The History of Automotive in the American South
By Lee Burlett
To many Southerners and non-Southerners alike, the automotive industry began in the region with earnest in 1980 when officials with Nissan announced they would build their first U.S. auto plant in Smyrna, Tenn., which is located in Rutherford County near Nashville. Following that announcement came a slew of other automotive assembly plants with nameplates that rival any region of the world. Mercedes-Benz, Nissan, Toyota, BMW, Honda, Hyundai and domestic automakers' Ford, GM and Chrysler, have all invested billions in the American South since 1980. Billions more have been invested by Tier One suppliers to those assembly plants and Tier Two suppliers who supply Tier Ones.
While the year 1980 may indeed be the year that put the South on the world automotive map for this generation, other generations know better. In 1909, the first nationally recognized auto show took place in Atlanta. It was called Automotive Week and it put Atlanta and the South on the national automotive map for the very first time.
Ironically, it was in the Nashville area that the first Southern automotive assembly plant was built. Marathon-brand "horseless carriages" were built at an old brick factory between 1910 and 1914. The company that manufactured them was called Southern Motor Works, which originally began in Jackson, Tenn., as Southern Engine and Boiler Works.
The Marathon brand grew from one to 12 different models, with three different engine options. But the products were considered inferior at best, especially when compared to vehicles made in the Detroit area at the time. The Nashville plant at full production employed over 400 workers.
But the South's first auto assembly plant met its demise in 1914 when it was taken over by a company in Indiana. That company stopped auto assembly at the plant and switched to automotive parts for automakers located in the Midwest. In 1914, 80 percent of automotive manufacturing in the U.S. was located in the Detroit area.
So, it could be argued that the Nashville area was the origin of auto assembly and auto supply in the South in addition to jump starting the modern automotive industry that is the American South today.
Detroit Comes to Georgia and Six Other Southern States
At the 1909 Automotive Week show in Atlanta, business and political leaders in the Peach State and elsewhere in the region lobbied automakers in Detroit to establish satellite factories in Georgia, as well as other locations in the South. Ford and General Motors took them up on the idea, primarily to cut distribution costs of their products.
Between 1909 and 1914, Ford built satellite assembly plants in 14 different cities in the U.S. and that total increased to 29 by 1917. By 1917, eight markets in the South were home to Ford plants. Those were Atlanta, Charlotte, Dallas, Houston, Louisville, Memphis, Oklahoma City and St. Louis. The only other automaker to build a plant in the South during that time was GM, which opened plants in St. Louis and Atlanta.
In 1925, Ford opened its Norfolk, Va. facility. That recently expanded and retooled plant now makes Ford's most important model: The F-150 pickup truck. And in 1935, General Motors opened its Baltimore, Md. assembly plant.
It wasn't until the 1940s that more plants would be built in the South. Atlanta again was the target market for both GM and Ford, which replaced their pre-WW II plants in the area. Also during the '40s, Ford replaced its prewar plant in Louisville and GM built a new plant in Arlington, Tex. St. Louis' economy benefited with the opening of Ford's Hazelwood facility in 1948 and Kansas entered the auto assembly business when General Motors rolled off the assembly line its first Pontiac sedan at a former B25 bomber plant in Kansas City, Kan. in 1946.
Also in the 1940s, Huntsville, Ala., was the site of a new automaker, Bobbi-Kar. The upstart had never actually manufactured a vehicle, but it moved into old wartime facilities in the north Alabama market to do just that. Bobbi-Kar would attempt to make a small car that was not being manufactured anywhere else by any automaker in the U.S. at the time. The company eventually would become Dixie Motor Car Corp. before going bankrupt. Its assets would be acquired by Keller Motors Corp., which hadn't brought a vehicle to market as well. Keller went out of business in 1950 without ever producing a single vehicle.
The only plant announced in the South in the 1950s was a new Ford plant in Louisville. That plant began operations in 1955.
By the 1960s, GM began an aggressive automotive parts plant expansion strategy in the South to supply its assembly factories in the Great Lakes. It was called GM's "Southern strategy." The plan was designed to cut costs, specifically labor costs. Plants were opened in Alabama, Georgia, Louisiana and Mississippi and were basic assembly operations that required little skill from workers.
In 1966, Chrysler entered the South for the first time when it selected St. Louis for an assembly facility. The St. Louis plant remains Chrysler's only Southern location. And in 1969 Ford began operating a truck plant in Louisville.
One of the biggest auto assembly plant announcements in the South's history was made in Oklahoma City in 1973. There, GM made a commitment to build a new plant that would incorporate the highest technology available. During its site search, GM looked at Tulsa, Tuscaloosa, Wichita and Waco before choosing Oklahoma City.
But the early 1970s oil crisis forced GM to suspend construction in Oklahoma City. It would be 1979 before the first car rolled off the line in OKC. GM also chose Shreveport in the late 1970s for a pickup truck facility. That plant opened in 1981 and has undergone a huge expansion in the last three years. Again, Tulsa was considered as a site for that facility.
GM announced its next-to-last plant in the South to date in 1979 in Bowling Green, Ky., with production realized in 1981. GM relocated the facility to Bowling Green from St. Louis. The automaker purchased a closed Chrysler parts plant and now makes about 20,000 Corvettes each year at the site. It remains the world's only Corvette manufacturing facility.
Shortly after GM began production in Bowling Green, it located a new facility in Wentzville, Mo., which is located in the St. Louis metro area. That facility gave the St. Louis metro three automotive assembly plants. No other Southern market has as many. The Kansas City metro has two plants as does Atlanta and Louisville. And it can be argued that the Birmingham area has two plants with the Honda and Mercedes plants located just outside its MSA.
When the Southern Auto Corridor Was Officially Born
In April of 1980, officials with Nissan announced they would build the Japanese automaker's first U.S. plant. At the time, Nissan officials did not reveal where the plant would be located. The big buffalo hunt was on. The previous year, Honda announced it would also open its first U.S. plant. That facility landed outside the South in Ohio.
But Nissan wanted to open its facility far away from the established Big Three domestic automakers in the Midwest, but most importantly, a good distance from any union organization. At the time (1980), the UAW had organized every automotive plant in the U.S. and Canada. Nissan would be the first anti-union automaker to break ground in the U.S. The idea was to create a distinctly different production system, one that it would control exclusively. Nissan eventually chose Smyrna, Tenn. after considering Cartersville and McDonough, Ga. Both of those sites are located in the Atlanta MSA. Nissan celebrated its new Smyrna plant with a groundbreaking ceremony in February of 1981. To this day, the Nissan plant in Smyrna, Tenn. remains union-free.
After Nissan chose Tennessee for its largest investment outside of Japan at the time, "Saturn mania" carpeted the South and the nation for that matter. In 1984, GM began its nationwide site search for a plant that would make an entirely new vehicle, one that would compete with Japanese automakers such as Honda, Toyota and Nissan. With Nissan's choice of Tennessee four years earlier, the feeling here is that GM officials figured that if Tennessee was good enough for Nissan, it was good enough for GM and Saturn.
GM/Saturn chose Spring Hill, Tenn., just southwest of Nashville, for what was at the time the largest industrial deal in U.S. history. With a $5 billion initial investment and 7,000 announced jobs, the new Saturn factory created a new challenge for nearby Nissan. Both plants have expanded numerous times since they opened shop in a seemingly one-upmanship manner.
The Saturn plant also brought with it a new phase in the history of the Southern Auto Corridor. GM employees and card-carrying UAW members from other plants, specifically from Michigan, were given preferential treatment in the job interview process. In fact, virtually the entire initial work force came from out of state and no workers from Tennessee worked at the plant when it opened.
With the Saturn and Nissan announcements made in the 1980s, Tennessee, which had no automobile production prior to 1984, shot up to third in the U.S. in that category just 10 years later. But more importantly to the state as a whole, automotive suppliers of every size in the state grew from 62 in 1980, when Nissan began its search, to more than 900 today. The suppliers, without question, have had a greater economic effect on Tennessee than the two automakers.
The final major announcement made in the Southern Auto Corridor by an automaker in the 1980s occurred in Kentucky. This one was huge. Toyota announced it would build a plant in Georgetown, which is located near Lexington. The plant began production in 1988 and the facility remains Toyota's largest production factory in North America. The Georgetown facility employs nearly 8,000 workers and builds 500,000 vehicles and 400,000 engines each year at the location. Toyota also placed its North American headquarters in northern Kentucky and its parts distribution facility is located in the northern part of the state as well.
When the Southern Auto Corridor Grew Up
Nissan, Saturn and Toyota nourished the first modern steps made by the Southern Auto Corridor, but it was two highbrow German automakers that ensured sustainable growth in the region. BMW made the decision in 1992 to set up its first North American assembly plant in Greer, S.C., located between Greenville and Spartanburg on Interstate 85. Not only was it the first North American assembly plant for the company, it was the first outside of Germany for Bavarian Motor Works. The Greer, S.C. site, which placed second in a Mazda site search in the 1970s, won out over a site in Omaha, Neb.
By the time BMW announced its facility in Greer, which has expanded numerous times, a network of suppliers was in place in the Southeast as a result of Saturn and Nissan in Tennessee, as well as domestic automakers that had been in the sub-region for years.
Following BMW's venture to the South in 1992 was Mercedes' decision to open its first plant outside of Europe in 1993. Mercedes-Benz chose Vance, Ala. for its first U.S. plant and it, too, has expanded to more than double its original size.
The Alabama Factor in the Southern Auto Corridor's Growth
Alabama's successful recruitment of Mercedes-Benz was met with a tremendous amount of negative publicity, especially from newspapers, economic development and political officials in North Carolina, the state almost everyone believed Mercedes would select for the facility. National news outlets hammered Alabama for its large incentive package it gave Mercedes, which totaled approximately $250 million. At the time, it was one of the largest incentive packages ever offered for a single project. In short, Alabama was perceived as a state that simply bought the Mercedes deal. Earning it was never discussed in articles at the time.
In fact, Southern Business & Development magazine (www.sb-d.com), the owner of this Web site, published this quote by a North Carolina economic development official in the winter 1994 edition. "We prefer to market North Carolina's inherent advantages. We are committed to being competitive, but we won't give away the store. In a time of limited resources, it doesn't make sense to spend as much as Alabama has to attract an industrial recruit. They're counting way too much on the multiplier effect. They're never going to get the kind of payback they're projecting," said David Sheehan, assistant director of the North Carolina Department of Commerce in 1994.
Well, there's no doubt that Sheehan's projections were wrong. No state in the South has benefited more from the automotive industry in the last 10 years than Alabama.
All of that negative publicity regarding the Mercedes project ended when in 1999 Honda announced it would build an assembly plant in Lincoln, Ala. That plant has doubled in size since it first opened its doors. Critics that dismissed the Mercedes decision as simply one based on incentives, were astounded that a company of Honda's reputation would pick Alabama.
With the Honda announcement, Alabama's economic development reputation went from suspect to superb in one day. No longer would the media hammer the state as the New York Times did in 1993 when it published the adjoining cartoon describing the Mercedes announcement.
When Korean automaker Hyundai announced in the spring of 2002 it would build its first U.S. plant in Alabama, media throughout the world labeled the state the "center of the Southern Auto Corridor" and even "a state that has positively transformed its economy in 10 short years."
An accurate way to measure that economic transformation is to compare capital investments made in the state by the automotive industry pre-Mercedes to 10 years later. In 1992, the year before Mercedes announced its plant, $21 million was invested by the automotive industry in Alabama. In 2002, that figure increased to $2.1 billion (that's with a "b").
>From 1993 to 2002, Alabama landed three of the four automotive assembly plants announced in the South during that time. The other one was Nissan, which picked Canton, Miss. in 2000.
The Nissan Deal
Typically, expanding automakers take at least a year, but more like 18 months, to pick a site for an assembly plant. The Nissan site search that landed just north of Jackson, Miss., took a mere five months.
In July of 2000, former Mississippi Gov. Ronnie Musgrove had his first meetings with Nissan officials. In August, the governor called for a special legislative session. The day before the 2000 presidential election, Musgrove called the legislators back to session to approve a $295 million bond authority plus additional tax incentives for Nissan. On that Thursday, Nissan made its announcement that Canton, Miss. would be the site for its second major automotive assembly plant in the Southern Auto Corridor.
The Nissan deal, more than any other announced in the South since its Smyrna, Tenn. project in 1980, exemplified the attractiveness of the Southern Auto Corridor. The Japanese automaker had to increase capacity and it did it in the South in just five months.
When the Southern Auto Corridor Matured
Between 1996 and 2002, more than half of all Southern-based automotive assembly plants, both domestic and foreign, expanded. The expansions weren't exclusive to the region's new plants. Ford expanded its nearly 80-year-old facility in Norfolk and its Claymoco, Mo. Facility. GM spent big bucks on its factory in Shreveport and retooled its plants in Kansas City, Kan. and Oklahoma City.
During that six-year span foreign automakers' Honda, Mercedes, Nissan (the company announced an expansion of its Canton, Miss. plant before it opened) and BMW spent billions on their existing facilities. That wasn't the case in the Great Lakes or any other region of the U.S. The six-year rash of expansions, more than anything, spoke volumes in the maturation of the Southern Auto Corridor.
During this time of urgent plant expansion in the South, most assemblies that previously manufactured sedans or smaller cars and trucks, expanded and retooled for heavier, more expensive models such as large pickup trucks, minivans and sport utility vehicles.
These models seem to be the South's future in automotive production. Heavy and expensive automotive products intended to be sold in the U.S., such as SUVs and pickup trucks, are very expensive to ship, especially if the transfer comes from offshore. That being true, don't look for domestic or foreign automakers to relocate Southern auto assembly plants to cheaper labor markets such as China, Mexico, India or anywhere else. It is just not economically feasible to do so considering the shipping costs of such vehicles.
The Southern Auto Corridor Jogs West ... Way West
Nissan's choice of Mississippi meant the Southern Auto Corridor jogged a little west of its Alabama/Tennessee center. When Toyota announced in 2003 it would build a pickup truck facility just southwest of San Antonio, experts in the field were left with mouths agape. Yes, as far as the Southern Auto Corridor's track record for plant locations is concerned, Texas is as far west as you can go.
Further confusing the experts is the fact that there is no supplier network of any size in south central Texas, except around its Mexican border areas. San Antonio is far from the Mexican border. In fact it's a five-hour drive to a somewhat large supplier network that sits on both sides of the U.S./Mexico border that at its center is McAllen, Tex.
That being the case, Tier One suppliers will have to invest hundreds of millions of dollars setting up shop in the San Antonio area, when they already have invested billions in the center of the Southern auto corridor.
So what is Toyota's curious location decision mean? It means other automakers are going to set up shop in south central Texas. There is no way domestic pickup truck manufacturers such as Ford, GM and Chrysler (well, maybe Chrysler), are going to leave the massive Texas truck market to Toyota.
This is going to be a battle to watch in coming years and, more than anything, it is the most important auto assembly plant announcement in the modern history of the Southern Auto Corridor. It expands the corridor by more than a thousand miles. That means other states left out so far in the Southern Auto Corridor recruitment game, such as Arkansas, are now in the game as serious players. It's interesting to note that the two largest automotive announcements (two major supplier locations), in Arkansas history were made in the state within six months of Toyota's 2003 San Antonio announcement.
Predicting the Future
OK, the following has nothing to do with the history of the automotive industry in the South, but it will be historical one day. The magazine, Southern Business & Development, has predicted the right state -- and published those predictions -- for every automotive assembly plant announced in the South since BMW. The only location we missed was Honda's 1998 decision. We picked Opelika, Ala. They picked Lincoln, Ala.
Yes, we predicted Mercedes' Vance, Ala. decision in 1993. The tip we got for that prediction was that a private plane headed to Stuttgart had four Southern governors on board. But there were five Southern states on the short list for the Mercedes project. Which governor was missing? It was former Alabama governor Jim Folsom, Jr.
Newspapers at the time reported Alabama was out of the race when the passenger list on that plane was revealed. We quickly published in our next edition, which, fortunately was at deadline, "that plane was the 'you did a good job, but' plane." Our publisher even phoned friends of his who are industrial real estate developers in Birmingham and urged them to purchase land near Vance. They laughed at the notion. Too bad.
And yes, we predicted Hyundai's decision to set up an assembly operation near Montgomery … nine months before the official announcement was made. We also predicted Toyota's San Antonio decision and this how we predicted it: "So, where will Toyota locate their proposed pickup truck plant? It's going to San Antonio … and Marion. Yes, San Antonio will be chosen first and don't be surprised if Marion is chosen for a Toyota assembly facility a year or two later."
So, what is www.SouthernAutoCorridor.com's prediction for the future of auto assembly in the region? Our first two predictions are this: Marion, Ark., which placed second in the Toyota site search will land a new Toyota plant sometime in 2004. The next plant will be announced somewhere on the Interstate 95 corridor between Savannah and Rocky Mount, N.C.
Yes, the history of the Southern Auto Corridor is truly an amazing story. But the best is yet to come. There are many foreign automakers that have yet to set up shop in the U.S. In the near future, look for Mitsubishi, Audi and Kia to make the move and possibly Suzuki. But just as important, it's been 20 years since a domestic automaker has built a new plant in the American South. That's about to change. And when the first one announces, don't surprised if five more follow it within a short period of time.