Competition All Around

As Detroit witnesses the southward migration of the U.S. auto industry with new vehicle assembly plants in places such as Lincoln, AL, and San Antonio, TX, blue-collar workers in the North can only ponder their long-term job security.

In the South, however, the arrival of plants from Japanese, German and Korean OEMs — and their affiliated suppliers — has not been a cure-all for regional economic woes attributable to the loss of textile jobs.

In fact, Tennessee and Alabama — two states that have won significant new automotive facilities over the past decade — actually have lost an alarming number of manufacturing jobs.

Alabama has lost 78,900 (18.8%) of its manufacturing positions since 1998, while Tennessee has lost 72,500 (14.8%) since 2000, according to the U.S. Dept. of Labor. Michigan, meanwhile, has lost 147,400 (16.4%) of its manufacturing jobs since '99.

The Dept. of Labor reports the U.S. has lost some 3 million manufacturing jobs since 1998, many to China. The statistics show another 2 million manufacturing jobs lost in the U.S. between 1979 — the all-time employment peak for the sector — and 1998.

While Northern workers bemoan the loss of jobs to the South, Southern workers struggle with the transfer of jobs to even lower-wage regions, such as Mexico and China.

In Tennessee, Charles Poe is convinced U.S. manufacturers can compete with China. The auto industry veteran already has snagged work from a Chinese competitor by undercutting the price by nearly 20% — while posting a profit.

A Tennessee company was buying small plastic jewelry boxes from China for $0.40 apiece. Poe said his company, Trueform Mfg. Co. in Athens, TN, could do the same job for $0.33 apiece, saving the customer $500,000. Trueform got the job and will produce 6 million gem boxes over two years using zero labor, as the manufacturing in Athens will be automated.

“We can compete with China,” says Poe, who began Trueform in '94. “We can come in under their price at certain volumes.”

Trueform employment is holding steady at 40, and the average wage is $11.50 per hour — competitive for the region.

In the Southeast Industrial Development Assn. (SEIDA), which includes parts of Tennessee, Georgia and N. Carolina, 22,300 people are jobless, largely due to textile losses. The region's unemployment rate is 5.3%.

The desperation to create jobs has forced economic-development groups in the North and South to sweeten the financial incentives for companies investing in their regions.

Beth Jones, economic development director for SEIDA, says automotive companies considering the region are demanding.

“They want it all — free land, tax benefits, money to train employees, help with infrastructure at the site,” Jones tells Ward's during a recent tour of the region. She says it's difficult to compete in the incentives game.

Yet many suppliers find the region ideal because of its central location, moderate climate and low cost of living. Tennessee Rand Co., a custom-machining supplier in Chattanooga working primarily in the auto industry since 1995, is a local success story. It has 140 employees — half of which were hired within the past 18 months. Thirty more employees will be added this year.

The company's second plant opened in June 2002 and is at full capacity. A 200,000-sq.-ft. (18,850-sq.-m) addition will be completed by the end of the year.

During a recent plant tour, the facility was bustling with activity as welding fixtures were being completed for the Ford Mustang cross-car beam, Ford Explorer seat frame and Ford Focus exhaust system. Most of Tennessee Rand's product goes north to supplier plants in Michigan, Indiana and Ohio.

Tennessee Rand Vice President Don Peters lives by a business model seldom observed in cost-conscious Detroit.

“We get business by not being the low bidder,” he says. “Companies we work for continue to come back.”