2004 State of the Year: It's Alabama, Again!

Timely investments are paying off for Alabama.

By Mike Randle

Contained in a story published in Southern Business & Development more than 10 years ago was a strong statement made by David Sheehan, an official with the North Carolina Department of Commerce. The statement was published in the Fall 1993 edition, shortly after Mercedes-Benz chose Alabama, of all places, for it first North American assembly plant.

"We prefer to market North Carolina's inherent advantages," Sheehan said. "We are committed to being competitive, but we won't give away the store. In a time of limited resources, it doesn't make sense to spend as much as Alabama has to attract an industrial recruit. They're counting way too much on the multiplier effect. They're never going to get the kind of payback they're projecting."

Sheehan's statement essentially meant that North Carolina had balked on investing in Mercedes-Benz back in 1993 by choice. By choice, Alabama didn't.

It's an old story, but it particularly applies here. Yes, just over 10 years ago, mouths went agape when one of the planet's most visible corporate nameplates, Mercedes-Benz, announced it would build its first North American assembly plant in tiny Vance, Ala., located halfway between Tuscaloosa and Birmingham. While Alabama officials' tongues wagged at the economic potential a project like Mercedes would bring, they took plenty of heat regarding the incentive package they offered the German automaker. Did Alabama's investment in Mercedes pay off?

The year before Mercedes announced its new assembly plant in Alabama (1992), the state saw a total $21 million in investments from the automotive industry. Just 10 years later, during calendar year 2002, Alabama saw those investments increase 100 times to $2.1 billion (that's with a "B"). In 1992, you could count the number of automotive suppliers operating in Alabama on two hands. Today, there are just over 200 suppliers in the state employing over 80,000 workers. In 2003 alone, 32 new auto parts suppliers announced they would open new plants in Alabama.

Since Mercedes announced in 1993, Alabama has secured large original equipment manufacturing projects from Honda, Toyota and Hyundai. Three of the last five assembly plants announced in the Southern Auto Corridor (www.SouthernAutoCorridor.com) have landed in Alabama.

Was the North Carolina official wrong regarding Alabama's investment in Mercedes-Benz? As you've heard countless times in your life, "you should never say never." In Alabama's case, not only have they received the payback they were projecting from the original Mercedes investment, they have secured the multiplier effect many times over. In fact, it can easily be said that the decision to land Mercedes in 1993 was the smartest investment ever made by the people of Alabama.

For the second year-in-a-row, we have chosen Alabama as "State of the Year" in the Southern Business & Development 100. The State of the Year award is the only one that we, as editors, must place some subjectivity into the selection process. Why? States in the South vary in population from the smallest, West Virginia, to the largest, Texas. It's impossible to rank states in the South like we rank our other categories in the SB&D 100. Those are based solely on population such as Mega-market (2 million-plus), Major Market (750,000-1.99 million), Mid-Market (250,000-749,999) and so on.

We chose Alabama as the 2004 State of the Year for a variety of reasons, almost all of which are not subjective. No. 1: Alabama earned 280 points, the same as in 2003 when it became the first small Southern state (under 5 million in population) to earn State of the Year honors. Alabama's point total last year as well as this year topped points earned by Georgia, North Carolina and Tennessee, three states that have won State of the Year before and three states that are larger than Alabama.

Typically, a state the size of Alabama is not supposed to compete with Southern economic development all-stars such as Georgia, North Carolina and Tennessee. After all, those three, along with Texas, Florida and Virginia, have achieved "destination status," a phrase we give a select few Southern states that automatically find themselves on corporate site search shortlists without lifting a finger.

Not only has Alabama distanced itself from its small state peers, it has outperformed three of the aforementioned Southern destination states in the SB&D 100 the last two years. One year of outperforming your big brothers is impressive. Still, some will chalk that up as a fluke. Outperforming larger states two years in as many years is not only impressive, it removes any doubt as to its credibility.

The second reason we chose Alabama as "State of the Year" in 2004 centered on the fact that significant new and expanded announcements were made throughout the state. From the Tennessee border to the north, to the smallest hamlets near the Gulf of Mexico in the South, the wealth was spread like never before in the state of Alabama. There was an excellent mix of new job generating projects in rural and metro areas alike.

Here's reason No. 3: When recognizing a state in our annual ranking, we look closely at its history of turning large projects. Alabama typically lands about a dozen deals with 200 jobs or more in any given year. In 2003, Alabama more than doubled that average with 27 big job deals.

And finally, it's our assertion that the most important aspect in how states in the South perform in the economic development arena is how they stack up on a per capita basis. It's the only way to level the playing field where West Virginia (1.8 million in population) and Texas (over 23 million in population) can compete.

Points in our system are earned based on the number of deals announced and how large those deals are. We compare points based on population and determine a per capita ranking. This year, Alabama earned more points per capita than any other state in the South. Last year we gave Alabama the State of the Year crown with a No. 3 per capita ranking. That being the case, how could we not repeat the recognition when the state earned the No. 1 per capita ranking?

If you study the numbers, Alabama's economy may indeed be one of the best state economies in the country right now. Sure, the state has seen its share of business closures like every other state over the last several years. But there are few states, if any, in the U.S. turning as many significant job-making announcements per capita than Alabama right now. In fact, there are few states, regardless of size, that are experiencing as much activity as Alabama is experiencing today.

Of course, the automotive industry is the primary reason Alabama is on such an impressive deal making roll. Of Alabama's 27 deals of 200 or more jobs, 14 came from the automotive sector. The fact that the state landed virtually every Hyundai parts supplier in 2003 helped Alabama earn State of the Year in 2004.

However, it's not just the automotive industry that is investing and hiring in Alabama. Significant job and investment projects in 2003 came from mining, telecommunications, distribution, back office, agribusiness, aviation, government services, metal fabrication, plastics, primary metals, aerospace and general manufacturing. But clearly, the automotive industry is the backbone of Alabama's economy right now, making the decision way back in 1993 to pony up for Mercedes look like a stroke of genius, even though many people at the time labeled the decision a folly.

The following is a list of selected projects won by Alabama in the two years it has been named "State of the Year" by Southern Business & Development. It should be noted that many of these projects came as a result of investments made collectively by the people of Alabama and officials of Honda, Boeing, Hyundai, Mercedes and Toyota, to name just a few of the companies that have recently set up shop in the state.

Alabama's Biggest Deals in 2002 (State of the Year 2003)

Alabama's Biggest Deals in 2003 (State of the Year 2004)

Alabama's Biggest Deals since Mercedes in 1993

* Investment in millions.