DOMM-1001-NewsletterPageGraphics-15-05-May-02

Why Automakers are Heading South

Auto manufacturers are on the move, and all signs are pointing south.

In recent years, southern states have become a popular location for automobile manufacturing plants. Volkswagen made the move in 2011, building a new assembly plant in Chattanooga, Tennessee. Within the past year, Toyota made a splash by announcing the upcoming move from its home on the west coast to Plano, Texas, and Mercedes-Benz relocated its U.S. headquarters to Atlanta, Georgia. Other major brands also took their operations to the southern U.S., including Hyundai, Kia, Porsche and Nissan.

Earlier this month, Volvo confirmed their plans to build a $500 million plant in Berkeley County, South Carolina. The European company, which will continue to be based in Sweden, said this new plant will provide as many as 2,000 new jobs from the get-go and that jobs could total up to 4,000 eventually. This will be  Volvo’s first stateside plant since the manufacturer entered the North American market in the 1950s. Construction for the plant will begin in late 2015, and vehicle production is scheduled to commence in 2018.

Just a few days later, Mercedes-Benz announced that it will also be spending approximately $500 million building a new 8.6-million-square-foot plant in Charleston, S.C. This plant will focus on producing the brand’s next-generation Sprinter commercial van, creating an estimated 1,300 new jobs. Mercedes-Benz commented that Charleston, S.C., was selected for the skilled workforce it offers, as well as its strategic location near reliable suppliers and a port for easy transportation of products. Construction is planned to begin in 2016.

These changes have had a resounding effect on the Midwest. Michigan and Indiana still lead the country in auto employment, but the next three states are Kentucky, Tennessee and Alabama. Although each company may have specific reasons for a move to the South, experts believe the southern allure boils down to three factors.

  1. Work Culture: Compared to the North, unions in southern states are fairly weak. Most states in the South are right-to-work states, which appeal to automakers. Because of the complications working with unions presents, many automakers are willing to make the move.
  1. Population Growth: According to the most recent census, the population of southern states is growing faster than anywhere else in the country. Economic growth may be lagging behind, but the sheer number of consumers has made automakers take note.
  1. Infrastructure: The South’s network of railroad and highway lines makes transportation to these cities easier than ever. Southern colleges have also played an important role in automotive growth and development. Clemson University is the only school in the country to offer a Ph.D. in automotive engineering, and is home to the Clemson University International Center for Automotive Research (CU-ICAR), which has created partnerships with other universities in the area.

Although the effects of these moves likely won’t be seen for a number of years, the South’s challenge to support such a sizable influx of business is imminent. In time, both regions will have to adjust to their new roles; the North as the seasoned veteran of auto manufacturing, and the South as the unproven rookie, ready to make a name for itself.

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