Tongues wagged when Southern Business & Development magazine reported that Ford Motor Company was scouting sites in south Texas in early May, spurring speculation that the Big Three automakers might locate new plants in the South, and possibly Mississippi.
But how likely is the scenario, considering that domestic automakers General Motors, Ford and DaimlerChrysler have ironclad union contracts?
“It’s not totally unlikely, but there are a tremendous number of factors to be considered,” said Buzz Canup, president of Canup & Associates Inc., and project director for the Nissan implementation team. “For the Big Three to try and locate a new assembly plant somewhere outside their existing locations, the overriding factor would have to be whether they could do it more cost-effectively than with their previous plant locations.
“General Motors has closed down 10 or 11 assembly plants in the U.S. But when you look at where some of those plants were located, they were very old, pretty much landlocked, in some cases in unfavorable parts of major metropolitan areas in terms of labor and land use, characteristics of areas around the plant itself concerning safety and security, even employee safety driving to and from work, and those factors would be realistic in encouraging a company to look in other locations.”
Depending on the results of cost benefit analyses, said Canup, the domestic automakers may determine that looking at other locations is a favorable option.
“Especially with the incentive packages that have been offered lately, companies have been able to offset a significant amount of investment cost and even a significant amount of recurring costs,” he said. “The only compromising part of the decision would surround the union grievance issue.”
Incentive packages to lure automakers, like the $300-million package Georgia gave DaimlerChrysler to build a facility near Savannah, have been criticized.
“Some are saying our state will go broke competing for these large automotive plants,” said Sen. Trent Lott (R-Miss.), “but most Mississippians would rather their tax money be invested in jobs over dead-end social programs. They don’t care about political jockeying among state, local and federal officials either, or about turf battles along county, city or regional jurisdictional lines.”
The automotive movement in the South began in the early 1980s, when Ford had a manufacturing plant in Atlanta and GM had a facility in Shreveport, La. When the import market grew rapidly, foreign automakers eager to establish North American operations selected locations in the South, beginning with Nissan in Tennessee in 1983, Toyota in Kentucky in 1985, Saturn in Tennessee in 1987, and Mercedes-Benz in Alabama in 1993.
BMW recorded the fastest start-up in automotive history in the mid-1990s when it finished building an assembly plant near Spartanburg, S.C., in less than two years. Honda chose Alabama in 1999 and Nissan selected Mississippi in 2000. Automotive suppliers followed them all, and Interstate 20 became known as the Southern Automotive Corridor.
The draw? The South is the least unionized region of the country, business costs and taxes are the nation’s lowest, the area reports the lowest business failure rate and boasts the nation’s lowest per capita debt.
Within the next decade, 10 to 20 new plant announcements in the South are anticipated. Audi officials, who have been mulling a location for their first North American assembly plant, met earlier this summer with Georgia Gov. Sonny Perdue, but other sites being considered by the German automaker are unknown.
Southern Business & Development (SB&D) recently ranked Como as No. 2 on its list of the South’s best automotive assembly plant sites, close behind the Railport Industrial Park in Marion, Ark., and the only Mississippi site. (Brookhaven, Columbus/Lowndes County, Vicksburg/Warren County, metro Jackson and Tupelo made the magazine’s list of favored automotive supplier sites.)
“If the Como site isn’t the best assembly plant site in the South, then at worst it’s the second-best,” wrote SB&D publisher Mike Randle. “The Como site features 1,700 privately-owned acres, all under purchase option. In addition, thousands of acres are available adjacent to the site and there are four existing industrial parks within 12 miles. Currently, Como is used for agriculture, so there are few trees, making it an easy site to develop. A Phase I environmental assessment has been done and there are no major wetlands on the property. In fact, soil borings have revealed that some of the best dirt in the Southeast can be found on the Como site.”
In a rare move following Toyota’s announcement to locate the new plant in San Antonio, corporate officials praised Mississippi, not Arkansas or Tennessee. A few economic developers suggested that Como might have been selected if county officials had removed an offensive Japanese Camp road sign.
The first cut in the site selection process involves proximity to competitors or the company’s own existing plants, said Canup.
“The second cut is based on workforce availability and labor,” he said. “Within that one category, you get into all sorts of analyses in terms of workforce density, trainability, productivity, union avoidance or inclusiveness. I did a project for a truck assembly plant and part of the criteria was that the state and community had to be willing to accept a UAW workforce and that turned the apple cart upside down in some states.”
Canup said he doubted that Mississippi would turn down such a request.
“Having said that, I think the state would also be very respectful of the labor posture of existing companies within the state,” he said. “You don’t want to turn down new business, but at the same time, you don’t want to jeopardize existing business. Out of respect, I’d think the state would at least have some type of a coordinating, communicating strategy with existing industry by geographical region because even within Mississippi, there are pockets of historically union areas. Those communities would probably welcome a union plant, but other communities may be trying to create a positive labor environment for non-union companies.”
When asked if Como would accept a UAW plant, Canup said he didn’t know.
“It would be one of the first go, no-go criteria,” he said. “When I did the study for the truck assembly plant, we told the folks they must be willing to accept a UAW workforce. We were only looking at four or five states in the Southeast on that particular project and three of them self-eliminated, if I remember right. Kentucky (a non right-to-work state) was one of our final sites. They were quite willing to accept a UAW workforce.”
Market shares for Detroit’s Big Three continued to decline this year, and Randle predicted the pattern would continue, partly because of burdensome labor costs.
“I heard somewhere that for every employee they’ve got, they’ve got three retired they’re taking care of,” he said. “Their model is not working compared to foreign automakers.”
Some Southern states might want to discourage domestic automakers from locating there, said Randle.
“If you have a domestic in your state, it’d be the last plant in your state, most likely,” he said. “You want to continue catering to foreign automakers because, to be quite honest and blunt, domestics are basically screwed. There’s not a whole lot they can do other than bite the bullet and say ‘we’re outta here, we’ve got to open up in less costly areas,’ and I don’t know if they have the kahunas to do that.”
The Big Three automakers lack the business flexibili
ty to transplant factori
es because of overcapacity and national union agreements.
“For them to consider adding new plants, they would have to close others,” said Bruce Belzowski, senior research associate for the University o
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