Last week’s announcement Mercedes-Benz expects to complete construction of its new U.S. headquarters near Atlanta by 2018 and press reports Georgia now is pursuing a potential assembly plant project with Jaguar Land Rover refocuses the spotlight once again on the American auto industry’s shift South.
New Jersey-based Mercedes-Benz U.S.A. revealed Feb. 3 the exact location of its new nerve center, which will be built on a greenfield site in Sandy Springs, GA, about 15 miles (9 km) north of Atlanta. Mercedes U.S. initially announced the move to Georgia in January after also considering sites in Texas and North Carolina.
Set on a 12-acre (4.9-ha) tract, the 250,000-sq.-ft. (23,225-sq.-m) operation is expected to be in full swing by early 2018, as Mercedes becomes the second Germany-based automaker to locate its U.S. headquarters within a short drive of Hartsfield-Jackson Atlanta International, the country’s busiest airport.
Meanwhile, the Atlanta Journal Constitution reported last week Georgia Gov. Nathan Deal recently met with JLR executives during what the paper says was a “secretive economic development mission” to the U.K. in January. The AJC says JLR is scouting North America for a potential vehicle assembly plant site.
If JLR goes to Georgia, it will mark the fourth international automaker with operations in the state, following Mercedes, Kia, which has an assembly plant in West Point, and Porsche, now occupying a new state-of-the-art headquarters on grounds that once supported a Ford factory.
The full press by Georgia is steadily shifting the state’s economic portfolio toward greater reliance on the automotive industry. Although the state is unable to provide a complete picture of the industry’s economic impact, it says the sector now generates $5 billion in exports annually and profits of $6.5 billion per year.
Porsche’s new 26.4-acre (10.7-ha) state-of-the-art operation, completed late last year, is the state’s latest automotive jewel. It houses 400 employees and includes a museum, technical service and training center, conference center and 1.6-mile (10-km) test track.
Bernard Maier, head of sales and marketing for Porsche, tells the Automotive News World Congress in Detroit in January Georgia’s logistics advantage – centered on Hartsfield-Jackson – was a big factor in the automaker’s original decision 16 years ago to locate in Atlanta. “It’s the biggest airport in the world,” he notes. “Ninety percent of (our customers) are in reach within two hours.”
Tom Croteau, deputy commissioner-Global Commerce for the state of Georgia, says in an interview the airport was one of the biggest draws for Mercedes, as well. The U.S. arm is expected to assume oversight of the Canadian and Mexican markets as well, and having access to Hartsfield-Jackson will make it easier to bring in executives from those operations.
“It is part of Atlanta’s DNA. It’s a big factor when you have business and dealers all over the country,” he tells WardsAuto. “You can bring board members in from around the world for meetings – and you can get flights that accommodate everyone’s schedule.”
But also working to Georgia’s advantage is the labor controversy fomenting just over the border in Tennessee, where the UAW appears to be making inroads at Volkswagen’s Chattanooga assembly plant. If the union’s organizational efforts are successful, Chattanooga would be the first UAW-represented foreign-owned light-vehicle assembly plant in the U.S., other than the handful that began life as joint ventures with the Detroit-based automakers.
After a nasty political battle last year pitted government officials against the union during an organization drive that ultimately fell fewer than 45 votes short, VW agreed to open its doors to the UAW in November, allowing it to hold meetings in the Chattanooga facility and discuss issues with plant management. In December, the UAW said it was eager to begin formal discussions about becoming an official collective-bargaining agent for its membership, said to include at least 45% of the plant’s hourly workforce.
Tennessee's Loss Georgia's Gain?
That development appears to be keeping the state of Georgia busy for now, but it also has officials wary potential UAW success in Tennessee could start a domino effect throughout the South.
“It’s a double-edged sword for us,” Croteau says of the unionization drive in Chattanooga. “There’s concern, because we don’t want to see that bleed into Georgia. A large part of our success has been as a non-union environment.
“At the same time, we’ve seen companies that have said, ‛We’re looking at Georgia, because we don’t want to look at Tennessee because of the potential unionization going on.’ So it’s also driving opportunities to us.”
Croteau says the UAW could expect strong political resistance if it attempts an aggressive organizing move in Georgia.
“I think the political stand would be (that) we are a minimum-regulatory environment, and we consider non-unionization to be a part of that favorable regulatory environment where both businesses and individuals can make their own decisions,” he says. “We’re a right to work state, and we’re committed to being a right to work state.”
Kia is the state’s top automotive employer, with about 3,000 workers at its assembly plant that built 365,510 Kia Optima cars and Kia Sorento and Hyundai Sante Fe CUVs last year.
That operation has been a big factor in drawing suppliers to the state, as well. Georgia already is home to 25 automotive suppliers, including Korea-based Mando, Glovis and Mobis that followed Kia to the state. The automaker says it is responsible for bringing 10,000 jobs to the region.
“We have good activity related to Kia,” Croteau notes. “And we’ve always had good activity related to Japanese suppliers. So when you put all that together our activity in that industry sector has been our top economic development opportunity for the last few years.”
The industry’s climb back from the depths of the recession in 2009 has had a positive impact on the state as well.
“In general (we’ve) had great activity the last couple of years,” Croteau says. “The economy is doing well in the U.S. and the Southeast is considered the new automotive center going forward.
“And Georgia is situated between Mercedes, VW and BMW (in South Carolina), so that gets us a lot of looks from suppliers who want to supply to all three of those European OEMs.”
Mercedes to Bring Jobs, Prestige
Lower wages are a critical part of what’s drawing the auto industry to Georgia.
Mercedes, which will begin staffing of a temporary operation in July, reportedly is expecting fewer than half of its New Jersey-based workers to take positions in Georgia, about on par with employee-retention rates for other automakers that have made similar moves.
That will open the way for local hires, which the automaker can expect to recruit at about 80% of the pay in New Jersey. Mercedes says in a statement it will hire “hundreds” of people locally. In all, about 800-1,000 jobs will be housed at the new headquarters.
Georgia is the home to 121,304 auto-industry-related workers, who earn an average $13.43/hour and of which a scant 2.9% belong to a union. That puts automotive wages among the lowest in the region, below those of Tennessee, Mississippi, Alabama and other neighboring states. UAW membership in Georgia has declined 95% over the past 15 years, according to state data.
“Cost is always part of the equation,” Croteau admits. “From labor costs to real-estate costs, logistics costs, training costs, all of those were factors (Mercedes) looked at.”
But Mercedes means more to Atlanta than just the 800-1,000 jobs, Croteau says. Having the German automaker make the city its home alongside Porsche, Delta and Coca-Cola provides the type of cachet that “allows us to recruit that many more (automotive) companies and really have a high profile with European companies.”
That certainly won’t hurt as the state continues its pitch to Jaguar Land Rover.
Incentives also were a big part of the draw for Mercedes, Croteau acknowledges. The package to lure the automaker from New Jersey includes a reported $23 million in tax credits and other spiffs. The state also boasts lower corporate taxes than New Jersey.
Overall, the Southeast region is expected to account for production of 4.4 million vehicles in 2015, equivalent to 25.1% of North American production, according to WardsAuto data. That is forecast to grow to 4.7 million vehicles and a 26.3% share of North American output in 2018.
Georgia should produce more than 373,000 vehicles this year, 8.6% of the Southeast region’s total.
Croteau says he isn’t worried the government’s full-court recruitment offensive will make the state’s economy too reliant on the up-and-down auto industry that saw the once-flush Midwest slapped with the Rust Belt label in the 1980s.
“I think the (state’s economic) portfolio is already balanced,” he says. “We’re not so reliant on any one industry. And we don’t have some of the issues built in with unionization as the Rust Belt does.”
