South This Report Is About

South

This report is about the automobile industry migrating south and thus leaving northern and eastern states reeling. Corporate America and especially the automobile industry have become very competitive as the world has become more of a global economy. Companies are constantly on the lookout for new ways to strategically reduce overhead and still increase market share and profitability. In the past, Northern states like New Jersey, Detroit and New York offered the automobile industry high salary and unionized employees often forcing the manufactures to consider moving abroad.

When moving was not an option, the automobile industry was constantly closing plants and laying off employees to help balance the books. As recently as 1990's, companies needed to use solutions like labor force reduction to cut the associated cost of labor. This strategy was an always a resource nightmare as 'getting laid off' or 'getting downsized' became all too common buzz words. The automobile industry has found a viable alternative to moving abroad or shutting down facilities.

There has been a steady migration by the entire auto industry from states like Michigan and other Midwest states to Southern states. "The relocation of automotive manufacturing is threatening the economic future of East Coast and Midwestern states and creating a whirlwind of investment from Mississippi to South Carolina." (Corbett, 2002) Cities like Detroit are holding on for dear life and can only forecast mild levels of prosperity for about ten more years or so according to many industry experts.

Moves from places like Michigan, New Jersey and New York entail hundreds of thousands of manufacturing jobs lost and will also be a boon for the southern states that have become the new emerging production market for the automobile industry in the United States. "However, it's North America's East Coast that is getting hit the hardest. A number of auto factories have closed there since the 1980s. General Motors Corp. facilities in Tarrytown (now called Sleepy Hollow), NY, Clark, NJ; and Framingham, MA, are just a few." (Corbett, 2002) the real advantage the south has is that both Asian and European automakers are also expanding or opening new plants in southern states. This report therefore aims to answer the question of why the southern United States has become such an attractive location for the automobile industry.

The automobile industry has tried many new strategies such as decreasing its dependence on suppliers and making remaining suppliers utilize new quality measures and also providing products with just-in-time delivery systems. These requirements have added benefits of elevating the communication process between suppliers and the industry for both data and verbal processes. The business strategy is focused on the company's use of more economical materials that can be delivered with effective prices and on time. The auto industry has also been experimenting with new marketing strategies that utilize the internet and have been touted as an opportunity to offer 'internet ordered personalized cars.' Imagine buying a car made specifically for you as the technology has made this a reality for the near future. But even all of these advances are not as dramatic as the migration south.

To the dismay of the Northern states who have historically been the home of much of the automobile industries United States manufacturing, the worlds car manufacturers have begun to move there factories and manufacturing facilities to the Southern region of the United States. "In one of the most dramatic changes to the United States factory network since the Industrial Revolution introduced mass production and power-driven tools two centuries ago, the auto industry is shifting output to the Southern countryside and away from regions home to generations of assembly line workers." (Corbett, 2002)

The moves have allowed the auto industry to recreate their logistics and output in union free tax haven states like Louisiana, Tennessee, Mississippi and Alabama. "Meanwhile, the auto industry is flocking southward like migrating birds in the fall. Once known for producing cotton and tobacco, Dixieland today might be better recognized for producing cars and trucks." (Corbett, 2002) These states have long considered themselves as viable alternatives for moving abroad for the automobile industry. The southern region has many advantages over its northern peers and the automobile industry is hopping on the band wagon to take advantage of the situation.

Some of the biggest incentives for manufactures are the outrageously low tax bases in southern states. "When taxes are paid, southern levies are lower than most Northern states. GM's Hamtramck, MIG, plant, for instance, has one of the highest property tax mileages in the United States at 88 mills." (Corbett, 2002) Taxes are some much lower than in say Michigan or New Jersey and southern state officials are very open to negotiations to land the new factories and the plethora of jobs. In other words, land values are low and government incentives are extraordinary so the automobiles industry would be crazy to not migrate south for those reasons alone. "Furthermore, utilities costs are lower. After the products have been assembled, the South's location is superior to the Midwest or the East Coast for delivery." (Corbett, 2002) but there are other incentives.

Not only is the land for the new facilities cheaper than in the north, there are other perks such as much lower utility fixed costs such as power. "Tennessee has some of the lowest industrial power rates in the United States, anywhere from 20% to 50% below other states, Grande points out." (Corbett, 2002) but, these plants are also all going to be completely new so the latest environmentally sound technology can be implemented from day one. Northern facilities are usually older and can not match such advantages. In fact a major concern of the automobile industry is the pollution rates of the northern facilities. "When plants are up and running, there are fewer environmental issues. Activism is not as prevalent. Industry also is relatively new to the South. So new assembly plants do not have to over-compensate for older factories contributing disproportionately to emission totals." (Corbett, 2002)

Couple taxes and low rates of utilities with the added bonus of excellent roads and waterways for final and parts products delivery and again the automobile industry would be crazy to pass up on the perks. "Tennessee is within one day's drive of 75% of all United States markets, and its road system is one of the best in the nation. Other southern states are improving infrastructure. Besides 1-65 and 1-75, which are straight shots to the Midwest, highways I20 and 1-35 provide quick access from the South to Mexico's burgeoning auto industry. Meanwhile, Michigan, for example, is a peninsula state with roadways that generally are in bad shape. The East Coast has fewer major parts suppliers. Components coming from the Midwest and the South add significant shipping costs to vehicle programs" (Corbett, 2002)