By Jack Rogers
From the January/February 2016 Issue
When you talk to folks in Alabama, you might think from the slow-and-easy rhythm of conversation in the Deep South that nobody’s in a hurry to do anything. But if you assume that’s a reflection of the state’s business climate and economic growth strategy, you better think again.
With Mercedes-Benz and Airbus anchoring its top-tier positions in automotive and aerospace manufacturing, an expanding high-tech hub and forward-thinking leadership in 21st-century workforce training, Alabama has put together a winning combination that can go toe-to-toe with heavyweights from coast to coast. The Crimson Tide is rolling, big time, and now it’s brought in our top honor: Alabama is BF’s 2015 State of the Year.
Since the beginning of last year, Alabama has reeled in a bevy of big-ticket projects that will provide a solid foundation for future growth. The top five projects alone in 2015, including Polaris Industries’ new manufacturing facility for off-road vehicles, yielded an impressive $2.7-billion haul in capital investment for Alabama. Alabama also snatched a coveted jewel for its high-tech hub, Google’s $600-million data center.
The arrival of Mercedes-Benz in Tuscaloosa in 1993 put Alabama on the map of prime destinations for foreign direct investment. The German auto giant has doubled down on its long-term commitment to Alabama with a $1.3-billion expansion that is adding new lines for third-generation M-class SUVs, C-Class Sedans and a new GLE Coupe, among other models.
After Mercedes-Benz planted its flag in Tuscaloosa, a bevy of leading automakers—including Hyundai, Toyota and Honda—also established major manufacturing facilities in Alabama, helping the state capture the top ranking for Automotive Manufacturing Strength in BF’s 2014 State Ranking Report. This burgeoning automotive assembly cluster (producing nearly 1 million vehicles per year) also has generated a thriving auto-supply network, which this year welcomed a $530-million investment from Kamtek Inc. for a new aluminum casting line in Birmingham and Yorozu’s new $100-million auto suspension parts production line in Jasper.
SWEET HOME ALABAMA FOR FDI
Alabama has been wildly successful in keeping the FDI floodgates open for the past two decades, landing Airbus’ first U.S. aircraft assembly plant in 2012, a $600-million investment that will create up to 1,000 new jobs when the plant reaches full capacity. Airbus is expected to roll out its first U.S.-made A320 passenger jet at the Mobile plant next year.
The migration of overseas manufacturers to Alabama goes well beyond Mercedes-Benz and Airbus. About 70 German companies have set up shop in the state, including industrial giant ThyssenKrupp, which built a new steel plant near Mobile.
Gov. Robert Bentley has headed trade missions to Germany three times during his tenure; Alabama Commerce Secretary Greg Canfield also is a frequent flyer to Europe seeking to draw new business to the state. Bentley also has the Far East on his radar. He is actively courting business in Japan, South Korea and China, and secured a major job-creating prize by convincing Golden Dragon Copper Tubing to set up its first U.S. operation in Alabama. Bentley pushed through special legislation to mitigate U.S. tariffs imposed on copper tubing. He also was able to get the Chinese company to put the plant in the part of the state with the highest unemployment. [On his official Twitter feed, Gov. Bentley pledged soon after taking office that he would not accept a salary as governor until Alabama achieves “full employment.”]
The flip side of FDI is trade; Alabama has matched its FDI success with rapid growth in exports, recently expanding its global reach to South America. Gov. Bentley led a trade mission to Peru, which resulted in the signing of a Memorandum of Understanding that is expected to boost Alabama exports of transportation products, agro-chemicals, plastics and medical devices to one of South America’s fastest-growing economies.
In addition to meeting trading partners’ concerns about issues like tariffs, the governor says expanding exports still comes down to a basic requirement:
“First, you have to make very good products, and we do that. You have to produce something that people want to buy, not only in the rest of the country but all over the world,” Bentley told BF.
Whether it’s foreign direct investment or an appetite for U.S.-made goods, a growing number of global players are singing the same tune: Sweet Home Alabama.
GOOGLE CHOOSES ALABAMA
Google’s groundbreaking Alabama data center project has an element that makes it different from just about every other 2015 economic development project in the state: rebirth and renewal.
The project represented a blockbuster in its own right for the Alabama economic development team, led by the Alabama Department of Commerce, the Tennessee Valley Authority and the Jackson County Economic Development Authority. The Internet giant will build a $600-million data center in the tiny town of Bridgeport, creating up to 100 jobs at a futuristic facility designed for efficiency and powered by renewable energy. The Alabama facility will be Google’s 14th data center in its global network.
Here’s where rebirth and renewal come in: Google will build it on 360-acre site at TVA’s Widows Creek Power Plant, which has been decommissioned as part of a process that began in 2012. The site advanced by the Alabama team was precisely what Google was seeking, allowing the company to repurpose an industrial site on the grounds of a coal-burning power plant.
“Jackson County has the right combination of energy infrastructure and developable land,” Google said in announcing the project in AL. “Jackson County, the state of Alabama, and TVA have also worked incredibly hard to make this site work for one of our data centers. We are looking forward to being a part of this community for many years to come.”
Patrick Gammons, senior manager, Data Center Energy and Location Strategy for Google, said the company can use the Widows Creek plant’s existing electrical infrastructure to transmit renewable energy to power the new data center. Plus, TVA agreed to help Google scout new renewable energy projects and bring the power to their electrical grid.
So the Google data center in Alabama will serve as a showcase for best practices in meeting the online giant’s ambitious global goal of powering its data centers with 100 percent renewable energy. “Data centers need a lot of infrastructure to run 24/7, and there’s a lot of potential in redeveloping large industrial sites like former coal-power plants,” Gammons said. “Decades of investment shouldn’t go to waste just because a site has closed; we can repurpose existing electric and other infrastructure to make sure our data centers are reliably serving our users around the world.”
The Alabama economic team working on “Project Spike,” as it was codenamed, had new tools in its toolbox to nail down the deal—an overhauled incentives platform that more effectively incentivized a company’s capital investment and incentives specifically tailored for data centers. The new investment credit, approved by the Alabama Legislature in spring 2015, was ready to be put to work as soon as Project Spike negotiations were concluded. As part of the package, Google will receive an investment credit of up to $50 million, spread out over 10 years, from the state to offset a portion of its income and utility tax liabilities. Under the Alabama Data Processing Center Economic Incentive Enhancement Act, Google also will receive abatements on non-educational sales and property taxes totaling $31 million.
Google’s data center project will generate direct economic impact, totaling $129 million over 20 years, with direct wages topping $93.6 million over that time frame, according to the AL Department of Commerce.
HUNTSVILLE: POISED FOR LIFTOFF
The winding-down of NASA’s space program with the retirement of the Space Shuttle fleet could have been a withering blow to Huntsville, AL, a prime NASA hub which produced the Saturn V rocket for the Apollo program as well as the Lunar Rover. But Alabama didn’t miss a beat in leveraging the existing skilled workforce in the Huntsville area as an unmatched asset for advanced manufacturing projects, backed by an extensive logistics network.
These assets convinced Polaris to put its new $127-million plant in Huntsville, following on the heels of 2014’s big win for the region, Remington Outdoor Company’s decision to convert and expand an old Chrysler plant into a modern manufacturing facility that will support up to 2,000 new jobs at full capacity.
Gov. Bentley’s strategic development plan for AL, known as Accelerate Alabama, aims to build on the state’s already solid foundation of manufacturing, forestry, chemicals and agriculture by targeting new growth sectors, including bioscience and information technology.
Alabama also isn’t resting on the laurels of its leadership position in workforce training, which includes on-site training facilities like the new Alabama Industrial Development Training (AIDT) center at the Mobile Aeroplex and a world-class robotics training lab. Gov. Bentley formed the Alabama Workforce Council to conduct top-to-bottom analysis of the intersection between higher education and workforce training, aimed at creating a pipeline of skilled workers in the state for years to come.
Relocating or Expanding Your Business In Alabama
Considering Alabama for your company’s relocation or expansion project? Check out Business Facilities’ Alabama Incentives and Workforce Development Guide.