#380. Manufacturing in the Southeastern U.S.

Posted on | The Agurban
Manufacturing in the Southeastern U.S. 

We have often referenced Joel Kotkin in our Agurbans. Mr. Kotkin is an internationally-recognized authority on global, economic, political, and social trends. A recent article by Mr. Kotkin, Foreign Industrial Investment is Reshaping America, originally appeared in Forbes.com. Below are some key points as they relate to manufacturing: 

–          Foreign industrial investment rose $30 billion between 2009 and 2010. These investments took place primarily in the chemical industry, as well as automobile, steel and other transportation sectors. It is also heavily focused on the southeastern states and Texas.
–          Large foreign global corporations look at the United States as a whole, and “looks at the factors that matter most, like ease of doing business,” notes Bill Taylor, head of Mercedes’ U.S. operations. “The Southeast has that and has a workforce willing to be engaged.” In 2011, Mercedes invested $350 million in their U.S. assembly plant in Tuscaloosa, AL.
–          The average cost of building an automotive assembly plant is over $1 billion, and represents major employment generators. They also bring parts suppliers and other industries related to auto manufacturing.
–          Over the next decade, these (foreign) investments could transform the nation’s industrial structure. Alabama and Kentucky already produce almost as many cars as Michigan. According to the U.S. Dept. of Labor, Michigan still leads the country in auto employment with 181,000 jobs, followed by Indiana. But the next three states are Kentucky, Tennessee, and Alabama.
–          Why is this happening? Unions certainly are much less of an issue in the Southeast. But…
–          Unions are not the only issue. The South also enjoys a strong network of rail and highway lines that make transport to key markets easy and affordable. Energy costs tend to be lower. Furthermore, many Southeastern port cities – notably Houston, Charleston, Mobile, Hampton Roads – have made big infrastructure investments in recent years.
–          The Southeast also plans to become a research hub for the auto industry. The Clemson University International Automotive Research Center is the nation’s only school to offer a Ph. D. in automotive engineering.
–          When Toyota recently announced plans to establish a plant for the Prius near Tupelo, MS, the new plant received 35,000 applications for 1,300 available. 

As always we will continue to keep close eye on these new investments.