GM cut production in the Great Lakes region. After all, some of the best automotive labor in the world is located in the Midwest and it remains the world's center for automotive research and design. For those who don't know, Toyota is considering building a major engine plant in Michigan and has taken over an underutilized Subaru assembly facility in Indiana. And in mid-May, Honda officials confirmed they will build a new assembly plant in the Midwest that will eventually produce vehicles at about the same rate as does its plant in Alabama. Honda opened a plant in Ohio in 1979 and there is a large network of suppliers serving that plant in the Midwest.

But the interesting twist to foreign automakers' new-found interest in the Midwest centers on operating costs. There's no question that lower operating costs have driven the foreign brands and their suppliers to choose the Southern Auto Corridor for so many facilities over the last couple of decades. While they won't admit it, foreign automakers enjoy a significant labor cost advantage by operating in the South as opposed to the Midwest. Of course, those same automakers save more on labor in Mexico than they do in the South. But there are other issues to automotive manufacturing, such as access to consumers, transportation, risk management and the labor availability and talent.

And then there's the labor union question. There isn't a single foreign-owned automotive plant that is organized by a labor union in the United States. Of course, GM and Ford, as well as DaimlerChrysler, all operate as union-organized companies and we all know that the Big 3 have legacy costs in this country that exceed that of foreign automakers by a huge margin. But don't blame the unions. Domestic automakers approved all of those labor costs.

That brings us to this question: Is the new interest shown by Japanese automakers in the Midwest an attempt to tap into talented union labor that has recently become available in the region? If that's the case, the automotive manufacturing industry in the U.S. as a whole is changing dramatically.

So let's get this straight; Toyota and Honda are looking to build OEM facilities in the Midwest and Ford officials were quoted in the spring quarter as saying they are also looking to build a new plant. Representatives with Ford are calling the prospective new plant a "lower-cost" U.S. facility. Where else could that be other than the Southern Auto Corridor?

Mike Randle

mike@SB-D.com

Will Nissan Let Toyota in Tennessee?

Nissan's CEO Carlos Ghosn was named one of the "Ten People Who Made a Difference" in economic development in the South in our last issue. The annual honors of that top 10 are not taken lightly by our staff when it comes to chosin' time. Ghosn was the guy who made the final decision last year to relocate the Japanese automaker's North American headquarters from Southern California to a site south of Nashville. Soon, Nissan will have its headquarters in the same state where it operates its largest U.S. assembly plant and its largest U.S. engine plant. It also has something like 400 suppliers in Tennessee that it does business with.

Ghosn remains the South's most powerful automotive executive, even though Nissan is not the South's most powerful automaker. Yet, in regards to a new Toyota assembly plant that is rumored to be announced later this year, it should be noted that Nissan is by far the most powerful automaker in Tennessee. Will Nissan and Carlos Ghosn pressure Tennessee officials to block Toyota from opening a new factory in the Volunteer State? Well, it was Nissan that appealed (more like demanded) to Mississippi officials to block Kia when the Korean automaker expressed interest in building a plant near the Japanese automaker's large facility in Canton, Miss. Kia took its plant to Georgia.

Nissan was Bound and Determined to have Quality Problems in Mississippi

Never admitting that it "bit off more than it could chew" by adding five different vehicle lines in three years at its plant in Canton, Miss., Nissan is now paying the price for such aggression. No other plant in the Southern Auto Corridor, except for its Smyrna, Tenn. facility, operates five different vehicle lines. Nissan's Tennessee facility is 23 years old and consistently ranks as one of the nation's most efficient.

Nissan, coming off 17 new models rolled out between 2001 and 2005, successfully created an incredible resurgence from near demise in the late 1990s to industry darling in the early 2000s. In fact, Nissan earned a 53 percent sales increase during 2001-2005, topping all automakers selling to U.S. consumers during that time.

Regardless of the incredible comeback for the Japanse automaker, its newest assembly plant in Canton, Miss., was producing some duds. The company has responded somewhat rapidly to fix quality control at the plant. New computer systems have been installed in the last month as well as defect-detecting laser systems. An army of Japanese engineers are now calling the plant home to find quick solutions to assembly line problems.

Over the last couple of years, more than one reporter has asked us about quality control problems at the Nissan plant in Mississippi. Most of those reporters' questions centered on labor quality in Mississippi. Few cited the fact that no assembly plant in the South has grown faster than Nissan's facility in Canton. In other words, when you go where no automaker has gone -- install five different vehicle lines at one plant in three years -- you're going to have problems no matter where the plant is located.

Nissan officials have told us that quality control at the Canton, Miss., plant, which produces the Titan, Quest, Armada, Maxima and Infiniti QX-56 models, has improved dramatically in recent months and they are waiting anxiously for the next round of Consumer Reports and other such media that tests cars and trucks. In other words, they are confident the engineers and new technology installed at the plant have solved any quality control problems. In this case, the quality control challenges in Canton had everything to do with Nissan's ambition to ramp up its Mississippi plant to a level that was unrealistic in a three-year time frame.

Rust Belt Auto Execs Eye New Nissan Jobs in Nashville

The first major automaker to move its North American headquarters to the Southern Auto Corridor is gaining attention from white-collar executives in the still automotive rich Rust Belt area that have either lost their positions or are expected to. Nissan has received over 17,000 resumes for the 700 or 800 positions it expects to create when it begins to relocate its headquarters from Southern California to Nashville this summer. Nissan expects about 600 workers to relocate with the company to mid-Tennessee. A report in Automotive News showed that many of those resumes are coming from executives who worked or currently work for GM, Ford and DaimlerChrysler in the Detroit area.

Alabama is the South's Biggest Loser in Delphi Closures

Luck, skill and some timely investments have helped Alabama lead the Southern Auto Corridor in growth over the last decade. Most of that growth has come from foreign automakers and their suppliers -- both foreign and domestic -- that have set up shop in the state. Yet, Alabama was anything but lucky in the spring quarter when Michigan-based Delphi Corp. announced it will sell or close three plants in the state. The plant closures in Gadsden, Tuscaloosa and Athens, Ala., will mean about 2,600 automotive workers will lose their jobs, or about six percent of the state's automotive industry employment. While Ohio is expected to lose six Delphi facilities and Michigan four, Alabama's loss of three plants is a significant blow to what has been the South's most active automotive state.

Editorial

Where, When will Toyota add Another Plant in the Southern Automotive Corridor?

In the spring quarter, a reporter with the New York Times published a story that noted Toyota is site searching for another U.S. plant. The Times reported that Virginia, North Carolina, Tennessee and Arkansas are the states on Toyota's short list.

News that Toyota is site searching is not news. The Japanese automaker has announced three assembly plants in North America in the last three-and-a-half years (Texas, Indiana, Ontario). A prediction that they are looking for another is a pretty safe bet. In fact, don't be surprised if Toyota announces another three plants in the next three years on this continent.

The early line on Toyota's next two facilities we give to Texas and Arkansas. It was another New York-based newspaper that reported last year that Toyota-owned truck maker Hino would build a new assembly plant in Marion, Ark. That was the Wall Street Journal. Hino has not confirmed the new plant as of yet. Yet, if Hino announces that truck plant in Marion later this year it wouldn't be a shock to us if parent Toyota runs one if its small SUV lines at the Hino facility. And this year or next, don't be surprised if Toyota adds another assembly plant in Texas.

Mike Randle

mike@SB-D.com

ALABAMA

Mercedes Delivers G-Class

The third Mercedes-Benz model produced at its Alabama assembly plant in Vance was delivered in the spring to dealers in the U.S. The German automaker's new high-end GL-Class SUV went into commercial production in April. The company also produces the R-Class Grand Sports Tourer model, which was introduced last year and the redesigned M-Class, which has been assembled in Alabama since 1997.

Performance Fibers Expanding Alabama Plants

Performance Fibers, a supplier of industrial polymers, announced in May it is expanding its tire cord fabric facilities in Scottsboro and Winfield, Ala. The expansion will increase production at the two facilities by 40 percent.

Tier-Two Korean Supplier Moves to Tallassee, Ala.

Korean parts supplier Uni-Tech of Alabama LLC is relocating its small operation from Selma, Ala. to rural Tallasee, Ala. The tier-two supplier of automated technology products for tier-one suppliers of Hyundai's one-year-old plant in Montgomery expects to employ about 20 workers. Officials at Uni-Tech stated they needed to relocate closer to customers in east Alabama and to a location that can serve the new Kia plant slated to be built in West Point, Ga. The announcement represents the first supplier deal created by the prospects of the newly announced Kia plant in Georgia.

KENTUCKY

Japanese Supplier Picks Rural Kentucky Location

Japan-based Nippon Piston Ring announced in May it is investing $49 million in a new plant in Bardstown, Ky. The company will produce about 4-million steel piston rings at a 200,000-square-foot facility that will house about 150 workers. The announcement represents Nippon's third U.S. manufacturing operation.

Japanese Supplier Moving HQ from Michigan to Kentucky

Akebono Corp., a supplier of friction materials and brake products, announced in March it is relocating its headquarters from Farmington Hills, Mich. to Elizabethtown, Ky. The Japanese-owned company opened its first U.S. plant in Kentucky in 1987 and employs about 1,200 workers in the Hardin County/Elizabethtown area.

Toyota Training Facility Opens at Kentucky Plant

Toyota's $12 million, 98,000-square-foot North American Production Support Center opened in the spring. The new center will train managers and employees that work at the Japanese automaker's assembly plants in the U.S., Mexico and Canada. The center is located at Toyota's Georgetown, Ky., auto assembly plant.

LOUISIANA

Louisiana Purchases Prospective Automotive Supersite

A 1,400-acre megasite in Richland Parish in northeast Louisiana is being purchased by the state of Louisiana in an effort to land an auto assembly plant. The site is located on Interstate 20 about midway between Nissan's plant in Jackson, Miss. and GM's assembly factory in Shreveport, La. Ownership of the site will enable the state of Louisiana to be more flexible in negotiations with a prospective automaker. It was reported Louisiana is paying $4.6 million to purchase the site.

MISSISSIPPI

Greenwood Lands Raybestos

In the spring quarter, Raybestos announced it purchased the former 206,000-square-foot Irving Automotive facility in the Greenwood-Leflore County Industrial Park. The brake manufacturer is relocating operations from two plants in the deal; one in Indiana and another in Michigan. The project is expected to create about 200 new jobs.

NORTH CAROLINA

Continental Tire Closing Ahead of Schedule

Citing high-costs, Continental Tire of North America is closing its plant in Charlotte in early July, two months prior to the date originally announced. The closure will affect about 480 workers. The company's union contract expired on April 30. Continental Tire is a subsidiary of Germany-based Continental AG. The shutdown is a result of the failure of union and company officials to agree on a new labor contract that would reduce Continental's overhead by $32 million a year at the plant.

Lotus Engineering Hiring 108

U.K.-based Lotus Engineering, announced in mid-May it is opening a research and development facility in Northampton County, N.C. that will employ 108 workers at an average annual salary of $48,000. Lotus is an automotive engineering consulting firm. The company provides a range of services to many of the world's car manufacturers and automotive suppliers, from initial concept, project design through development, to full production prototypes.

Motorsports Supplier Relocating to N.C.

Riley Technologies, a designer and manufacturer of racing cars, is relocating its Indianapolis operation to Mooresville, N.C., located just outside of Charlotte. The company is building a 40,000-square-foot facility at the Talbert Point Business Park. All 35 employees at the company's Indianapolis facilities have been offered positions in North Carolina.

Motor Sports in North Carolina now Employs over 27,000

A task force that included Teresa Earnhardt and David Hauser of Duke Power recently released a study showing that over 27,000 workers are currently employed by the motor sports industry in North Carolina. No other U.S. state has more workers in the racing industry. The study showed that the average salary of those employed in motor sports in the Tar Heel State is over $72,000. In March, Charlotte was named by NASCAR as the site for its hall of fame.

OKLAHOMA

Bridgestone Firestone may Close Oklahoma Plant

Officials with Nashville-based Bridgestone-Firestone North American Tire, a subsidiary of Tokyo-based Bridgestone Corp., informed union officials in late April that it may close its large tire manufacturing plant in Oklahoma City. The OKC facility houses 1,400 workers and has been in operation for almost 40 years.

TENNESSEE

Forty-Two Percent of Nissan HQ Employees Relocating to Tennessee

Nissan reported in the spring that 42 percent of its 1,300 employees in Southern California will make the move to the Nashville metro when the company officially relocates its North American headquarters this summer. The Japanese automaker has received more than 30,000 resumes from people who hope to fill the 700 additional jobs that are expected to be created within the next two years. Nissan already employs about 8,000 workers in middle Tennessee, including over 5,000 at its assembly plant in Smyrna, Tenn.

VIAM Expands in Coffee County

Japanese fabric maker VIAM is adding 115,000 square feet to its operations in Manchester, Tenn. About 40 new jobs will be created. VIAM produces floor mats, truck liners and other non-woven fabrics for the automotive industry and sells its products to Toyota, Nissan, Honda, GM, Ford and other automakers.

VIRGINIA

Dynax Expands in Roanoke Valley

Dynax America, a Japanese auto parts manufacturer and a North American subsidiary of Exedy Corp., will invest $11.7 million to expand its existing facility in Botetourt County's Eastpark Commerce Center. The company, which makes transmission parts, is adding manufacturing capacity at plant, which will result in 52 new jobs.

WEST VIRGINIA

Japanese Parts Distributor Opening Warehouse in W.V.

Meiji Corp., a Japanese company that supports Toyota's engine plant in West Virginia, is expanding in Putnam County. The company distributes factory automation components for the automotive industry, as well as those in the steel, plastics and chemicals industries.

QUIZ ANSWER

Toyota, Nissan and Honda, the Big 3 in Japanese automaking, operate or have announced 21 North American assembly plants and five of those are located in the Southern Automotive Corridor.