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backAMERItalk August, 2012
Mexico's Audi plant raises question of whether Alabama is topped-out in auto manufacturing
Alabama's auto industry will get an infusion of 877 new jobs starting later this year when Hyundai expands its Montgomery work force, the company said last week, but could announcements like that grow few and far between as the state sector matures?
Last month, German automaker Audi selected Mexico as the site of its first North American manufacturing plant, a project for which Alabama was believed to be eyed.
That decision came less than four years after Audi parent Volkswagen selected Tennessee over Alabama as the site of its new U.S. factory in a high-profile sweepstakes.
In fact, it's been a decade since Alabama landed an auto assembly plant, the granddaddy of economic development projects thanks to a large multiplier effect in the form of new suppliers and related business.
In the meantime, thousands of jobs have been created and millions of dollars spent in expansion and supplier projects for the state's existing three automakers -- Mercedes-Benz, Honda and Hyundai -- as they all continue to ramp up their state operations.
The rise of Mexico as a center of auto manufacturing, as well as a dearth of existing auto assembly plant projects at the moment, has some wondering whether Alabama is nearing a topping-out of its automaking potential.
But business recruiters believe the state has room for another auto assembly plant, said Greg Canfield, secretary of the Alabama Department of Commerce.
"The market for automotive manufacturers is ever-changing," he said. "We believe that there will be other opportunities that will potentially come our way."
There are auto manufacturers in some parts of the world that have no U.S. presence, he said, including those in China, India and one or two in Europe.
Existing makers
Meanwhile, there will continue to be growth opportunities tied to the state's existing automakers, he said.
"As labor costs rise in other parts of the world and as logistical and distribution costs rise, it may make more and more sense (for automakers) to look at shoring up their operations in the U.S.," he said. "Certainly we believe Alabama will be well-positioned for that."
Kim Korth, president of automotive consulting firm IRN Inc., said the past 10 to 15 years have been a period of contraction for U.S.-based automakers, culminating with the 2009 bankruptcies of Chrysler and General Motors.
But now, they're coming back faster than anyone anticipated, and Korth said there is the potential for those companies to build new auto plants, possibly in the Southeast or Alabama, where there are strong supplier bases.
Clearly, there are political issues to contend with, as that is a key difference between the union-heavy Detroit-based automakers and the Southeast auto sector, which is largely non-union.
"I don't think it's a high probability, but I don't think it's beyond the realm of possibility," she said.
Chinese manufacturers are another possibility, as are makers of medium and heavy trucks, she added.
"The short to medium growth opportunity for Alabama is in the continued growth and expansion of existing (automakers) and in the location of new Tier 1 and Tier 2 suppliers," Korth said.
Metro Birmingham is well-suited for that, since the area is strategically located among automakers throughout the Southeast, not just those in Alabama.
As for Mexico, Korth said she isn't surprised at Audi's choice of that country for its new plant, the choice of a number of auto manufacturers in recent years.
There are three key regions of the world for auto production -- Asia; North America and South America; and Europe -- and each is going to have a low-cost location. In the case of North America and South America, that's become Mexico, she said.
The country also has had huge growth in its Tier 1 supplier base, another important advantage.
Last year, Alabama's three auto assembly plants produced nearly 750,000 vehicles, and capacity continues to rise. Ongoing expansions at Honda in Lincoln and Mercedes in Vance are adding more than 1,500 jobs.
And on Monday, Hyundai said it would hire 877 workers as its adds a third shift in Montgomery.
Steve Sewell, executive vice president of the Economic Development Partnership of Alabama, said the state industry has a broad growth potential with its current automakers.
"There's not a (new auto assembly plant) project out there right now, and our focus will be on taking full advantage of where we see opportunities in the supply chain," he said.
Alabama has a responsibility to focus on its existing manufacturers, he added.
"We've attracted great automakers who have had terrific success, and we want to continue to see them be successful," Sewell said. "If we focus on that, we'll be well-positioned. We don't want to take our eye off that ball."
Source: al.com - GAI
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