Despite the “America first” scoldings of US President Donald Trump, foreign automakers have helped transform the economy of the Deep South in the past three decades.
However, they now face new challenges amid threats of trade wars and the rising influence of Silicon Valley in the auto industry.
In a region of the US more often identified with the legacy of racism and evangelical Christianity, German and Asian cafes dot the landscape in Alabama, where Daimler AG’s Mercedes-Benz, Honda Motor Co, Hyundai Motor Co and affiliate Kia Motors Corp, and Toyota Motor Corp all have plants.
Photo: AFP
“Lives are being changed,” said US Senator Bob Corker of Tennessee, where Volkswagen AG opened a plant in 2011 that now employs more than 3,200 people.
Veronica Curtis was one of the first 700 people hired when Mercedes started production at its Tuscaloosa, Alabama, plant in 1997, joining just five days after giving birth.
“I’ve never built a car, I didn’t know anything about cars,” Curtis told reporters.
Photo: AFP
However, 20 years later, Curtis, who is African-American, is a group leader for a team of 60.
“My husband wanted more and I did too,” she said, recounting trips for the company to India, South Africa and Europe. “If you are good enough, you can move on and I kept moving on.”
Such is the influence of the foreign car manufacturers, that colleges in southern US have adjusted their curricula to prepare students for jobs in this sector, including the University of Alabama, which trains engineers for the auto industry.
“We work with schools in our state to make sure that they are working with and they are listening to the companies,” Alabama Secretary of Commerce Greg Canfield said. “It takes a lot of coordination.”
Just about every major foreign brand that sells cars in the US has a factory in the southeast. The industry, including auto suppliers, employs 279,620 in the region, about one-third of the sector’s nationwide workforce, according to 2015 US Labor Department data.
Battered by the decline of the coal and textile industries, states such as Kentucky, Mississippi, Tennessee, Alabama, South Carolina and Georgia started to target automakers at the end of the 1980s with an array of enticements, including subsidies and deregulatory measures.
Former Kentucky governor Martha Layne Collins was the first to employ incentives with Toyota, said consultant Maryann Keller, whose husband had represented Toyota in the talks.
Collins “was roundly criticized,” Keller said, but “By today’s standards, she gave very little.”
“The biggest concern for companies is that the regulatory environment is friendly. We want to make sure that we offer the lowest tax rate ... that we have the right tax reform,” Canfield said.
However, South Carolina also modernized its road and rail infrastructure so that BMW AG could export cars built at its Spartanburg, South Carolina, factory through the port of Charleston, the state capital, 322km away.
Another big selling point has been the virtual absence of labor unions in the region, where most states have “right to work” statutes making it difficult to unionize.
“You look at Detroit and California, and you see that union employment has been detrimental,” Mississippi Governor Phil Bryant said. “It drives the cost of manufacturing above what we need to compete with foreign manufacturing.”
Automakers have been successful in keeping big plants union-free, turning back campaigns by unions.
Mercedes-Benz US International chief executive Jason Hoff described his company’s strategy: “We pay very competitive wages and we offer a very competitive benefits package.”
However, politics poses a medium-term risk to the industry, especially if the fear Trump will follow through on threats to impose tariffs on imports prompts automakers to slow their investments in the region.
Another question mark concerns the rise of autonomous driving and electric-car technology, which is advancing rapidly in Silicon Valley.
“The new electric vehicle plants are being built in the West, not in the South,” said Dennis Cuneo, an attorney at Fisher Phillips LLP, a law firm specializing in labor and employment law.
Tesla Inc has signaled plans to expand its plant in Fremont, California, where it already employs 6,000, in addition to the construction of a new battery plant in Reno, Nevada.
Faraday Future expects to build electric cars near Las Vegas and Lucid Motors is investing US$700 million in an electric car plant in Arizona.
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