Big Wheels Keep On Turnin'

First off the big deal block in 2002 was Hyundai, which concluded a boisterous state-vs.-state battle by picking Hope Hull, Alabama, on the southern outskirts of Montgomery, for its $1-billion investment in a new assembly facility. The factory will turn out its first test vehicles in 2004. What cinched the deal for Alabama over Kentucky and its $123-million incentive package was Alabama's $234.6 million, plus free-and-clear ownership of the land involved, a factor that emerged as a site selection theme throughout the year.

"The life cycles of vehicles are becoming much shorter, and that is driving a significant change in the way we renovate our facilities." – Dan Flores, General Motors Corp.

        But other factors have raised their heads since the project was announced. For one, now ex-Governor Don Siegelman and his fellow Alabamians may be feeling their own pinch, as their sacrifices to lure such projects have not only resulted in breaking ground, but digging a new financial hole that the state is struggling to escape. In November, officials with the Michigan Department of Environmental Quality filed an objection with the Alabama Dept. of Environmental Management, accusing the state of being much less stringent with its emissions rules, and thereby gaining an unfair recruiting advantage for the string of mega-projects the state has attracted since 2000.
        Some say the crucial difference is that Alabama's department is "authorized" by the EPA, while Michigan's is "delegated," but MDEQ spokesperson Patricia Spitzley says that's splitting hairs.
        "Alabama is beating their chest that they have this approved program, but that approved program cannot be any less stringent than the federal standards," she says. "They can't interpret the standards and apply them whichever way they feel like [doing]."
        EPA officials in the air division's Atlanta office said that Michigan's objections came well after the situation had been evaluated, and that EPA estimates show emissions will be under legal limits mandated by the Clean Air Act. The Act stipulates that the "best available control technology" must be used, and the brouhaha has erupted over how strictly individual states must follow federal guidelines in determining what technology should be employed. Ron Gore, head of the air division of the Alabama Department of Environmental Management, says the objection was based more on economic development aims than on concern for the quality of Alabama air. He says the changes proposed by Michigan would only limit emissions by a few more percentage points. He approved the final permit for the plant in October. Asked if agencies like his are coming under increased pressure because of economic development concerns, he says that is not the case at all.
        "Given the size and cost of these assembly plants, and the incentive packages, the cost of air quality compliance is way down there on the list of important factors," he says. "The most important factor I think is the willingness and ability of an environmental agency to run the permitting procedure quickly and efficiently. There is a certain basic minimum requirement everyone has to meet, and that's 95 percent of your operating expense right there."
        "It's not a retaliation, it's really about a level playing field," insists Spitzley. "It's not just Michigan, it's other states too, that are consistently applying the federal standards in their permitting, that could potentially be at an economic disadvantage when there appear to be other states that may not be following the federal standards and guidelines."
        Gore approved a similar emissions permit not long thereafter for Honda's location in Talladega County, where it plans to invest $425 million to double capacity and add 2,000 jobs. Add in a $600-million expansion by the Mercedes plant in Vance, near Tuscaloosa, and the state will be putting out 766,000 vehicles a year by 2005.
        Hyundai officials were settling into new offices in October as the plant construction and numerous road improvements were under way. The process had also been kickstarted to expand the city's foreign trade zone to include the Hyundai site. The city and county have doled out $18 million to pay for a two-phase site preparation process, the foundation work for the 823,000-sq.-ft. (76,457-sq.-m.) main building began Nov. 1, and work has begun on the nearby $7-million, 70,000-sq.-ft. (6,503-sq.-m.) employee training facility to be run by the state of Alabama upon completion in mid-2003. The early returns for the Montgomery area are already promising: a 33-percent rise in building permits and a 23-percent rise in those permits' value.
        The solar system of Hyundai suppliers have begun to establish their orbits. Most recently, Hyundai Mobis Co., a closely held unit of the carmaker which makes driver seat and chassis modules, announced in November it would build a $30-million, 430-job plant a few miles away. In July, Oxford Automotive announced it would invest around $200 million to build a new 370,000-sq.-ft. (34,373-sq.-m.) manufacturing facility on a 50-acre (20-hectare) site at the Jefferson Metropolitan Industrial Park in McCalla, convenient to all four Alabama OEMs. The company will make finished assemblies and underbody stampings when it opens in 2005. Dozens of others will follow suit in towns like Selma and Opelika, as well as reaching into Georgia and other states for suitable sites and business conditions.
        In South Carolina, BMW is still bringing home the bacon. Even if the state narrowly lost out to Georgia in the DaimlerChrysler site selection, it always has the new $400-million, 400-job additional investment by BMW announced in September to fall back on. The move was handily backed by an $80-million incentive from the state legislature that just happened to be triggered by a $400-million investment. Since locating in Spartanburg in 1992, the company has invested some $2 billion in the assembly plant. ZF Lemforder, which like Hyundai Mobis makes driveline and chassis technology, announced in September it would expand by 40,000 sq. ft. (3,716 sq. m.) at its Duncan, S.C. facility in order to service its BMW contracts.
        OEM locations and expansions on both sides are music to the ears of recently minted supplier plants Georgia, like the Jefferson Southern Corp. component plant in Rockmart, which makes 500 units a day for Honda. Already, the plant is adding to its 137,000-sq.-ft. (12,727-sq.-m.) footprint, with plans to add 50 to its team of 110 associates. In another corner of the state, Michigan Automotive Compressor, a company jointly owned by Toyota Motor Industries Corp. and Denso Corp., announced in July that it would build a $60-million to $100-million facility on 152 acres (62 hectares) near I-85 in Jackson County. The factory, due to open in June 2004, will employ 120 initially. Shozo Nakayama, executive vice president of Toyota Industries, said that local and state support were key, as was customer demand. The company's first plant is a 745,000-sq.-ft. (69,211-sq.-m.) facility that opened in 1989 in Parma, Mich.
        On the other side of Alabama, the under-construction $930-million Nissan plant in Canton, Miss., has been expanded before the first paint was dry. In June, Nissan announced it would toss in another $500 million in order to add production of its popular Altima sedan to the already planned lineup of pickups, SUVs and minivans. The move will provide a relief valve for the company's Smyrna, Tenn. plant, as well as spawn a new line of opportunity for what is becoming a well-stocked universe of suppliers.