Y'all Come

From the border states of Kentucky and Tennessee to such Deep South states as Alabama and Mississippi, making cars and trucks and the things that go in them is becoming as common as a southern accent. Although the economics could reverse and plants move to more profitable climes, the 10-year rise of automotive manufacturing in America's South seems "irreversible," says Albert W. Niemi Jr., dean of Southern Methodist University's Cox School of Business in Dallas and an economist who has tracked manufacturing's migration out of the North and East. "If you look at labor, land, energy [and] taxes, there is a significant cost advantage to doing business in the southern economy," he states. There's also the South's perceived quality of life. "It's cold here in Texas, but we're not going to get any snow tonight," Niemi quips. "Can a northern state compete [with the South]?" asks New York-based James Schriner, the leader of Deloitte & Touche's Fantus Corporate Real Estate strategies practice. "On the surface, you'd say, probably not." Boasts Tony Grande, the outgoing commissioner of Tennessee's Department of Economic & Community Development, "The South is truly the new automotive center of North America." Tennessee, for instance, now ranks fourth in U.S. auto production, touts such marquee names as Nissan and Saturn and lays claim to more than 900 automotive suppliers. Having located its U.S. operations in Tennessee in the early 1980s, Japan's Nissan Motor Co. Ltd. in 2001 announced plans to invest $1 billion in plants in Smyrna and Decherd over a four-year period. Meanwhile, General Motors Corp.'s Saturn division is undertaking a $1.5 billion expansion in the state. Bridgestone/Firestone Americas Holding Inc. has its headquarters in Nashville. In 2002 the company broke ground for a 750,000-square-foot distribution center in Lebanon, Tenn. Farther south, Nissan this spring is slated to open a $1.43 billion plant in Canton, Miss., about 20 miles north of Jackson. Nissan minivans will be first off the assembly lines, followed in 2004 by the Altima sedan. Some 5,000 people are expected to be employed when the plant reaches full production. Geographically next door in Alabama, a $220 million Toyota Motor Corp. engine plant is slated to begin production this spring in Huntsville, the city that built the Saturn V rocket that launched U.S. astronauts to the moon. "When Toyota was considering Huntsville, we told their board of directors that if we could build rocket engines, we felt that we could build their engines," relates Brian Hilson, president of the Huntsville-Madison County Chamber of Commerce. The plant will be Toyota's first V-8 engine manufacturing facility outside Japan. "I think a lot of the growth this far south has been a natural evolution within automotive production," says Hilson. Indeed, Alabama's emergence as a production location goes back before Mercedes-Benz's 1993 car and truck assembly plant in Tuscaloosa and extends forward to the Hyundai Motor Co. $1 billion auto assembly and manufacturing plant in Montgomery, where production is slated to begin in 2005. Meanwhile, state governors taking office this year aren't expected to withdraw the welcome mat for auto and truck manufacturers. "Regardless of party, we have been very consistent in our commitment to the automotive industry," stresses Tennessee's Grande. "Philosophically, we're very pro-business. And the new governor is already very much engaged in bringing automotive projects to the State of Tennessee. . . . While we need a diverse economy, the automotive industry will continue to be a major driver of the Tennessee economy." Alabama's Hilson observes that economic development has had a great run in the state during the past decade, with "a lot of emphasis" on the auto industry. "What I think we will be able to do is [to] continue to build upon that. There's not any reason at all to think that [new] Governor [Bob] Riley's administration will do anything less than that," he says. The drive south probably won't end with manufacturing. Tennessee, for example, would like to attract some of the design firms and R&D operations that remain up North. "We do very well in manufacturing, and we're making inroads into the financial services side," says Grande. "But there are a lot of high-paying, high-skilled jobs on the engineering side" that Tennessee would like to have as well, he says. However, there are bumps down the road, both for the states and the auto companies seeking to locate in them. With budgets in some cases squeezed more tightly than they have been in 50 years, for example, some states may not be able to offer the same level of location incentives that they have -- or may tighten their terms. At the same time, Alabama knows that to continue to attract carmakers and other manufacturers, it needs to improve the quality of its public education. "We've got to create some change in our ability to generate tax revenues sufficient to better support public education statewide," Hilson says. "If we don't do that then the statutory incentives that we are able to offer that affect the financing and tax-incentive capabilities really become secondary." And while states often publicize the number of jobs a particular project promises to create, companies, for their part, need to be careful not to overwhelm the local labor market, stresses Buzz Canup, president of Canup & Associates Inc., a Jackson, Miss.-based site-location and economic-development consulting firm. "Identify a location that has the workforce density that is sufficient to support not only your requirements, but continue to support the requirements of other business and industry in the region," he urges. "You don't want to go into an area and create a tremendous labor shortage over a short period of time and have an adverse impact on the community or region -- or, in some cases, even the state."