Alabama’s  Opportuni1es  &  Challenges  Observa1ons  From  a  Site  Selector  

     

EDAA  Winter  Conference  Feb.  3,  2014    Dennis  Cuneo  Fisher  &  Phillips  LLP          

Experience  

•  Former  SVP  Toyota  

•  Projects  >  $12  billion/  20,000  jobs  –  Auto….heavy  industry….R&D…high  tech  

•  Board  of  Directors:    3  companies  

•  Site  Selec1on:  –  Insider…  Investor….Consultant….Board  Member  

Toyota  Huntsville  Plant  

     •  Expanded  4  1mes  since  start-­‐up  •  $850,000,000  investment….1200  jobs  •  Only  Toyota  plant  building  4,  6  &  8  cylinder  engines  

Established  2001  

CEO  Magazine  Best  States  For  Business  State   2013  rank   2010  rank   Change  

Texas   1   1   -­‐-­‐  

Florida   2   6   +4  

North  Carolina   3   2   -­‐1  

Tennessee   4   3   -­‐1  

Indiana   5   16   +11  

Arizona   6   11   +5  

Virginia   7   4   -­‐3  

South  Carolina   8   10   +2  

Nevada   9   5   -­‐4  

Georgia   10   7   -­‐3  

Louisiana   11   40   +29  

Alabama   16   20   +4  Ohio   22   43   +21  

CEO  Rankings  Workforce  Quality  

  TX

FL

NC

TN

IN

AR

VA

SC

GA

LA

AL

Workforce  Quality

8.1 6.9 7.7 7.4 7.7 7.1 7.7 7.0 7.2 5.9 5.8

CEO  Magazine:    Best  &  Worst  States  for  Business  2013  

Percep1ons  Oden  Lag  Reality  

Paul  Krugman,  New  York  Times,  July  25,  2005  “….Japanese  auto  companies  opening  plants  in  the  Southern  U.S.  have  been  unfavorably  surprised  by  the  work  force's  poor  level  of  training.”    

 Response  LeMer  from  Toyota:  

"The  Huntsville  work  force  has  been  highly  mo1vated,  well  trained  and  produc1ve.  Almost  30  percent  of  our  hourly  team  members  are  college  graduates,  and  97  percent  are  high  school  graduates.”  

Do  Incen1ves  Maler  

“States  are  more  aggressive  in  compe1ng  with  one  another”    CEO  Magazine:    Best  &  Worst  States  for  Business  2013  

Do  Incen1ves  Maler?    

   2  Cases  Studies  –   R&D  Project  –   Auto  Parts  Project  

 

R&D  Project    

•  200  jobs  @  $110,000  per  job  ($145,000  w  benefits)  –  60%  engineers  

•  Ini1al  RFP  sent  to  12  States  

•  AL  didn’t  make  final  cut  –  Incen1ves  not  compe11ve  

IBM  Baton  Rouge  

•  800  sodware  jobs    •  Incen1ves  

– $30.5  million  building  – $29.5  million  in  grants  – $14  million  for  college  programs  to  increase  computer  science  graduates  

Source:    New  Orleans  Times  Picayune    3.17.13  

Auto  Parts  Project  

 •  Ini1ally  36  jobs  @  $54,000  per  job  

– Expansion  possible  

•  AL  loca1on  selected  near  OEM  

•  AL  incen1ves  lower  than  compe1ng  state  – Project  divided  with  plant  in  compe1ng  state    

Opportuni1es  for  Alabama  

•  Chemical  •  Aerospace  •  Re-­‐shoring  •  Automo1ve  

– Supply  Base/    R&D    

Alabama  Chemical  Corridor    

Source:    Alabama  Power  

“…most  promising  development  in  the  American  economy….  discovery  of  oceans  of  natural  gas  in  North  America….”    Forbes  8.21.2012  

Aerospace  

     Airbus  builds  on  State’s  robust  aerospace  sector.  

Re-­‐shoring  

-­‐  Wages  on  the  rise  in  China  &  developing  countries  -­‐  Lower  energy  costs  in  U.S.  -­‐  Advanced  manufacturing  techniques    McKinsey:    2/3  of  manufacturing  occurs  close  to  demand  

   But  There  Are  New  Challenges  As  Well  As  New  Opportuni1es  

For  the  Southern  States  

Auto  Industry  Strong  hub  of  Auto  Produc1on  in  the  South  

2  decades  of    Investment  by  Foreign  Automakers  

Source:    Thomas  Klier,  Federal  Reserve  Bank  of  Chicago  

Past  20  years  Alabama  has  become    

Automo1ve  Powerhouse  

4th  in  U.S.  vehicle  produc1on  4th  in  vehicle  exports:  $6.6  billion  in  2012  1/4  of  all  passenger  vehicles  built  in  the  South  made  in  Alabama.  Source:    amazing  alabama.com  

But  the  South  &  Alabama  face    new  challenges  &  new  opportuni1es  

as  Auto  Industry  restructures        

Canada    $3.2  billion  

Total  $51.7  billion  

U.S.  Great  Lakes    

$23.9  billion  United  States    

$35.8  billion  

Mexico    $12.7  billion  

South    $8.2  billion  

U.S.  Great  Lakes  includes:  IL,  IN,  KY,  MI,  MO,  and  OH  South  includes:  AL,  FL,  GA,  MS,  SC,  TN,  and  TX  

North  American  Automaker  Investments    2010-­‐2013   Source:  CAR  Research,  Book  of  Deals  

Since  the  Great  Recession  Mexico  Has  Outpaced  U.S.  Southern  Region  

24 month comparisons Oct 2010 – Sept 2012 * States include TN, MS, AL, GA, NC, SC, FL & TX

Mexico  •  More  trade  agreements  •  Cheaper  labor  •  Growing  Parts  Infrastructure  

 

Automaker  investments  in  

Mexico    2010  –  2013  $12.7  billion    

Automaker  Investments  in  Southern  States  2010  –  2013  $8.2  billion  

What  does  the  future  hold?  

New  Assembly  in  Mexico  

•  Nissan,  Honda,  Audi,  Mazda,  (w  Toyota  produc1on)  building  new  plants.      

 •  Chrysler,  Ford,  GM  adding  capacity  at  exis1ng  plants.  

•  BMW  &  Hyundai  reportedly  in  talks  with  Mexican  government.  

 •  Volkswagen:    majority  of  $7B  NA  investment  in  Mexico.  

Another  Challenge  for  the  South  

UAW  currently  targe1ng:  – Volkswagen  Chalanooga  – Nissan  Canton  – Mercedes  Tuscaloosa    

UAW  Campaign  At  Nissan  

UAW  Campaign  at  Mercedes  

State.  Sen.  Bobby  Singleton  at  news  conference    about    UAW  campaign    at  the  automaker's  Tuscaloosa  County  plant.  

Source:    AL.com  

 

Center  for  Automo1ve  Research  Southern  Automo_ve    Research  Alliance  

   

 Iden1fying  &  Exploi1ng  Opportuni1es    Southern  Automo1ve  Industry  

1.   Alabama  2.   Kentucky  3.   Louisiana  4.   Mississippi  5.   South  Carolina  6.   Tennessee  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐  -­‐    •  Duke  Energy  •  CU-­‐ICAR  •  University  of  Alabama  •  AAMA  •  MAMA  •  SCMA  •  TAMA  •  GAMA  

-­‐       

Par$cipa$on  by  six  states      

Suppor$ng  contribu$ons  and  in-­‐kind  par$cipa$on  by  Duke  Energy  and  various  Universi$es  &  AMA’s    

Southern  Automo_ve  Research  Alliance  (SARA)  

Southern  Automo_ve  Research  Alliance  (SARA)  

Opportuni1es  to  Grow  Southern  Auto  Industry    •  Expand  Supply  Base    •  Enhance  Automo1ve  R&D  in  the  Region  

Auto  Parts  Suppliers  S_ll    Concentrated  In  Upper  Midwest  

Thomas  Klier,  Federal  Reserve  Bank  of  Chicago  

Assembly  

Tier  1  

Tier  2  

Tier  3  

Includes  Alabama,  Georgia,  Mississippi,  North  Carolina,  South  Carolina,  and  Tennessee.  

Source:  CAR  2010  

Includes:  Illinois,  Indiana,  Michigan,  Ohio,  Pennsylvania,  and  Wisconsin    

Opportunity  

Less  Lower  Tier  Supplier  Jobs  in  the  South  

Jobs   US   Region   Outside  Region  

Direct   2000   2000   -­‐-­‐  

0  

Supplier   5133   2603   2530  

Spin-­‐off   8680   4630   4809  

Totals   15,813   8474   7339  

Opportunity  High  %  out-­‐of-­‐region  jobs  

Es_mated  Job  Impact  Southern  Auto  Assembly  Plant  

Source:    Center  for  Automo1ve  Research  

Fuel  Economy  

Source:  CAR  2013    

Connec_vity/Automa_on   Electronics  Safety  

Bio-­‐Based  Materials/  Fuels  

Lightweigh_ng  

New  Automo1ve  Technology  Brings    New  Opportuni1es    

 

Porsche    

High-­‐Tech  Automo1ve  Systems  

Next  genera1on  high  strength  steels  Foamed  metals  

Aluminum  and  magnesium  alloys    Corrosion  protec1on  

Bio-­‐based  materials  Advanced  plas1cs  and  composites  Mold  in  color/Films/Other  for  plas1cs  Alterna1ve  automo1ve  trim  cover  insert  and/or  bolster  fabrics  

Recycled  low  cost  filler  materials  Coa1ng  technology  

Non-­‐destruc1ve  tes1ng  methods    Robo1cs  simula1on  sodware  Forming  high  strength  steels  

New  laser  technology  for  trimming,  piercing  and  cuvng  

New  joining  technologies  Tool  rapid  hea1ng  and  cooling    Mul1-­‐material  joining  technologies  Low  cost  fine  blanking  alterna1ves  

Materials  and  Processes   Powertrain  and  Fuels   Connected  Vehicles  Gasoline  direct  injec1on  Turbochargers  and  superchargers  Dual-­‐clutch  transmissions  

Higher-­‐speed  automa1c  transmissions  (8-­‐  or  9-­‐speed)  Con1nuously  variable  transmissions  

Vehicle  electrifica1on:  motor  assist,  hybrid  electric  vehicles,  plug  in  hybrid  electric  vehicles,  extended  range  electric  vehicles,  or  balery  electric  vehicles    

Alterna1ve  fuels:  natural  gas,  biofuels  (E85  and  B20),  and  hydrogen  

Dedicated  Short  Range  Communica1ons  (DSRC);  3G,  4G,  LTE  Cellular;  Wi-­‐Fi;  Bluetooth;  and  Global  Posi1oning  System  Infotainment  (e.g.  Sync,  Uconnect,  and  Cue)  Human  machine  interface  Collision  warning  and  avoidance  

Lane  departure  warning  Blind  spot  and  pedestrian  detec1on  Road  condi1on  and  event  no1fica1on  

Adap1ve  route  guidance  with  real-­‐1me  traffic  informa1on  Signal  phase  and  1ming  

Tolling  and  E-­‐payment  Loca1on-­‐based  services  

Efficiency  monitoring  and  carbon  footprint  accoun1ng  Infrastructure  investment  planning  and  condi1on  monitoring  Fleet  management  

Prognos1cs  and  diagnos1cs  

Advanced  Driver  Assistance  Radar,  light  detec1on  and  ranging  (LiDAR),  and  cameras  Forward  collision  warning  systems    

Automa1c  emergency  braking  and  steering  Back-­‐up  and  rear-­‐view  assistance  systems  

Lane  departure  and  lane-­‐keeping  assistance  systems  Adap1ve  cruise  control  and  adap1ve  cruise  control  with  lane-­‐keeping  

Blind  spot  and  pedestrian  detec1on  systems  Parking  assistance  and  automated  parking  systems  Adap1ve  headlights  and  adap1ve  high  beams  

Source:  CAR  2013  

Loca1on  of  Automaker  &  Supplier    R&D…Design…Engineering  

Nissan  HQ  

Other  opportuni_es???  

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