March 7, 2008
Editorial
South Carolina for Volkswagen? We don't think so.
Speculation continues about Volkswagen and where it will place its new assembly plant in the U.S. VW could place its prospective plant somewhere in South Carolina reports indicate. But, considering the lack of available super sites in the Palmetto State, the chances of that happening are slim. But that's not the real reason we believe VW is not going to select South Carolina whenever they make their decision, if they do.
The two reasons we believe South Carolina will be shut out of the VW site search have nothing to do with sites/product, quality of life, labor availability or any other site selection factor you can think of. Like most Southern states, South Carolina is incredibly competitive in what it offers locating industry and the Palmetto State is an outstanding place to live and work.
Nope, our reasons on why we believe South Carolina will not land the proposed 2,500-employee VW plant (if there is one) center on two people: BMW CEO Norbert Reithofer, who administers the German automaker and its only U.S. plant, which is located in Greer, S.C., and South Carolina Gov. Mark Sanford.
Gov. Sanford, now well into his second term, has been critical of large incentive packages given out to major corporations, such as an automaker. Last year, Gov. Sanford vetoed a bill that included incentives for Michelin, which announced it would expand its already massive operations in the Upstate region of South Carolina by another $350 million. The South Carolina Legislature overrode Sanford's veto, so Michelin received its incentives to expand in the Palmetto State.
Reports have surfaced that Anderson County, S.C., which is located in the Greenville-Spartanburg metropolitan area, has made VW's short list. Greer, S.C., which is where BMW operates its plant, is also located in the Greenville-Spartanburg metro. Having two German automakers, two that compete for buyers, operating major automobile assembly plants in one market is just something that has never been done before in the history of the Southern Auto Corridor.
Will BMW CEO Norbert Reithofer let VW into his own backyard? It's our opinion that would be highly unlikely. Will Gov. Sanford pony up an incentive package for VW that will likely be close to $300 million after publicly saying last year, "Does it make sense to eliminate essentially all taxes for large corporations and not do the same for small businesses?" That, in our opinion, would be highly unlikely, too.
Nope, look for the prospective VW plant to land in either North Carolina (Rocky Mount or Linwood), Georgia (Pooler) or Southside (Emporia) Virginia.
Michael C. Randle
mike@sb-d.com
Alabama Gets Massive, Next-Generation Air Force Project
In the late winter quarter, the Air Force announced that it will bring production of its next-generation aerial refueling tanker project to Mobile, Ala. The deal represents an investment that could exceed $100 billion (that's with a "B"). Northrop Grumman and the European Aeronautic Defence & Space Co., the parent company of France-based Airbus, won the contract over Boeing. The deal was expected to be split between Boeing and EADS, which would have brought work to Seattle for Boeing and work for EADS in Mobile. That scenario did not happen and Mobile, Ala. is apparently the sole winner in the massive Air Force contract. The aerospace project is expected to create more than 1,500 jobs in south Alabama.
Editorial
"Foreign Workers in Mobile, Ala. What?"
Foreign worker phobia reached an all time high the first week of March when Washington State's senior elected officials went bonkers over the Air Force's choice of Northrop Grumman-EADS over Boeing for a $40 billion contract to build next-generation aerial refueling tankers. The deal includes the manufacture of 179 large refueling aircraft over the next 15 years, with most of the work to assemble the new planes being done in Mobile, Ala. The project means that Mobile joins only Seattle and Toulouse, France as the three locations in the world that manufacture large jet aircraft.
Regarding the Air Force's decision, six of Washington State's nine House members and its two senators released a statement that partially read, "This is a blow to the American aerospace industry, American workers and America's men in uniform." The outcry continued when the elected officials said the choice of a European country and its "foreign workers" is essentially a slap in the face to American companies. They called the Air Force's decision as "outsourcing."
The last time I looked, Northrop Grumman is an American company, the largest manufacturer for the U.S. Navy and builder of the B-2 strategic bomber. The California-based conglomerate has also worked with Boeing on many projects for the Air Force. With this particular project, however, Northrop Grumman chose to team with the European Aeronautic Defence & Space Co., in order to become more competitive in its bid for the tankers. It was a good move.
Experts in defense contracts have said regarding the project that Boeing's bid did not beat out Northrop Grumman-EADS' bid in a single measure, whether it be costs, the plane's performance or the ability to execute the contract. In other words, Boeing's bid was simply not competitive. Why then would the Air Force choose Boeing to build the tankers?
As for the claim of "outsourcing," when did an American company, teaming with a European company to build a major aerospace manufacturing center in the U.S. become outsourcing? Have we ever pointed fingers at Toyota, Honda, BMW, Mercedes or Hyundai after they have built major assembly plants in the U.S. and claimed the projects are "outsourced" investments? Every single one of those foreign automakers employs American workers here in America.
As for the "foreign workers" claim, we ask this question. Where is Mobile, Ala? Well, in case they don't know, it is in Alabama. Alabama in in America. Mobile is also where Northrop Grumman-EADS will build a 1,500-employee, $600 million aircraft assembly plant as a result of the new Air Force tanker contract and Airbus' (EADS subsidiary) decision to also use the location to build commercial freightliners.
Michael C. Randle
mike@sb-d.com
Toyota's Dennis Cuneo: "Second Wave" of Suppliers Expected in the Southern Auto Corridor
We spoke with Toyota's Dennis Cuneo in early March to get an update on what he was currently up to. Cuneo has headed up the site search for several Toyota facilities, including the new Toyota assembly plant being built near Tupelo, Miss., and the San Antonio pickup truck facility. Cuneo was working for the law firm Arent Fox in Washington, D.C. and had retired from Toyota. He is now back in the Cincinnati area (Toyota's North American headquarters is based in the Cincinnati suburb of Erlanger, Ky.) and is back working with Toyota, Toyota Boshoku, the fastest-growing auto parts company in the world, and was recently elected to the Board of AK Steel, which is also headquartered in the Cincinnati area.
We asked Cuneo what if anything was behind an increase in lead activity on our Web site, www.SouthernAutoCorridor.com. We have seen a dramatic increase in not only the number of inquiries on our site, but also a significant increase in the quality of the leads.
In response, Cuneo said, "I expect to see continued migration of parts companies to the Southern Auto Corridor to serve the cluster of assembly plants that has built up in the Georgia/Alabama/Mississippi/Tennessee area. We've seen the first wave of mostly JIT plants that need to be located close to the assembly plants. We are starting to see the second wave -- companies who want to serve more than one assembly plant."
"Smart Car" Plant Rumors
Spreading throughout the South are rumors that Toyota and other automakers are considering "smart car" plants in the South. We've received several emails regarding automakers looking at sites in Northeast Louisiana (the Franklin Farms megasite), in Hutto, Tex., Aiken, S.C. and in Linwood, N.C. for a site to build next generation automobiles. Time will tell if those rumors are just that. But, other than the emails about prospective plant sites, most of which come from land owners themselves, we cannot give you any more information at this time. For more information on the Southern Automotive Corridor, go to www.SouthernAutoCorridor.com.
GlaxoSmithKline Clawbacks
Drug giant GlaxoSmithKline is the latest company to admit it will not meet incentive performances in North Carolina. GSK agreed to a North Carolina incentive package worth about $1.5 million to expand its pharmaceutical facility in Zebulon, N.C. The deal, which required the company to add 200 workers and invest at least $92 million, has been met. GSK has invested about $100 million in the manufacturing facility and added more than 200 workers. However, the incentive package is based on GSK keeping those 200 additional employees for 10 years and the company revealed in the winter quarter that will not be the case. GSK employs about 6,000 workers in the Raleigh-Durham area and has already announced layoffs in the region.
Web site Cites Biotech Efforts
Fiercebiotech.com has named five states in the U.S. as the top five locations in the world for economic development efforts in biotechnology. The states are New York, Massachusetts, California and in the South, Florida and Texas. Fiercebiotech reported that the five states "have stepped up to the plate with offers of significant financial support to spawn a new generation of drug developers." The list is the third annual for Fiercebiotech and its the first that did not include Singapore.
Sinclair Oil Investing $1 Billion in Tulsa
Billed as one of the largest single private investments in Tulsa's history, Sinclair Oil announced in the winter quarter it is investing $1 billion in its Tulsa, Okla., refinery to expand fuel production for use in the Western South and in the Midwest. The Salt Lake, Utah-based refiner will also add equipment that will reduce emissions by 1,000 tons a day. The expansion is expected to create about 200 new jobs.
Big Deal in Danville, Va.
Com.40 Ltd, a furniture manufacturer based in Poland, announced in the winter quarter that it is investing $36 million and creating over 800 jobs in Danville, Va. The new manufacturing facility will produce mattresses and upholstered furniture for retailer IKEA. The facility represents the first in North America for Com.40. Two years ago, Swedwood/IKEA announced another large project in the Danville/Pittsylvania market.
Forbes Publishes Fastest Growing Metros: South Dominates
In the winter quarter, Forbes magazine published "America’s Fastest-Growing Large and Small Metros.” The list was dominated by markets in the South, more specifically, those cited in the states of Texas (4), Florida (6) and Alabama (3).
Fastest Growing Large Metros
1. Austin-Round Rock, Tex.
2. Cape Coral-Ft Myers, Fla.
3. Atlanta, Ga.
4. Seattle, Wash.
5. San Francisco, Calif.
6. Dallas-Fort Worth, Tex.
7. San Jose, Calif.
8. Houston, Tex.
9. Orlando, Fla.
10. Palm Bay-Melbourne-Titusville, Fla.
Fastest Growing Small Metros
1. Mobile, Ala.
2. Texarkana, Tex./Ark.
3. Palm Coast, Fla.
4. Huntsville, Ala.
5. Prescott, Ariz.
6. Auburn-Opelika, Ala.
7. St. George, Utah
8. Port St. Lucie, Fla.
9. Gulfport-Biloxi, Miss.
10. Naples-Marco Island, Fla.
Daimler Financial Hiring 750 in Fort Worth
Daimler Financial Services Americas, formed when Chrysler split from Daimler Benz, is hiring 750 new employees in Fort Worth. The project will include a new 160,000-square-foot office building in Fort Worth’s Alliance development. Daimler will close a similar facility in Chicago and more about 180 workers there will relocate to Fort Worth. Daimler Financial's headquarters will remain in the Detroit area.
Forbes Names Top Technology Cities
Forbes also recently revealed its annual ranking on top technology cities. The Silicon Valley earned the No. 1 spot, followed by the Washington, D.C. region of Northern Virginia and Maryland, Raleigh-Cary, N.C., Boulder, Colo., and Huntsville, Ala.
Forbes Names Most Wired Cities
Seems like Forbes.com is coming out with one ranking after another these days. In the winter quarter the magazine came out with its "America's Most Wired Cities" ranking, and markets in the South snagged six of the top 10 spots. The ranking was based on a formula that recognized broadband adoption, access options and Wi-Fi availability.
Most Wired Cities
1. Atlanta
2. Orlando
3. Seattle
4. San Francisco
5. Raleigh
6. Miami
7. Tampa
San Diego
Phoenix
10. Charlotte
Austin Tops All in MovieMaker Magazine's Ranking
In the winter quarter, Austin, Tex., was named the No. 1 market in MovieMaker Magazine's "Top Ten U.S. Cities to Live and Make Movies." Also making the list in the South were Shreveport, La. (No 3), Wilmington, N.C. (6), Baltimore (9) and Memphis (10). Earning an "Honorable Mention" was Richmond.
South Carolina Rings up Record Year
The South Carolina Department of Commerce announced the recruitment of 15,666 jobs in calendar year 2007, shattering the record set in 2006 by about 1,300 jobs. In the last two years, SC DOC has helped create more than 30,000 new jobs in the Palmetto State. The $4.045 billion in capital investment made by business and industry in South Carolina in 2007 also set a record on the investment side of the economic development equation.
Record Mark Set for Investments in Alabama
Over $6 billion was invested in Alabama in calendar year 2007, a record mark. From those investments, some 17,540 jobs are expected to be created. The $6.1 billion in investments topped the previous record of $4.7 billion set in 2005. One deal helped Alabama set the record year. ThyssenKrupp announced and has begun construction on its $3.7 billion steel plant located north of Mobile, Ala. That project has been reported as the largest single industrial project ever announced in the U.S.
Site Selection Names Six Southern States in its Top 10
Tennessee (No. 3), North Carolina (4), Texas (5), Virginia (8), Florida (9) and Kentucky (10) were Southern states that made Site Selection Magazine's top 10 states, based on the number of projects turned in calendar year 2007. Ohio and Illinois topped the list, with New York and Michigan earning a top 10 ranking as well.
2007 Records Lowest Unemployment Rate in W.V. History
West Virginia's average unemployment rate in 2007 was 4.6 percent, the lowest unemployment rate in the state's history. The number of West Virginians working last year averaged 778,269, the highest number during a year ever recorded.
Mobile, Ala. Cited in Forbes
Forbes magazine, based on data provided by financial analyst Moody's, is expected to have a gross metropolitan product of 34 percent in the next five years, the largest projected increase of any market of any size in the U.S. The report was published by Forbes in the winter quarter. Mobile has recently won two of the largest economic development projects in U.S. history; ThyssenKrupp's $3.7 billion steel plant, which is under construction and Northrop Grumman and the European Aeronautic Defence & Space Co.'s new Air Force contract to build aerial refueling tankers.
Editorial
Alabama and Georgia: The Korean Yin and Yang
On January 3, 2006, Southern Business & Development was the first media outlet to predict that Korean automaker Kia would build its first U.S. assembly plant in West Point, Ga. We wrote that the "pup (Kia) will not venture far from its mother, which is Hyundai." Two months later, in March, Kia announced its plans to build its assembly plant in West Point.
Since then we have predicted that with Hyundai assembling its vehicles in Montgomery, Ala., and Kia about to produce its vehicles 80 miles away in West Point, there could be some unique, cost-saving collaborations between the two Korean automakers that would give them an advantage unseen in the Southern Automotive Corridor.
A large number of Korean auto parts suppliers have been in production for over three years now in Alabama. It was obvious that those same suppliers would supply the new Kia plant currently under construction across the state line in West Georgia. Georgia is benefiting as well, landing several Korean suppliers in West Georgia in the last year.
Last year when Hyundai announced it would build an engine facility at the site of its plant in Montgomery, we wrote that those engines would be used in Kia vehicles once that facility opens in Georgia. That has become a reality as well.
Now we hear that Kia will add a transmission facility at its new auto works in West Point. The transmissions that will be produced in West Point by Kia will be used by Hyundai for its two models in Montgomery.
Our latest prediction regarding the developing yin and yang relationship between Georgia and Alabama and Hyundai and Kia is an easy one. The two Korean automakers will have a decided advantage over some of their Japanese rivals when it comes to producing high quality vehicles at lower costs here in the Southern Auto Corridor.
Michael C. Randle
mike@sb-d.com
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