Southern Auto Corridor News

Note to Readers: SB&D is particularly dialed into automotive deals announced in the South as a result of our upcoming launch of www.southernautocorridor.com and this new section. If a Southern state is not included in this edition of "SAC" news, it's because no automotive deals or significant automotive news occurred in the state last quarter. Note to Southern states and communities: SB&D prints every significant job-making or investment deal that occurs in the South every quarter in Southern Auto Corridor News and in our Relocations & Expansions section. If we missed one, well, we missed one (it rarely happens - typically, we find them all).

Seen or Heard this summer

Seen: Georgia Gov. Sonny Perdue spent nearly three hours at the offices of Audi officials in Ingolstadt, Germany.

Heard: "Kia is the next major international automaker to call the South home and it's worth the cost for Mississippi to successfully recruit them." U.S. Senator Trent Lott, R-Miss.

EDITORIAL

It's a Stretch, but the Nation's Biggest Business Story in History May be Unfolding

By Lee Burlett

As I write this, the "Big Three" are in critical negotiations with the United Auto Workers. Reports state that health care insurance issues are at the forefront of the new contract talks, as well as likely plant closures outside of the South. But if you really dig and talk to certain insiders, other information about the negotiations can be found.

Apparently the "Big Three" are conceding that their business model is not competitive with foreign automakers that operate plants in the U.S., primarily in the American South. And the fact that most foreign automakers with plants in the U.S. operate in the South hasn't gone unnoticed by Ford and GM.

The "Big Three" realize there is one primary difference between operating the majority of their U.S. plants in the Great Lakes region compared to the South: labor costs. It's difficult to compete with major international automakers when they are paying anywhere from $15 to $25 an hour and you're paying $25 to $40 an hour. It just doesn't compute. The foreign automakers have a tremendous economic advantage in the South compared to the domestics in the Midwest. In fact, the advantage works out to be a least $30,000 an hour in reduced wages in a typical 2,000-employee assembly plant. That adds up to about $3 million a week for a plant that works two shifts, or about 100 hours a week.

So don't be surprised if the subject of closing and relocating some of the domestic's oldest Midwestern plants to states in the South that have a UAW presence isn't brought up in the negotiations. SB&D has confirmed Ford site searchers have visited Texas and Georgia in the last several months. Is GM far behind?

If domestic automakers do indeed relocate plants from the Midwest to the South, it could be the beginning of the end of the Midwest automotive industry. And that would be one of the biggest stories in the history of American business.

ALABAMA

Tier-One Suppliers for Hyundai Nearly Complete

It was a good run. Since last November, there seemed to be a tier-one supplier for Korean automaker Hyundai announcing somewhere in Alabama every other week. But the windfall of tier-ones for the Montgomery plant is almost over. To date, 14 tier-one Hyundai suppliers have come to the state and only two or three more are expected to announce new facilities in Alabama in the near future. Interestingly enough, the majority of tier-one suppliers to Montgomery's Hyundai plant located in rural locations.

Now it's the tier-two suppliers' turn. Typically, tier-twos don't locate near assembly plants. It's just not cost effective considering the standard value of a tier-two contract. In fact, only one tier-two supplier for the Mercedes plant located in Alabama. However, Alabama officials are convinced another wave of suppliers, this one of the tier-two variety, could invade the state prior to Hyundai's opening. To that end, about 60 economic development officials from the local and state levels are headed to Korea in October in order to pursue tier-two suppliers.

Over 30,000 Alabamians work directly in automotive manufacturing. That figure is expected to increase to as much as 40,000 in the next three years.

Plastech Building Near Birmingham

Plastech Engineering Products broke ground in August on a new $50 million, 294,000-square-foot plant in McCalla, a small city in the southwestern portion of the Birmingham MSA. Dearborn, Mich.-based Plastech is one of the nation's largest minority-owned suppliers and will produce plastic products for the Mercedes-Benz plant in nearby Vance, Ala. as well as other assembly plants in the South. The company expects to employ 400 workers at full production.

Toyota Expanding Alabama Engine Plant

Like Honda, Nissan and other Japanese automotive deals done in the South over the years, Toyota has announced it is expanding its Huntsville, Ala. engine plant just after the paint has dried on its new facility. The expansion will add over 400,000 square feet to the existing plant, which just recently opened. Toyota will invest $20 million in the deal and add 150 workers. In the spring quarter the massive Japanese automaker announced another engine plant in Jackson, Tenn. If history repeats itself, expect that facility to expand right after it opens two years from now.

Supplier Opening Plant

A Canadian automotive supplier announced in early August it is opening a $25 million, 150-employee operation in Huntsville, Ala. Toronto-based Matsu, Inc., is adding 40,000 square feet to an existing 80,000-square-foot building located in the Lowe Industrial Park. The company manufactures metal stamping and welded assemblies and will serve several OEMs in the Southeast. Matsu officials said they looked at other sites in Georgia, Tennessee and Mississippi before picking Huntsville. Production at the new plant will begin in the summer of 2004.

Mercedes Supplier Lands in Tuscaloosa

Another Mercedes-Benz supplier is coming to Alabama. Eberspaecher NA, a builder of exhaust systems, announced it is building a new facility in Tuscaloosa County. The new plant will employ 60 workers.

Hyundai Contract Adds Jobs at Teksid

Teksid Aluminum is investing $18 million in an expansion of its Sylacauga parts facility as a result of a new contract with Hyundai, which is building a plant near Montgomery. Teksid, which supplies the Honda plant in Talladega County, will make engine components for Hyundai. The expansion will mean the creation of 100 new jobs.

Largest Hyundai Supplier So Far Picks Prattville

The city of Prattville, located about 25 miles north of the site of the Hyundai plant under construction, is the site of the largest supplier announced to date. Venture Industries is investing $100 million in Prattville for a 670,000-square-foot facility that will house over 600 workers.

Tiny Elba, Ala. Recruits Supplier

Ohio-based Toledo Molding & Die has chosen the south Alabama rural town of Elba for a plastic injection molding plant. The company is building a 92,000-square-foot facility and will employ 135.

Tier-One Supplier Picks Greenville, Ala.

Hysco Hyundai announced it is building a steel processing plant in Greenville that will serve the Hyundai facility and other suppliers for the plant. The $30 million, 125-employee plant is the second supplier to announce in Greenville. The company broke ground on the 180,000-square-foot facility in July.

Hyundai Supplier Building in Montgomery

T&WA, Inc., is building a 60,000-square-foot facility that will supply the Montgomery area Hyundai plant. The Louisville-based supplier assembles tires and wheels and will hire approximately 40 workers.

German Supplier Lands in Tuscaloosa

Brose Corp., a German-based supplier to automotive plants throughout the Southeast, is building a $13 million plant in Tuscaloosa. Interior door modules will be produced at the new plant where 80 workers will be housed.

ARKANSAS

DENSO Decision to Build New Plant in Arkansas Riles Canadian Auto Workers

Japanese auto supplier giant DENSO is building a $35 million, 500-employee vehicle air conditioning and radiator plant in Osceola, Ark. The late July announcement is the biggest automotive deal ever announced in Arkansas, a state that has recently thrown its hat into the ring as evidenced by its second-place finish in the recent Toyota assembly plant site search that ended in San Antonio. While Arkansas officials are absolutely giddy to get into the Southern Auto Corridor game in a big way, Canadian union members are miffed that the deal wasn't an expansion of DENSO's existing plants in Guelph, Ontario or Battle Creek, Mich. A representative for the Canadian Auto Workers noted that DENSO's decision to build in the American South as opposed to Canada or the Great Lakes Region is another sign that the Canada-U.S. auto pact is being violated by automakers. The representative blames the Canadian government for not supporting the automotive industry in Canada. Meanwhile, DENSO officials stated that Osceola (pop. about 9,000) was chosen for its proximity to new customers, a strong work ethic in its work force and the kindness and honesty displayed by local officials.

FLORIDA

Cleveland Supplier Expands to Jacksonville

Cleveland, Ohio-based XLO Group is building a 30,000-square-foot facility in Jacksonville that is expected to house up to 85 new employees. The parts supplier is investing $2 million in the deal and officials with the company cited Jacksonville's port as the primary reason for expanding to the area. XLO's customers include domestic and foreign automakers such as Ford, GM, Honda, Mitsubishi and Nissan.

Seen or Heard this summer

Seen: Ford Motor officials site searching in Georgia.

Heard: Georgia is purchasing, therefore securing, several Interstate frontage sites in the Peach State to lure more auto assembly. This after Gov. Sonny Perdue was heard saying incentives are getting out of hand in the South for new assembly plants.

GEORGIA

New Ford Plant in Limbo

According to unnamed sources, Ford Motor Company had narrowed its site search in Georgia for a new assembly plant to Morgan County and Meriwether County this summer. Morgan County is located on Interstate 20 south of Athens and east of Atlanta. Meriwether County is located southwest of Atlanta on Interstate 85. Now, it looks as if a new Ford plant in Georgia is in doubt as the Michigan-based automaker looks to move production of a midsize sedan to Mexico. Ford officials would not comment on a new plant in the Peach State.

KENTUCKY

Japanese Supplier Locates

Kobe Aluminum Automotive Products, a joint venture of suppliers to Toyota, is building a 108,000-square-foot plant in Bowling Green. The plant will produce aluminum products and will house just over 100 employees.

Japanese Supplier Building First U.S. Plant

Ritatsu Manufacturing, a Japanese parts supplier for Toyota, is building its first U.S. plant in Beaver Dam, Ky. The tier-two supplier is investing $3 million and is expected to hire 30 new workers.

Dura Automotive Closes Plant Near Paducah

Dura Automotive Systems has closed its Fulton, Ky. supplier facility, leaving more than 300 workers without jobs. Dura officials recommended the closure after meeting with union members in the spring. Dura was Fulton's largest employer.

Lebanon, Ky. Recruits Parts Company

US Chita is planning a new auto parts plant in Lebanon. The company makes coil and sheet springs for auto suppliers. The Japanese company will hire about 40 workers for the deal.

MISSISSIPPI

Win-Win Situation with Nissan, Suppliers

Prior to opening its massive plant just north of Jackson, Nissan put together joint ventures with several suppliers large and small. A few of the partnerships include suppliers locating within the plant itself. A small tier-two, minority-owned supplier is included in that group as well as parts giant Visteon. The Visteon joint venture is called Lextron Visteon Assembly Systems. The joint ventures seem to be win-win situations for both Nissan and the suppliers. The only loser in the group? Even though Visteon has a national contract with the United Auto Workers, Lextron Visteon does not. UAW officials have already conceded that organizing the Nissan plant in Jackson would be nearly impossible. They should know. UAW has tried to organize the Nissan plant in Smyrna, Tenn. several times over the last 20 years with no success.

MISSOURI

Looks Like St. Louis Ford Plant Will Close

Gov. Bob Holden signed a bill this summer designed to keep a Ford plant open in suburban St. Louis. The legislation offers Ford incentives featuring tax breaks, worker training and some flexibility in state regulations. Nearly 2,500 workers are employed at the plant where Ford Explorers are assembled. But despite Missouri's retention efforts, it looks as if the plant will close in 2005. Production will be relocated to one of Ford's Louisville factories.

NORTH CAROLINA

Senate Approves New Incentives for Large Automotive Deals

Automotive concerns that invest $100 million or more in new plants in North Carolina could receive a handsome refund of state and local sales taxes under a bill overwhelmingly approved by the Senate. The bill has now moved to the House. If approved by the North Carolina House of Representatives, the new law will give sales tax refunds on building materials used to construct the new plant and refunds on certain equipment purchased for the facility. The proposed legislation is another sign that North Carolina is moving quickly to snare an automotive assembly plant. North Carolina is home to more automotive suppliers than any other state in the Southeast but Tennessee, yet the state has not landed an auto assembly plant to date.

Options Run Out on Alamance Supersite

Options on one of North Carolina's best sites for a new assembly plant were not renewed this summer. The 1,400-acre site that was being touted as a supersite for an auto assembly plant was lost when one of the landowners decided to take an offer to sell his parcel for residential purposes. That move reduced the size of the rest of the site to less than 1,000 acres. In 1993, Mercedes-Benz was close to choosing another site in Alamance County near the city of Mebane. The German automaker eventually chose Alabama.

Continental Teves Closing Plant

Continential Teves will close its brake plant in Asheville sometime next year and move production to existing plants in Fletcher, N.C. and Culpeper, Va. Company officials cite weak demand for the product. When completed, the closure will eliminate 340 jobs.

SOUTH CAROLINA

Japanese Company Building in Laurens

A company that supplies the automotive supplier industry is building a 70,000-square-foot facility in Laurens, S.C. Kimura Unity, which produces steel storage containers for automotive suppliers, is investing $5 million in the deal. Fifty jobs are being created.

Standard Motor Expanding in Greenville

New York-based Standard Motor Products is adding 200 workers to its Greenville plant. The company is investing $10 million in new equipment at its 181,000-square-foot facility.

ArvinMeritor Expands

ArvinMeritor, one of the largest auto suppliers in the world, is expanding its York, S.C. axle plant. The $7 million expansion will create 183 new jobs and will enable the parts maker to manufacture large axles for tractor-trailers.

TENNESSEE

Nissan Pathfinder Production Moves from Japan to Tennessee

Nissan officials announced in late June that production of its popular Pathfinder SUV model will be moved from Japan to its existing plant in Smyrna, Tenn. The move is expected to create up to 1,500 new jobs in the Volunteer State. Nissan will add nearly 200,000 square feet to its 5.7 million-square-foot facility in Smyrna and invest $250 million in the project. The Smyrna plant currently manufactures four Nissan models. The Pathfinder will be the plant's fifth model, the same number of models that will ultimately be produced at Nissan's new Jackson, Miss. plant.

Teksid Expanding in Dickson

Teksid Aluminum Foundry announced this summer that is it expanding its aluminum casting facility in Dickson. Teksid will invest about $9 million and add 90 jobs. The company currently employs over 500 at the plant and is expanding as a result of a new contract made with Hyundai.

Nissan Supplier Building Near Nashville

A parts supplier to Nissan's plant in Smyrna, Tenn., is building a 60,000-square-foot facility in Gallatin, Tenn. PK USA began construction on the plant in July with completion by the first of the year. PK makes metal assemblies. Officials said 50 new jobs are scheduled for the project.

Seen or Heard this summer

Seen: Scouts and consultants representing Ford site searching in south Texas.

Heard: Ford Motor will close four plants (in New Jersey, Missouri, Ohio and Michigan) within the next two years.

TEXAS

Bonds Sold to Pay for Toyota Site

Over $23 million in taxable revenue bonds were sold by the city of San Antonio to acquire the 2,600-acre site that Toyota is about to break ground on for its new pickup truck plant. The Starbright Industrial Development Corp. was launched to finance San Antonio's incentives promised to Toyota. In addition to securing the site, the city will provide $10 million in site improvements and build a training facility on site.

VIRGINIA

Siemens VDO Investing $47M in Newport News

Siemens VDO is spending over $47 million in the expansion of its Newport News facility to produce next-generation fuel injectors. The expansion will create over 100 jobs. The tier-one supplier and manufacturer of various automotive products, is expanding its facility to roll-out the new Deka VII fuel injector. Siemens VDO is Newport News' third-largest manufacturer.

Supplier Expanding in Altavista

Schrader Bridgeport, a supplier of tire and control valves, is expanding its operations in the beautiful mountain town of Altavista. The company is investing $5 million and creating 50 new jobs. Schrader Bridgeport has manufactured in tiny Altavista for over 35 years.

Parts Distribution Center Expands in Prince George

As a result of its acquisition of Dana Corp.'s Engine Management Division, Standard Motor Products is expanding its parts distribution center in Prince George County. The company is investing $3 million and will hire an additional 175 workers. Standard, based in New York, is one of the largest automotive aftermarket manufacturers in the world.

Teleflex Creating 75 Jobs in Russell County

Michigan-based Teleflex Automotive Group, a supplier of cable, throttle, transmission and driver controls, is expanding its parts manufacturing facility in the Southwest Virginia town of Lebanon, Va. The supplier is investing $3 million in the deal and hiring an additional 75 people. Teleflex has operated in rural Lebanon for 15 years.

WEST VIRGINIA

Japanese Supplier Locates in Putnam County

Tokyo-based Nippon Thermostat of America, a supplier to all Japanese automakers, including Toyota, Honda, Nissan, Mazda, Suzuki and Mitsubishi, announced the location of a 31,000-square-foot facility in the Putnam Industrial Park. Construction on the facility began this summer with a completion date of June of 2004. The Japanese supplier plans to hire 60 initially. With three manufacturing facilities in Japan, the company makes thermostats for about one-quarter of the world's vehicles.

EDITORIAL

Only Four Southern States Left Void of an Auto Assembly Plant

By Mike Randle

On May 27, Nissan boss Carlos Ghohn announced the rollout of "job one" at its new assembly plant in Canton, Miss. I witnessed it personally. The first vehicle was, fittingly for the U.S., a minivan. With that product debut, the number of Southern states with automotive assembly plants rose by one to 13. Only Arkansas, Florida, North Carolina and West Virginia are seeking their first assembly facility. West Virginia is not void of an OEM, however. Toyota operates a highly productive and profitable engine plant in the Mountaineer State.

If you look at foreign automakers' history of plant location in the South over the last quarter century, you'll discover they tend to land in Southern states that don't already have an assembly operation. For example, BMW announced in South Carolina in 1992. It was the Palmetto State's first plant. Ditto Alabama when Mercedes announced its new facility in 1993. The aforementioned Nissan facility was Mississippi's first. And Toyota's announcement in San Antonio might as well be a first for Texas. After all, the only other OEM in Texas is the GM plant in Dallas/Fort Worth, which is in another region of the state. If you've ever traveled extensively in Texas you know why many describe it as a country in itself.

In addition to states that are rookies in the assembly plant game, another factor (the most supreme of all) foreign automakers look for in a site search in the South is even a small United Auto Worker presence. If it's there, they won't come. Or at least, they haven't to date. Note that Kansas, Missouri, Louisiana, Virginia, Oklahoma, Texas and Georgia, all states in the South that have had domestic UAW plants operating for decades, have no foreign plants operating there today (Texas has a prospective Toyota plant and Georgia has a prospective DaimlerChrysler plant). The only mixed breeds of foreign and domestic plants exist in Kentucky and Tennessee. Again you can add Texas and Georgia to make it a foursome when Toyota and Daimler open their plants.

But it's the other foursome of states in the South void of assembly plants that piques my interest right now. Arkansas' chances of landing an assembly plant soon are intriguing. Will they "write the check" to secure one at what is one of the best sites in the South located in Marion? I predict they will. If they don't when the chance presents itself, Arkansas officials would do an extreme injustice to its future economy -- more importantly its economic reputation.

The wild card is North Carolina. Long known as the most skeptical state in the South for those in the know when it comes to economic development -- some call it arrogance, some call it conservatism -- I call it the 40-year-old Research Triangle Park Syndrome (use your imagination) -- is in need of a very big deal from any industry sector right now. Manufacturing in the state has been hammered recently, but only because of the industry sectors inherent in the state (textiles and apparel) and the fact that North Carolina is the South's most manufacturing-intensive state. Will the Tar Heel State turn that big deal soon? We predicted two years ago that Arkansas was on the verge of turning the biggest deal in its history. It almost did in Toyota. A similar prediction, here: NC could be the home of the next big automotive deal.

As for Florida and West Virginia, the two other states without assembly plants: The only chance Florida has for an automaker is a Jacksonville site. DaimlerChrysler considered one at the old military airfield in Jacksonville. But you can forget the rest of the state. West Virginia has one or two assembly plant sites, but the mountainous terrain is a tough thing to deal with for 1,500 acres of flat land. WV has done a tremendous job at attracting suppliers. That's probably their role in the future.

So, where will the next foreign automotive assembly plant land in the South? A case can be made for almost any Southern state. However, if the next foreign automaker to announce in the South is not Kia (that deal will go to Alabama or Mississippi) and history repeats itself, look for Arkansas and North Carolina to be at the top of the site search list.