Atlanta placed third in KPMG International’s analysis of major American cities with tax structures favorable to businesses.
The “KPMG’s 2008 Competitive Alternatives: Focus on Tax” study puts San Juan, Puerto Rico at No. 1 with a total tax index of 46.6, which represents tax costs 53.4 percent below the U.S. national average of 100. San Juan was followed by Baltimore at 92.1 and Atlanta at 95.1. Atlanta also ranked ninth among the 35 largest international cities.
Rounding out the top five American cities are Tampa, Fla., (98.1) and Detroit (98.6).
"Cities across the United States recognize that attracting and retaining businesses of all sizes is important for a vibrant local economy," said Hartley Powell, national leader of the strategic relocation and expansion services practice at KPMG LLP, the U.S. member firm of KPMG International. "As the survey results indicate, certain cities are leaders in developing a tax environment that encourages business development, and tax costs are a key consideration in the site selection process."
KPMG said its study is a global comparison of the total tax burden in 102 cities throughout 10 countries, including corporate income taxes, capital taxes, sales taxes, property taxes, miscellaneous local business taxes and statutory labor costs.
Monday, July 28, 2008
More from DCI’s “Winning Strategies” Survey: EDO Websites
Often, an executive’s first contact with an economic development organization is through the organization’s website. Regarding the likelihood of visiting an economic development organization’s website during their next site location search, 64% of respondents indicated a “4” or “5” on a scale of 1 to 5, where 1 is “Low” and 5 is “High.” In 2005, 65% gave this rating, while in 2002, only 39% did.
Location advisors are much more likely to visit an economic development organization’s website than the corporate respondents. A follow-up question asked respondents to indicate which features are most important to the usefulness of an economic development organization’s website. Twelve features that are commonly included in the design of an economic development organization’s website were presented:
• Directory of available buildings & sites
• List of leading local employers
• Demographic information (e.g. population size, average income, age distribution)
• Information on local schools, including colleges and universities
• Information on available incentives
• News section that describes current developments
• Testimonials from local companies
• Photos/maps of the community
• Information on quality of life (e.g. residential neighborhoods/recreation options)
• Information about the community’s target industries
• Current comparisons to competitor locations (e.g. cost comparisons)
• Website sitemap
“Information on available incentives” was selected by 82% of respondents, “demographic information” by 73% and “directory of available buildings & sites” by 49%.
The ordering of these features has remained consistent over time. Executives did register a decrease in the importance of a “directory of available buildings & sites.” In 2005, 64% of the survey audience rated this as an important resource compared with 49% in the current survey.
Comparing the three subgroups shows that executives from large companies find demographic information most useful, while for midsize company executives and location advisors, information on available incentives is most useful.
Economic development organizations must recognize that their website will frequently be the first place location decision-makers go to learn more about their community. Keeping the website attractive and full of useful, up-to-date information may help gain a community a spot on a short list.
The full report can be viewed at DCI’s website here.
Location advisors are much more likely to visit an economic development organization’s website than the corporate respondents. A follow-up question asked respondents to indicate which features are most important to the usefulness of an economic development organization’s website. Twelve features that are commonly included in the design of an economic development organization’s website were presented:
• Directory of available buildings & sites
• List of leading local employers
• Demographic information (e.g. population size, average income, age distribution)
• Information on local schools, including colleges and universities
• Information on available incentives
• News section that describes current developments
• Testimonials from local companies
• Photos/maps of the community
• Information on quality of life (e.g. residential neighborhoods/recreation options)
• Information about the community’s target industries
• Current comparisons to competitor locations (e.g. cost comparisons)
• Website sitemap
“Information on available incentives” was selected by 82% of respondents, “demographic information” by 73% and “directory of available buildings & sites” by 49%.
The ordering of these features has remained consistent over time. Executives did register a decrease in the importance of a “directory of available buildings & sites.” In 2005, 64% of the survey audience rated this as an important resource compared with 49% in the current survey.
Comparing the three subgroups shows that executives from large companies find demographic information most useful, while for midsize company executives and location advisors, information on available incentives is most useful.
Economic development organizations must recognize that their website will frequently be the first place location decision-makers go to learn more about their community. Keeping the website attractive and full of useful, up-to-date information may help gain a community a spot on a short list.
The full report can be viewed at DCI’s website here.
More from DCI’s “Winning Strategies” Survey: Corporate Executives’ Perceptions Of EDO's
Sixty-five percent of respondents indicated that they have worked closely with economic development organizations (either on the state, regional or local level) while working on a location decision. That breaks down as 62% of midsize company executives, 55% of large company executives and 94% of location advisors.
Generally, the respondents have favorable impressions of the economic development community. When respondents who have worked with economic development groups rate their overall impressions of the organizations on a scale of 1 to 5, economic development groups earn a mean score of 3.7.
Over time, corporate impressions of economic development groups have fluctuated slightly. In 2005, the mean score was 3.81, up from the mean in 2002, 3.54, the lowest rating in any survey year. In 1999, economic development organizations were given a rating of 3.77 and in 1996, the rating was 3.73.
In the 2008 survey, economic development organizations received an average score of 3.61 from large company executives, 3.71 from midsize company executives and 3.72 from location advisors.
To explore when the initial contact with an economic development group occurs during the site selection process, the survey asked respondents to choose from five options:
During the initial screening of all possible locations, to request preliminary data.
After we have developed a shortlist of potential communities, to request specific data or arrange site visits.
After the field has been narrowed to a few finalists, to negotiate incentive offers.
After a location has already been selected, for assistance in identifying a suitable building/lot.
We would not contact an economic development organization at any stage in a site location search.
The most frequent response was “After we have developed a shortlist of potential communities, to request specific data or arrange site visits” with 40% of those surveyed selecting this option.
This differs slightly from the pattern of responses when the question was asked, for the first time, in the 2005 version of the survey. We did not find evidence of a shift by site selectors to contact economic development organizations later in the selection process – a change which many in the industry anticipated.
There are differences among the three subgroups of the 2008 survey. Location advisors are more likely to utilize the services of an economic development organization (only 1% indicated they would not contact an economic development organization at any stage), and are more likely to contact one earlier in the site selection process.
Generally, the respondents have favorable impressions of the economic development community. When respondents who have worked with economic development groups rate their overall impressions of the organizations on a scale of 1 to 5, economic development groups earn a mean score of 3.7.
Over time, corporate impressions of economic development groups have fluctuated slightly. In 2005, the mean score was 3.81, up from the mean in 2002, 3.54, the lowest rating in any survey year. In 1999, economic development organizations were given a rating of 3.77 and in 1996, the rating was 3.73.
In the 2008 survey, economic development organizations received an average score of 3.61 from large company executives, 3.71 from midsize company executives and 3.72 from location advisors.
To explore when the initial contact with an economic development group occurs during the site selection process, the survey asked respondents to choose from five options:
During the initial screening of all possible locations, to request preliminary data.
After we have developed a shortlist of potential communities, to request specific data or arrange site visits.
After the field has been narrowed to a few finalists, to negotiate incentive offers.
After a location has already been selected, for assistance in identifying a suitable building/lot.
We would not contact an economic development organization at any stage in a site location search.
The most frequent response was “After we have developed a shortlist of potential communities, to request specific data or arrange site visits” with 40% of those surveyed selecting this option.
This differs slightly from the pattern of responses when the question was asked, for the first time, in the 2005 version of the survey. We did not find evidence of a shift by site selectors to contact economic development organizations later in the selection process – a change which many in the industry anticipated.
There are differences among the three subgroups of the 2008 survey. Location advisors are more likely to utilize the services of an economic development organization (only 1% indicated they would not contact an economic development organization at any stage), and are more likely to contact one earlier in the site selection process.
More from DCI’s “Winning Strategies” Survey: Importance of Factors in Business Location Decisions
In the 2008 survey, a new question probed the factors that are most important in a location decision. As executives weigh the strengths and weaknesses of potential locations, what makes them choose one area over the others? Eight factors (“Business-friendly government,” “Competitive incentives/tax exemptions,” “Efficient transportation systems,” “Labor,” “Overall operating costs,” “Proximity to funding sources/financial markets,” and “Quality of life”) were presented.
Respondents were asked to rate each on a 1 to 5 scale, where 1 equals “low” and 5 equals “high.” The factors were placed in order in the table below based on the mean score each earned.
The three survey subgroups (midsize and large companies; location advisors) prioritize these factors similarly. The biggest exceptions are that executives from midsize companies put “Quality of life” ahead of “Competitive incentives,” and “Efficient transportation systems” higher than “Overall operating costs,” while the other two groups rank “Competitive incentives” higher than “Quality of Life” and “Overall operating costs” higher than “Efficient transportation systems.”
Similarly, location advisors rank “Competitive incentives” higher than “Business-friendly government,” while the other two groups flip the order of these factors. The following chart shows how each subgroup rated each factor.
The full report can be viewed at DCI’s website here.
Respondents were asked to rate each on a 1 to 5 scale, where 1 equals “low” and 5 equals “high.” The factors were placed in order in the table below based on the mean score each earned.
The three survey subgroups (midsize and large companies; location advisors) prioritize these factors similarly. The biggest exceptions are that executives from midsize companies put “Quality of life” ahead of “Competitive incentives,” and “Efficient transportation systems” higher than “Overall operating costs,” while the other two groups rank “Competitive incentives” higher than “Quality of Life” and “Overall operating costs” higher than “Efficient transportation systems.”
Similarly, location advisors rank “Competitive incentives” higher than “Business-friendly government,” while the other two groups flip the order of these factors. The following chart shows how each subgroup rated each factor.
The full report can be viewed at DCI’s website here.
More from DCI’s “Winning Strategies” Survey: Effectiveness Of Established Marketing Techniques
A separate question asked by Development Counsellors, Inc. in their “Winning Strategies” survey (see below), they asked respondents to rate the effectiveness of seven typical marketing techniques used by economic development groups.
What is the most effective means of reaching corporate executives who may be considering a new site location? Respondents rated each technique (“Advertising,” “Direct Mail,” “Hosting Special Events,” “Internet/Web Site,” “Planned Visits to Corporate Executives,” “Public Relations/Publicity,” and “Telemarketing”) on a 1 to 5 scale, where 1 equals “poor” and 5 equals “excellent.” The order in the chart below is based on the percentage of
responses that were either a “4” or a “5.”
“Internet/website” soared to capture the highest rating among all economic development marketing tools for the first time, pointing to how essential a strong Internet presence is. The following chart shows the ranking of all the marketing techniques. Looking at responses over time, we see the steady rise of using the Internet as a marketing technique from 1996 to 2008.
The full report can be viewed at DCI’s website here.
What is the most effective means of reaching corporate executives who may be considering a new site location? Respondents rated each technique (“Advertising,” “Direct Mail,” “Hosting Special Events,” “Internet/Web Site,” “Planned Visits to Corporate Executives,” “Public Relations/Publicity,” and “Telemarketing”) on a 1 to 5 scale, where 1 equals “poor” and 5 equals “excellent.” The order in the chart below is based on the percentage of
responses that were either a “4” or a “5.”
“Internet/website” soared to capture the highest rating among all economic development marketing tools for the first time, pointing to how essential a strong Internet presence is. The following chart shows the ranking of all the marketing techniques. Looking at responses over time, we see the steady rise of using the Internet as a marketing technique from 1996 to 2008.
The full report can be viewed at DCI’s website here.
More from DCI’s “Winning Strategies” Survey: Influencing Corporate Decisions
Where do corporate executives get their information about business locations? Which marketing tactics can economic development officials use to influence target companies? What factors are most important in making a location decision?
For the fifth time, Development Counsellors, Inc.’s “Winning Strategies” survey asked corporate executives with site selection responsibilities to tell us which sources of information influence their perceptions of a community’s business climate. Respondents were asked to choose three from 13 possible responses: “articles in newspapers and magazines,” “business travel,” “dialogue with industry peers,” “direct mail,” “meetings with economic development groups,” “national surveys,” “personal travel,” “print advertising,” “TV/radio advertising,” “TV/radio newscasts/shows,” “word of mouth,” “online sources” (added in 1999) and “other.”
The top five responses are:
1. Dialogue with industry peers 61%
2. Articles in newspapers and magazines 53%
3. Business travel 43%
4. Meetings with economic development groups 32%
5. Online sources 28%
The top three influencers – “dialogue with industry peers,” “articles in newspapers and magazines” and “business travel” have remained remarkably consistent since the survey was first conducted in 1996. Executive perceptions are heavily influenced by what “other credible sources” say about a community (or what they observe in their own travels), rather than by what a community says about itself via controlled media.
According to DCI, economic development groups need to think creatively about how to apply these lessons to their own marketing programs. They offer two observations drawn from DCI’s experience in economic development marketing:
Stimulating greater “dialogue with industry peers” – essentially getting local business leaders to communicate with external colleagues about a region’s business advantages - remains a challenging but potentially blockbuster marketing opportunity. Successful ambassador programs initiated by local economic development groups have had some impact in this area. Growth in social media and online communications offers a new and inexpensive avenue for “peer-to-peer” dialogue.
A structured program to communicate with the business traveler offers a similar opportunity – particularly for larger communities with significant tourism assets. Creative approaches implemented by economic development organizations include training programs for taxi/limousine drivers, tailored materials in airport/hotel business centers and “strategic conferencing” – attracting specific meetings/conferences that will bring target executives to a community.
The full report can be viewed at DCI’s website here.
For the fifth time, Development Counsellors, Inc.’s “Winning Strategies” survey asked corporate executives with site selection responsibilities to tell us which sources of information influence their perceptions of a community’s business climate. Respondents were asked to choose three from 13 possible responses: “articles in newspapers and magazines,” “business travel,” “dialogue with industry peers,” “direct mail,” “meetings with economic development groups,” “national surveys,” “personal travel,” “print advertising,” “TV/radio advertising,” “TV/radio newscasts/shows,” “word of mouth,” “online sources” (added in 1999) and “other.”
The top five responses are:
1. Dialogue with industry peers 61%
2. Articles in newspapers and magazines 53%
3. Business travel 43%
4. Meetings with economic development groups 32%
5. Online sources 28%
The top three influencers – “dialogue with industry peers,” “articles in newspapers and magazines” and “business travel” have remained remarkably consistent since the survey was first conducted in 1996. Executive perceptions are heavily influenced by what “other credible sources” say about a community (or what they observe in their own travels), rather than by what a community says about itself via controlled media.
According to DCI, economic development groups need to think creatively about how to apply these lessons to their own marketing programs. They offer two observations drawn from DCI’s experience in economic development marketing:
Stimulating greater “dialogue with industry peers” – essentially getting local business leaders to communicate with external colleagues about a region’s business advantages - remains a challenging but potentially blockbuster marketing opportunity. Successful ambassador programs initiated by local economic development groups have had some impact in this area. Growth in social media and online communications offers a new and inexpensive avenue for “peer-to-peer” dialogue.
A structured program to communicate with the business traveler offers a similar opportunity – particularly for larger communities with significant tourism assets. Creative approaches implemented by economic development organizations include training programs for taxi/limousine drivers, tailored materials in airport/hotel business centers and “strategic conferencing” – attracting specific meetings/conferences that will bring target executives to a community.
The full report can be viewed at DCI’s website here.
Gain Positive PR in Tough Times
Widespread layoffs, plant closings and a weak economy have seemingly dominated the mainstream press coverage in recent months. But along with all the news of doom and gloom, there has been an increase in the number of stories offering examples of successful economic development initiatives.
For instance, the Wall Street Journal today published a special section that highlights the economic success of communities around the globe. How can you take advantage of the search for good news? Here are some tips:
· Don’t limit yourself to business writers and editors alone to pitch your story. Every category of media offers opportunity. For instance education reporters would be interested in your workforce development efforts, real estate reporters on your efforts to create megasites, etc.
· Lists – offer journalists inspiration for a top five or top ten lists. We all love them and appearing on one increases your community’s credibility.
· Be proactive – offer a positive and upbeat tone. Give hope and encouragement to others who are working to turn their communities around. Provide doable examples of what you have done and explain how and why they worked for you.
Follow these tips and you will not only generate additional media attention for your community but offer other areas the benefit of your experience and knowledge as well.
DCI Releases “Winning Strategies in Economic Development Marketing” Survey
Texas, North Carolina and Georgia have the best business climates among the 50 states, according to a recent survey of executives by Development Counsellors International.
North Carolina ranked second among the 281 respondents, with 30 percent saying the state has the best business climate.
Texas was No. 1 among 41 percent of survey participants, while Georgia was third (20 percent). They were followed by Tennessee and Florida (15 percent each) and Nevada (14 percent).
Executives frequently cited a strong labor market and low operating costs in selecting the top states.
The poll placed California, New York and Michigan at the bottom.
China, India and Mexico were selected as the top countries outside the U.S. for investment.
Development Counsellors’ “Winning Strategies in Economic Development Marketing” survey has tracked development trends since 1996. This is the first year respondents were asked to rank the business favorability of the world's 25 largest countries outside the U.S.
"With the battle for business more intense than ever, states and their economic development organizations need to pay close attention to the results of this survey," said DCI President Andrew T. Levine. "Whether accurate or misguided, perceptions about a location's business climate often play a crucial role in site selection decisions and where companies invest money and create jobs."
The comprehensive survey also asked a series of questions to divine the most effective economic development marketing tools, the leading sources of information that influence executive perceptions of a community's business climate and the most important factors in business location decisions.
Considered the leader in marketing places, Development Counsellors International (DCI) specializes in economic development and tourism marketing. The agency has worked for more than 350 cities, regions, states and countries since it was established in New York City in 1960.
For a free copy of the full "Winning Strategies" survey report or an executive summary, visit www.aboutdci.com/winningstrategies.aspx.
North Carolina ranked second among the 281 respondents, with 30 percent saying the state has the best business climate.
Texas was No. 1 among 41 percent of survey participants, while Georgia was third (20 percent). They were followed by Tennessee and Florida (15 percent each) and Nevada (14 percent).
Executives frequently cited a strong labor market and low operating costs in selecting the top states.
The poll placed California, New York and Michigan at the bottom.
China, India and Mexico were selected as the top countries outside the U.S. for investment.
Development Counsellors’ “Winning Strategies in Economic Development Marketing” survey has tracked development trends since 1996. This is the first year respondents were asked to rank the business favorability of the world's 25 largest countries outside the U.S.
"With the battle for business more intense than ever, states and their economic development organizations need to pay close attention to the results of this survey," said DCI President Andrew T. Levine. "Whether accurate or misguided, perceptions about a location's business climate often play a crucial role in site selection decisions and where companies invest money and create jobs."
The comprehensive survey also asked a series of questions to divine the most effective economic development marketing tools, the leading sources of information that influence executive perceptions of a community's business climate and the most important factors in business location decisions.
Considered the leader in marketing places, Development Counsellors International (DCI) specializes in economic development and tourism marketing. The agency has worked for more than 350 cities, regions, states and countries since it was established in New York City in 1960.
For a free copy of the full "Winning Strategies" survey report or an executive summary, visit www.aboutdci.com/winningstrategies.aspx.
Monday, July 21, 2008
Was KC a pawn to Bombardier?
By KEVIN COLLISON
The Kansas City Star
Last year, it was the failed effort to woo the Pittsburgh Penguins to the Sprint Center. Last weekend, it was Bombardier Aerospace deciding to assemble a new line of jets in Montreal.
While casual observers may believe Kansas City was used as a pawn by Montreal-based Bombardier merely to extract more concessions from Canada, experts say that’s not really the way it works.
“Typically, these projects are very competitive,” said Jonathan Sangster, a senior manager at CBRE Consulting in Atlanta. “People don’t have time to waste going through these motions.”
And sometimes the Kansas City area wins in the corporate recruitment process.
In 1996, for example, Kansas City edged out Omaha, Neb., and Louisville, Ky., for a coveted Harley-Davidson motorcycle plant. Farmers Insurance Group picked Olathe over Oklahoma City and Phoenix two years ago for a 950-person service center, and the Los Angeles-based firm now has 2,000 total employees in the area.
Sangster has been in the national site selection business for 10 years, participating in more than 125 deals. Not once has he experienced a situation where the company already had made a decision and was only going through the motions to up the ante for incentives. More here.
The Kansas City Star
Last year, it was the failed effort to woo the Pittsburgh Penguins to the Sprint Center. Last weekend, it was Bombardier Aerospace deciding to assemble a new line of jets in Montreal.
While casual observers may believe Kansas City was used as a pawn by Montreal-based Bombardier merely to extract more concessions from Canada, experts say that’s not really the way it works.
“Typically, these projects are very competitive,” said Jonathan Sangster, a senior manager at CBRE Consulting in Atlanta. “People don’t have time to waste going through these motions.”
And sometimes the Kansas City area wins in the corporate recruitment process.
In 1996, for example, Kansas City edged out Omaha, Neb., and Louisville, Ky., for a coveted Harley-Davidson motorcycle plant. Farmers Insurance Group picked Olathe over Oklahoma City and Phoenix two years ago for a 950-person service center, and the Los Angeles-based firm now has 2,000 total employees in the area.
Sangster has been in the national site selection business for 10 years, participating in more than 125 deals. Not once has he experienced a situation where the company already had made a decision and was only going through the motions to up the ante for incentives. More here.
Tennessee drives for bigger automotive stake
Tennessee landed its first automobile assembly plants in the 1980s, but over the past two decades the Volunteer State has watched the next nine major Southern car plants go to neighboring states, including three assembly plants and an engine plant to Alabama.
Last week’s announcement that Volkswagen picked Chattanooga over Huntsville, Ala., for a $1 billion production facility again should secure Tennessee’s top automotive position in the region, some say.
But U.S. Sen. Lamar Alexander, R-Tenn., who as governor a generation ago recruited both Nissan and General Motors’ Saturn automobile assembly plants, has much grander dreams for Tennessee’s automotive industry.
“This decision by Volkswagen, in my opinion, means that Tennessee is on its way within a generation to being the No. 1 state in America in terms of automobile jobs,” Sen. Alexander said. “When an assembly plant arrives, the supplier and their jobs are not far behind.”
Sen. Alexander said Tennessee “is right in the middle” of the Southeast, where most of the new automobile plants have been built in the past 25 years, and should be able to attract many more.
Gov. Phil Bredesen and his chief economic recruiter said they will continue to recruit auto plants. But the two cautioned against putting too much focus on the typically cyclical industry.
“There comes a point with this industry — I don’t think we’re there yet, maybe another auto plant we would be — where it becomes too much,” Gov. Bredesen said.
The governor pointed to Michigan, the home and headquarters of American auto manufacturers, which has been hit hard by a steady erosion of jobs at General Motors, Ford and Chrysler. Last month, Michigan had the highest jobless rate in the nation at 8.5 percent. By comparison, unemployment in Tennessee averaged 6.5 percent in June, according to the U.S. Bureau of Labor Statistics.
“I don’t want us to be in a position where Michigan has gotten itself over the years where your whole state economy is dependent on one sector,” Gov. Bredesen said.
Long way to go
Tennessee, which ranked No. 4 in car production in 2006, still has a long way to catch up with Michigan, which placed first in both car and truck manufacturing jobs and output. Michigan still produces three times more vehicles than Tennessee and has far more suppliers and automotive design businesses.
“I don’t know that Tennessee would ever bypass Michigan, but I think the South probably will over time,” said Ed McCallum, an automotive site selection consultant who has written about the Southern migration of America’s automobile industry. “It’s just easier and cheaper to make cars and trucks in the South.”
Earlier this year, Volkswagen moved its North American headquarters from suburban Detroit to Herndon, Va., just outside Washington. Stefan Jacoby, president of Volkswagen of America, said the ongoing problems at the Detroit-based automakers played a role in his decision to relocate the headquarters.
“We originally moved our headquarters to Detroit from New Jersey because we wanted to be one of the Big Three,” he said. “But if those competitors are shrinking and restructuring, maybe it’s not so good to be near them anymore.”
Less than half
Matt Kisber, commissioner of Tennessee’s Department of Economic and Community Development, said the Bredesen administration’s strategy is to maintain less than half of the manufacturing work force concentrated in the automotive industry “to assure that we have a balanced economy.”
“We don’t want to become too heavily dependent on any one sector,” he said.
Currently, 31 percent of state manufacturing jobs are in or in some way support the automotive industry, according to state data.
Gov. Bredesen and Mr. Kisber underscored that they now are working hard to recruit supplier companies for Volkswagen to the Chattanooga area.
“These are good jobs,” Gov. Bredesen said of Volkswagen. “They’re a mix of white-collar and blue-collar jobs. They will bring a lot of other jobs to the region.”
Research opportunities
U.S. Rep. Zach Wamp, R-Tenn., founder of the Tennessee Valley Technology Corridor, said he hopes the South’s growing number of automobile plants also will spur more research and engineering facilities in the region for the automotive industry.
“We can parlay this investment (by VW in Chattanooga) into a major next-generation advanced transportation research center on biodiesel in Chattanooga,” he said. “Oak Ridge is the center for biofuels research, and we had a summit last summer in Greenville, S.C., of the ICAR (International Center for Automotive Research) partnership with Clemson University. We’ve been working on this for 12 years.”
Gov. Bredesen emphasized that he does not believe Tennessee is anywhere near the saturation point in the auto industry.
“I don’t think it would be healthy for the state to have four more auto plants here,” he said. “But we don’t have four more in the works. One more is fine, and we’re going to continue to recruit on that.”
Staff writer Herman Wang contributed to this report.
Last week’s announcement that Volkswagen picked Chattanooga over Huntsville, Ala., for a $1 billion production facility again should secure Tennessee’s top automotive position in the region, some say.
But U.S. Sen. Lamar Alexander, R-Tenn., who as governor a generation ago recruited both Nissan and General Motors’ Saturn automobile assembly plants, has much grander dreams for Tennessee’s automotive industry.
“This decision by Volkswagen, in my opinion, means that Tennessee is on its way within a generation to being the No. 1 state in America in terms of automobile jobs,” Sen. Alexander said. “When an assembly plant arrives, the supplier and their jobs are not far behind.”
Sen. Alexander said Tennessee “is right in the middle” of the Southeast, where most of the new automobile plants have been built in the past 25 years, and should be able to attract many more.
Gov. Phil Bredesen and his chief economic recruiter said they will continue to recruit auto plants. But the two cautioned against putting too much focus on the typically cyclical industry.
“There comes a point with this industry — I don’t think we’re there yet, maybe another auto plant we would be — where it becomes too much,” Gov. Bredesen said.
The governor pointed to Michigan, the home and headquarters of American auto manufacturers, which has been hit hard by a steady erosion of jobs at General Motors, Ford and Chrysler. Last month, Michigan had the highest jobless rate in the nation at 8.5 percent. By comparison, unemployment in Tennessee averaged 6.5 percent in June, according to the U.S. Bureau of Labor Statistics.
“I don’t want us to be in a position where Michigan has gotten itself over the years where your whole state economy is dependent on one sector,” Gov. Bredesen said.
Long way to go
Tennessee, which ranked No. 4 in car production in 2006, still has a long way to catch up with Michigan, which placed first in both car and truck manufacturing jobs and output. Michigan still produces three times more vehicles than Tennessee and has far more suppliers and automotive design businesses.
“I don’t know that Tennessee would ever bypass Michigan, but I think the South probably will over time,” said Ed McCallum, an automotive site selection consultant who has written about the Southern migration of America’s automobile industry. “It’s just easier and cheaper to make cars and trucks in the South.”
Earlier this year, Volkswagen moved its North American headquarters from suburban Detroit to Herndon, Va., just outside Washington. Stefan Jacoby, president of Volkswagen of America, said the ongoing problems at the Detroit-based automakers played a role in his decision to relocate the headquarters.
“We originally moved our headquarters to Detroit from New Jersey because we wanted to be one of the Big Three,” he said. “But if those competitors are shrinking and restructuring, maybe it’s not so good to be near them anymore.”
Less than half
Matt Kisber, commissioner of Tennessee’s Department of Economic and Community Development, said the Bredesen administration’s strategy is to maintain less than half of the manufacturing work force concentrated in the automotive industry “to assure that we have a balanced economy.”
“We don’t want to become too heavily dependent on any one sector,” he said.
Currently, 31 percent of state manufacturing jobs are in or in some way support the automotive industry, according to state data.
Gov. Bredesen and Mr. Kisber underscored that they now are working hard to recruit supplier companies for Volkswagen to the Chattanooga area.
“These are good jobs,” Gov. Bredesen said of Volkswagen. “They’re a mix of white-collar and blue-collar jobs. They will bring a lot of other jobs to the region.”
Research opportunities
U.S. Rep. Zach Wamp, R-Tenn., founder of the Tennessee Valley Technology Corridor, said he hopes the South’s growing number of automobile plants also will spur more research and engineering facilities in the region for the automotive industry.
“We can parlay this investment (by VW in Chattanooga) into a major next-generation advanced transportation research center on biodiesel in Chattanooga,” he said. “Oak Ridge is the center for biofuels research, and we had a summit last summer in Greenville, S.C., of the ICAR (International Center for Automotive Research) partnership with Clemson University. We’ve been working on this for 12 years.”
Gov. Bredesen emphasized that he does not believe Tennessee is anywhere near the saturation point in the auto industry.
“I don’t think it would be healthy for the state to have four more auto plants here,” he said. “But we don’t have four more in the works. One more is fine, and we’re going to continue to recruit on that.”
Staff writer Herman Wang contributed to this report.
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