Mike Randle, Editor

You are what you is, you is what you am, a cow don't make ham!

I borrowed that headline from American composer Frank Zappa (1940-1993). It came from a song off the "You Are What You Is" album, which came out in the early 1980s. The phrase can be applied to almost anything. Here are some things I'd like to apply it to in late summer of 2003.

Manufacturing in the South

I wrote this in SB&D in the fall 1998 edition, a time when the latest manufacturing job alarm went off for cities, counties and states in the South: "For decades the South was labeled the U.S.'s Mexico by the national business media. Isn't it ironic then that many traditional low-wage industries have left the South recently for what is the American South's Mexico, which, appropriately, is called Mexico."

Now it's 2003. Mexico can be supplanted by any number of countries in that statement, especially China. Yes, manufacturing is a bad word right now in the minds of the South's daily media honks. It shouldn't be.

If you look at a line chart of manufacturing employment in the South over the last fifty years, there are more ups and downs on it than the stock market during the same period. Since the last recession of 1991, the American South saw net gains in manufacturing jobs more years than not. In fact, the rural South, where manufacturing jobs are bleeding the most right now, saw an increase of over 100,000 manufacturing jobs from 1992 to 1998. By the way, when did those manufacturing job chart lines dip down most recently like they have today in the South? That would be the recessions of the early 1980s and early 1990s. Ditto the early 2000s. Since I've been accused recently of making my column too political, you go ahead and figure out who sat in the White House during those three recessions.

No, the South cannot be something it cannot be. It is what it is and the South is the center of the U.S. manufacturing universe. It leads all U.S. regions in Gross Regional Product in the manufacturing sector and every other sector of the economy for that matter. If anything, high-wage, high-end manufacturing will not only continue to call the region home, it will increase its presence every time the economy grows. Why? The U.S. is the world's largest consumer of manufactured goods and the South is the lowest cost region in the U.S. to make those goods.

Is it Costs? You Bet!

In late August I spoke at the Southern Economic Development Council's first-ever automotive seminar in Nashville. One thing I said was that "high-wage, high-end manufacturers will continue to announce huge deals in the South because of costs, primarily labor costs that are lower here than other regions of the country." At the end of my speech, Dennis Cuneo, Sr. V.P. of Toyota Motor Manufacturing of North America, rushed up to me and said "Mike, we pay almost as much per hour in the South as we do in other regions." I responded by saying "in the first five years of operations you don't." Fact is, carmakers typically will save about $500 million in labor costs alone in the first five years of operations by building their plants in the South as opposed to any of the other three U.S. regions.

A stronger disagreement to my claim that costs are the No. 1 factor to high-end manufacturers landing in the South came about 30-minutes later when Emil Hassan, Sr. V.P. of Nissan North America, said during his lunch speech that "I take exception with one speaker this morning who claimed Nissan invests in the South as a result of costs." He said Nissan had four plants in Mexico that he managed and if costs were the case, his company would build all of its plants there. Emil also proudly proclaimed that the Nissan Altima, manufactured in Tennessee and about to be built in Mississippi, won "car of the year" recently.

When it was question time for Emil, I had three written down. The questions, exactly how I wrote them, were: (1) Emil, you mentioned that you manage four Mexican plants. Is Nissan's presence there the result of the world-renowned Mexican labor force or costs? (2) Do you think that the Altima would have won "car of the year" if it were built in Mexico as opposed to the American South? (3) I only cover the South, so I really don't know. Are there any Nissan plants operating in New York, Connecticut, Illinois, Michigan, New Jersey, Pennsylvania, California or Massachusetts, states with some of the highest labor costs in the country?

As Frank so strongly and hilariously suggested, you cannot be something you're not. And Toyota and Nissan, as well as Lockheed-Martin, Boeing, Mercedes, Eli Lilly, Honda and a host of other world-renowned manufacturers, invest in the South because it is the region in the U.S. with the best prospects of highest profitability when it comes to making something, especially if that something costs big bucks. None of them, including the spokespersons of Toyota and Nissan, should apologize, squirm or even misrepresent the fact that they save big bucks on labor in the South. We certainly don't apologize for it. We're proud that, for the money, our labor is the worlds best.

Our advice is that when you set your sights on your next high-end manufacturing expansion, you set your sights here in the South, not to a foreign location such as Mexico or China. No, the Altima, if built in Mexico, would not have won "car of the year." It won car of the year because it was manufactured in the American South.

Yes, you are what you is, you is what you am, a cow don't make ham! And the South is and will remain for decades the largest and most active manufacturing region in the U.S. because it is the lowest-cost U.S. region in which to manufacture.

mike@sb-d.com