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East Central region making efforts to lure second-tier suppliers for Mercedes plant

Bama expansion, payoff here?

COLUMBUS – The East Central Mississippi Economic Council (ECMEC) hopes to take advantage of a large expansion of the Mercedes Benz plant in Vance,

Ala., by making efforts to attract second-tier suppliers of the plant to locate in neighboring Mississippi.

“With the recent announcement by Mercedes Benz of their plans to double the size of their plant in Vance, Ala., plans on this side of the state line got underway for an

initiative we had hoped would happen,” said Charleigh Ford, executive director of the Columbus-Lowndes Economic Development Association and president of the

ECMEC. “Basically, we are talking about attracting second-tier suppliers of the Mercedes plant into this area. We hope can get some new industry to locate up here.”

Ford said that, with the expansion, the Mercedes plant has now reached the size where second-tier supplies might find it advantageous to locate operations closer to

the plant in Vance. Representatives of the ECMEC have had meetings with Mercedes officials to pitch the advantages of the second-tier suppliers locating in

Mississippi. They have also directly contacted the suppliers.

“We have been working on an extensive list of those companies that are supplying parts for the Mercedes automobile, and hope that we have made some good

contacts,” Ford said. “Many have promised that they will take a hard look at us if business conditions approach the point where it would be worth their while to move

into our area.”

Gerald Mills, field office manager for the Meridian district of the Mississippi Development Authority, said that attracting the second-tier suppliers is an important

strategy for taking advantage of the automobile industry’s move to the South.

“With the announcement of the expansion in Vance, we’ll see a lot more feasibility for those second-tier suppliers to come South,” Mills said. “The real story here is

the cooperation between all the counties and developers in working on these second-tier suppliers. Everyone is pooling their resources, and doing things they couldn’t

have done alone. I think that is the thing that has excited me the most about this effort.”

The ECMEC is made up of 16 counties in east Mississippi who have joined to promote economic development as a region.

Mercedes manufactures the engine and power train, and fabricates the body of the Sport Utility Vehicles (SUVs) manufactured in Vance. Most of the rest of the

components needed for the SUVs are purchased from a large number of second-tier suppliers for assembly by first-tier supplies near the plant.

Ford said that first-tier suppliers must be located close to the plant. But there could be advantages for second-tier supplies to locate a little farther away. The

advantages touted for locating the second-tier plants in Mississippi include greater availability of labor.

“We’ve got labor available,” Ford said. “When you are hiring several thousand more people as is needed for the Mercedes expansion, it tends to make for a tight

labor market. Of course, people will come from outside areas for those jobs. But I think that you would find that second-tier suppliers might be reluctant to build their

operation close to an automobile assembly plant because of labor and other factors.”

Labor costs might also be lower in Mississippi. Although Mercedes is not a unionized plant, hourly wages are considered to be higher than average for manufacturers

in the region.

In addition to the greater availability of labor, East Central Mississippi has industrial property including buildings available, plus good financial and tax incentive

programs from the Mississippi Development Authority.

The combination of incentives, available industrial sites and a good labor force should prove attractive to at least some of the hundreds of suppliers of parts for the

Mercedes plant.

“It is something that a company would consider,” Ford said. “It would make sense.”

Vance is located in west central Alabama not far from the Mississippi state line. The Mercedes plant is located about 72 miles from Columbus. Ford said Mississippi’s

possible plant locations are close enough to keep transportation costs low, and far enough away to be in a different labor market.

“We’re in what they call the green zone for the Vance plant,” Ford said. “It is feasible to ship parts from here over to that plant with low transportation costs.”

To minimize costs and improve profitability, the Mercedes Benz plant uses “just in time” sequencing for obtaining parts. Having too large an inventory of parts creates

expenses for storage. Plus the company doesn’t want to want purchase costs incurred until absolutely necessary.

In addition to meeting with officials from Mercedes, Ford said economic development representatives have been in contact with several suppliers who seem interested

in locating in Mississippi. In addition to suppliers in the U.S., some suppliers for the Mercedes plant are located in Europe. The transportation costs for European

suppliers might make locating a plant in Mississippi particularly attractive.

Members of ECMEC have been attending automobile supply parts trade shows to make contact with suppliers.

“We have been attending automobile component parts shows in Detroit and other communities with regional shows, and feel we have positioned ourselves well to

continue these efforts,” Ford said. “We recently went to Lexington, Ky., for a regional show, and are planning a large presence at the national show in Detroit next

March.”

In addition to the Mercedes plant, second-tier suppliers locating in Mississippi might also be able to provide parts for a Honda manufacturing plant in Lincoln, Ala.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

About Becky Gillette

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