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Birmingham, AL—Beleaguered Delphi Corp., the bankrupt auto parts maker, is facing a strike by its workforce and closing plants nationwide. But the company is growing in Alabama. DaimlerChrysler AG recently gave suburban Detroit-based Delphi the contract to design and build the cockpit for a new Mercedes sport utility vehicle. Delphi will manufacture the parts at two facilities near the Mercedes vehicle-assembly plant in Tuscaloosa, about an hour SW of Birmingham.
The focus of US automotive manufacturing is shifting from North to South. For the past six years, the auto industry has been turning from Detroit to cities in states like Alabama, Tennessee, Kentucky and North Carolina. The southern facilities, however, are primarily serving foreign rather than domestic vehicle manufacturers. While Ford Motor Co. and General Motors Corp. cut production at home and abroad, European and Asian automakers are expanding in the US, mostly south of the Mason-Dixon line.
Alabama is a good example of the trend. Stuttgart, Germany-based DaimlerChrysler, Tokyo-based Honda Motor Co. Ltd. and Seoul-based Hyundai Motor Co. all opened plants in the state in the past 10 years. Last year, 479,000 new vehicles rolled off the three companies' assembly lines. The number is expected to jump to 650,000 this year. More than a dozen parts manufacturers, suppliers and distributors followed in the automakers' wake and more are coming. Just recently, the US division of Seoul-based GMB Korea Corp. announced that a $28.6 million plant in Auburn, AL will produce powertrain components for the Hyundai factory in Montgomery, AL.
The South's appeal to automakers is easy to understand. Land, construction and labor costs are lower here than in most other parts of the country. According to Gary Matthews, executive director of the Tishomingo County Development Foundation in Luka, MS, construction costs in rural areas like Tishomingo County are about 70% of the national average. He says the savings were a major factor in Samuel Manu-Tech Inc.'s recent choice of Luka for development of a $22 million steel fabrication facility. The Toronto-based company will produce ready-to-use components for the transportation, construction and marine industries. Skyline Steel LLC of Parsippany, NJ also chose Luka for construction of a $17.4 million steel mill.
Southern state and local governments have aggressively pursued new business with economic incentives. No less than six federal, state and local agencies provided grants and loans to fund Samuel Manu-Tech's land purchase, site work, rail spur, water and wastewater systems, access road and other infrastructure needs.
While Detroit and the rest of the Northern rust belt could make a comeback in the coming decade, it seems more likely that their futures will center on automotive research and design instead of manufacturing. Without question, it is the South, particularly the corridor that runs along interstates 65, 75, 85, 20 and 55, that is fast becoming the new hub for automotive manufacturers, suppliers and distributors.
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