By Business Facilities Editorial Staff
From the January/February 2018 Issue
According to Dave Sargent, vice president of global automotive at J.D. Power, auto sales will be “OK but not great” in 2018. Reasons for this include the fact that consumers are holding on to their cars longer, purchasing used instead of new vehicles and that approximately 3 million lease vehicles are headed back to market. These are in addition to trends such as subscriptions and ride sharing services and declines from automotive and technology companies spending millions to develop electric and self-driving vehicles that aren’t expected to earn much money for a while.
Sargent predicts that automakers across the board will offer generous incentives to boost sales and clean out inventory but says that automakers can still bank on sales of sport utility vehicles (SUVs) and crossover utility vehicles (CUVs).
“If an automaker’s lineup is heavily sedan, it’s a very uncomfortable place to be,” Sargent said. “Consumers are leaving this segment in droves.”
According to Brandon Mason, a director in PricewaterhouseCoopers’ automotive practice, light trucks (e.g., SUVs and CUVs) hold a 64 percent market share versus 36 percent for passenger cars. He forecasts U.S. sales of 16.7 million to 16.8 million units in 2018. Atlanta-based analysis conglomerate Cox Automotive Inc. puts that number at 16.6 million while London-headquartered IHS Markit forecasts 16.9 million for the year.
MISSISSIPPI’S WINNING FORMULA
A winning formula needs the right ingredients. Mississippi has all of them. From a skilled and productive workforce to the state’s low corporate tax rate, Mississippi’s pro-business environment fosters growth and attracts new investment. State and local leaders work hand-in-hand with Mississippi’s corporate partners to create new career opportunities statewide.
One company benefitting from this formula for success is Toyota. The Japanese automaker produced its 1 millionth Corolla in December of 2017, eight months after their 10-year anniversary in Blue Springs, MS. This Toyota team assembled 500,000 vehicles faster than any other Toyota plant in North America. To celebrate the company’s successful partnership with Mississippi, Toyota plans to build a nearly $10 million training center. The training center showcases how more than 1,500 Mississippians produce Corolla vehicles shipped around the world.
In addition to Toyota hitting their millionth car mark, Mississippi’s first automotive original equipment manufacturer Nissan, also hit a significant manufacturing milestone at the Nissan North America Canton Manufacturing Plant in Canton, MS. The auto giant added a new vehicle to the production line, the Nissan Titan XD pickup truck, and celebrated production of its 3-millionth Mississippi-built vehicle.
Nissan was the catalyst in recruiting automotive manufacturing companies to Mississippi. The National Strategic Planning and Analysis Research Center issued a report detailing the automaker’s economic impact in Mississippi—25,000 direct and indirect jobs created and more than 6,400 Mississippians directly employed. This exemplifies the success automakers experience with Mississippi.
Calsonic Kansei, a long-time supplier to Nissan, employs more than 500 team members at the automaker’s Canton plant. Because of Mississippi’s winning formula, the supplier announced a recent expansion to meet the growing demand for the company’s products. Calsonic Kansei expanded to a new facility in Madison County, representing an investment of $16.33 million creating 98 new jobs.
Joining Calsonic Kansei’s need for more space due to increased demand is fellow automotive supplier S&A Industries, which announced plans to expand in New Albany, MS, investing $4 million and creating 40 jobs.
A key growth area in Mississippi’s dynamic automotive sector is tire manufacturing.
Thanks to the state’s highly efficient one-stop permitting process and aggressive state business advantages, Continental Tire broke ground just 10 months after announcing they were locating in Hinds County, MS. This project netted the state a number of economic development awards and accolades by the world’s fourth largest tire manufacturer. The plant reflects an investment of $1.45 billion and 2,500 new jobs, while significantly reinforcing Mississippi’s leadership position in the Southern Automotive Corridor.
Mississippi continues to experience success in business recruitment and expansion because of its business-friendly environment. State lawmakers implemented the Corporate Franchise Tax Phase Out, which eliminates corporate franchise tax over a 10-year period starting in 2018. The phase out reduces the current $2.50 tax for each $1,000 of capital by $.25 annually until a complete phase out occurs in 2027; an exemption on the first $100,000 of capital begins in 2018.
The Mississippi Works Fund dedicates $50 million over 10 years towards strengthening the state’s workforce. The state’s highly ranked community college system can now enhance their customized training programs to more effectively meet the needs of companies and prepare more Mississippians for in-demand careers. Seventy-five percent of the funds may be used for new job creation, while 25 percent of the funds are allocated to strengthen the skills of Mississippi’s existing workforce and for workforce certification. The Mississippi Development Authority has the ability to direct funds as part of recruitment and expansion efforts.
In addition, the state’s robust research universities and network of community colleges take an innovative approach in providing companies with a next-generation workforce. Mississippi State University’s Center for Advance Vehicular Systems focuses on improving engineering, manufacturing and design technologies, while the School of Polymers and High Performance Materials and the Mississippi Polymer Institute at Univ. of Southern Miss. continue to be national leaders in the study of composites, advanced materials, polymers and plastics. Further, the state’s community colleges work directly with companies, providing pre-employment training and customized training programs, ensuring workers are ready to contribute to a high quality product on Day 1.
With strong incentives, a business-friendly environment, low operating costs, robust infrastructure and a growing skilled workforce, Mississippi continues to sharpen its competitive edge.
KENTUCKY’S AUTOMOTIVE ADVANTAGES
Kentucky shattered its corporate investment record by 80 percent in 2017 with $9.2 billion in announcements, an achievement propelled by a new right-to-work law and a slate of other business climate improvements that, of all the state’s target industries, most immediately benefitted the automotive sector.
The commonwealth already ranked first among U.S. states in vehicle production per-capita and third overall, but with its numerous advantages combined, Kentucky attracted more than $4.3 billion in announced investment and 4,500 new jobs in its automotive industry last year. That’s a sizable slice of the total investment and 17,200-plus new jobs announced across all industries.
“Due to our ideal geographic location, high quality of life, low costs for business operation and exceptional workforce, we are confident that the economic future of Kentucky is very bright indeed. We are well on our way to becoming the globally recognized center of excellence for engineering and manufacturing in the U.S.,” Gov. Matt Bevin said.
Four months after KY became a right-to-work state in January, Braidy Industries announced it would build a $1.3-billion aluminum rolling mill in the northeast corner of the Bluegrass State. In a region hit hard by coal and steel job losses, the Braidy Industries aluminum mill will create 550 jobs paying an average $65,000 each to produce rolled sheet and plate for the automotive and aerospace industries.
The same month, Toyota announced a $1.33-billion reinvestment project for its flagship plant, Toyota Motor Manufacturing Kentucky Inc., TMMK. In addition to prepping the facility to produce a new generation of vehicles on a shared lighter, stronger platform, the TMMK Reborn project renewed the automaker’s 30-plus-year commitment to Kentucky. Later in the year, Ford Motor Co. announced it would invest $900 million in its Kentucky Truck Plant in Louisville—one of two Ford production facilities in the city—to support production of the 2018 aluminum-alloy bodied Lincoln Navigator and Ford Expedition. The new-generation SUVs moved to high-strength aluminum-alloy bodies cut weight and increase capability, performance and fuel economy.
Those large-scale commitments joined 56 other automotive projects announced in KY last year. When those new facilities come on line, KY’s auto industry will employ nearly 101,000 people and encompass 519 facilities.
Terry Gill, Cabinet for Economic Development secretary, said a comprehensive and business-minded approach is shifting Kentucky’s fortunes.
“Last year’s impressive surge in economic development indicates Kentucky is gaining recognition as a top location for new investment and job creation. With key measures enacted, including passing right-to-work legislation, red-tape reduction and starting a workforce training revolution, Kentucky is sending the message internationally that it’s serious about recruiting business,” Sec. Gill said.
Vivek Sarin, the Cabinet’s executive officer, noted the progress made both on an international scale and in communities across Kentucky.
“We’ve made multiple trips to Japan, Canada, Europe and across the U.S. this year, recruiting businesses, strengthening relationships and carrying the message that Kentucky has earned short-list consideration for corporate-investment projects,” Executive Officer Sarin said. “We’re also traveling the width and breadth of the state, encouraging local preparation and working in partnership to create development opportunities.”
Gov. Bevin’s approach to economic development is that government should operate with the speed and efficiency of a private company. That ethic combined with ongoing business climate improvement—including new workforce-training programs, red-tape reduction, P3 legislation, abolishing prevailing wage and plans to take up state pension and tax reform—are making Kentucky a hub for engineering and manufacturing in the U.S.
Kentucky already has tremendous resources in place that it is leveraging to achieve that goal. Those include apprenticeship programs that give students education and experience within established manufacturers, engineering schools at major universities, extensive resources and programs for entrepreneurs and startups and—perhaps most importantly—thousands of businesses that constitute Kentucky’s manufacturing sector. In fact, Kentucky ranked sixth on Business Facilities’ 2017 list of Top Manufacturing States by Percentage of Workforce.
Kentucky advanced significantly on the goal in October 2017 when state officials and Toyota’s North American leadership celebrated the opening of Toyota’s $80 million Production Engineering Manufacturing Center in Georgetown, KY, which houses more than 600 engineers to serve the company’s 14 existing North American plants.
As well, battery developer EnerBlu Inc. in December 2017 announced it would move to Kentucky and invest in two facilities. The company will relocate its headquarters from Riverside, CA to a 150,000-square-foot building in Lexington, where it will invest $40 million and create 110 administrative, research and development and executive positions. EnerBlu selected Pikeville, in Eastern Kentucky, to build a $372 million, 875-job manufacturing facility to produce lithium titanate batteries for buses, trucks and other heavy-duty commercial and military vehicles.
Among its other advantages helping recruit companies, Kentucky’s ideal location as a gateway between the nation’s two auto-production hotbeds offers suppliers the opportunity to produce components in a low-cost state and ship their products quickly and cost-effectively to assembly plants or other suppliers in Kentucky and across the Midwest and South.