Whether it is through mergers or acquisitions, joint ventures or subsidiaries, foreign direct investments (FDI) are having a major influence on the Yellowhammer State’s economy.
FDIs are investments made in a country by companies or people based overseas.
“A lot of Alabama’s most recent economic development successes have been built on the back of successful FDI campaigns,” says Greg Barker, president of the Economic Development Partnership of Alabama.
The numbers tell the story. In Alabama, 732 international companies are employing 120,000 U.S. workers, and some 65,800, about 55%, of those jobs are in the manufacturing sector, according to a report by the Global Business Alliance. Moreover, from 2016 to 2021, FDI employment rose 8% while private sector employment during the same period in Alabama rose just 3%. In addition, most of the international employers in Alabama are from Germany, Japan and Canada.
Furthermore, the Alabama Department of Commerce says that since 2018, foreign companies have launched investment projects valued at more than $13 billion across Alabama, generating 17,000 job commitments.
The German appliance maker Miele recently revealed its plans in 2024 to open its first U.S. production hub in the city of Opelika.
Investors from other countries are also selecting Alabama to start up operations and grow.
In 2024, Boresight, an Australian aerospace company that provides aviation system engineering, integration and manufacturing services, announced it would set up operations in Huntsville.
Meanwhile, in Macon County, South Korean auto parts manufacturer Samkee Corp. opened a new production facility in Tuskegee Commerce Park.
Experts say FDI brings several advantages to a state such as economic stimulation, human capital development, jobs and access to management expertise, skills and technology.
The disadvantages, however, include exposing a host country to foreign political influences, experts say. Moreover, foreign investors can influence interest and exchange rates or even overtake a domestic industry that is no longer competitive in the market.
Attracting foreign investors in the first place, however, requires several factors, Barker says.
“You’ve got to have the right livability so that you could attract executives to a community,” he says. “You’ve got to have cost-effective tax rates, and state and local governments eager to work with these new industries as they’re getting started up.”
And while snagging FDI for a town or county is advantageous, having those foreign companies grow their operations, bringing in increased capital investments and operating capital to an area, is even better, Barker says.
“It’s validation,” says Barker. “Did the company make the right decision by picking the community? Has the community benefitted from the investments from the company?”
For example, last summer Hyundai Motor Manufacturing Alabama LLC announced plans to spend $290 million to enhance production of its sport utility vehicles in Montgomery, including $190 million for tooling and equipment upgrades to prepare for production of the new fifth-generation Santa Fe.
In Selma, Seoyon E-Hwa Interior System, which produces molded plastic interior trim parts for Hyundai Motor Manufacturing Alabama, is adding 60 more jobs to the current 440 through a $4 million expansion project for its Alabama facility.
“Announcing that you’re going to put a facility in a community is a great thing,” says Barker, “but what validates the state, and what validates the company’s presence, are the expansions.”
Birmingham
The greater Birmingham region is host to nearly 110 FDI companies with representation from nations like Australia, Germany, Japan, Canada, Spain, Sweden, Ireland, France and South Korea.
Twenty-seven of the companies are based in Germany, 21 in Japan and 17 in Canada. Furthermore, foreign companies have brought almost $2.6 billion in capital investment, and over the last decade, more than 4,000 jobs to Birmingham, according to data from the Birmingham Business Alliance.
Many of the foreign companies serve Alabama’s auto manufacturing industry, says Trevor Sutton, the economic development director for the Birmingham Business Alliance. He says the Birmingham metro area has especially seen an uptick in foreign companies setting up business services operations.
In 2022, for example, the German company MBN Automotive Inc., which makes assembly line machines, opened a sales and customer support office in Birmingham, with plans to grow its sales team in Alabama.
Sutton says an advantage of foreign direct investment is that foreign companies that have remained in Birmingham and expanded can be helpful during recruitment tours to attract other foreign-based companies to the area.
“It’s easier for us to go internationally and to bring along a partner who has had a great experience here to speak for us, rather than us showing up, cold calling, trying to sell Birmingham or Alabama as a whole,” Sutton says.
“To have a partner who can say, ‘I do business here, and it’s great,’ is extremely helpful,” says Sutton.
Montgomery
Over three years in Montgomery, from 2022 to 2024, FDIs have reached more than $1.12 billion, says Charlie Bass, director of research and GIS at the Montgomery Area Chamber of Commerce.
“And that’s just specific to the foreign direct investment,” says Shelby Stringfellow, senior vice president of economic development for the Montgomery Chamber. “That doesn’t include additional economic investments that are non-FDI related.”
FDI is also responsible for around 11,600 jobs in the Montgomery area, the Chamber reports.
The majority of the FDI in Montgomery is automotive-related, Stringfellow says, and many are South Korean companies that support Hyundai Motor Manufacturing Alabama, which is located in Montgomery.
In fact, Montgomery and the River Region are home to about 40 South Korean companies, the majority of which support automotive manufacturing, Stringfellow says.
“I would say the impact from foreign direct investment to Montgomery has been huge,” says Stringfellow. “Hyundai, for example, and its suppliers have about a $2.4 billion impact annually, and it makes up around 20% of our GDP here in Montgomery.”
Other major foreign businesses in Montgomery include the food manufacturing company Viscofan with corporate offices in Navarra, Spain, which makes sausage casings, and a Canadian company, Premier Tech, that makes horticulture and agriculture products.
Stringfellow says FDI has afforded the region with several benefits, including higher wages.
“The automotive manufacturers are near the top of wage payers, and so foreign direct investment really helps raise the middle class,” Stringfellow says.
“We also work with the Alabama Department of Commerce, and they have project managers who are located internationally to help funnel foreign interests back to the state of Alabama,” Stringfellow says.
“And those programs can funnel projects back here to Montgomery.”
Mobile
Around the port city of Mobile, aviation, ship building, steel processing and chemical plants make up the bulk of FDI, says Bradley Byrne, president and CEO of the Mobile Chamber.
“Since 2020, over the last five years, we’ve announced $2.32 billion in foreign direct investment just in Mobile County, and we know that we’ve got one to three more announcements before the end of this year. So, that figure is going to go up. By the end of the year, it’ll go over $2.5 billion,” Byrne says.
Some of the most recent announcements include AM/NS Calvert, the steel company that received an incentive of more than $280 million from the U.S. government to build a plant that will make non-grain-oriented electrical steel.
Another is from the ship manufacturer Austal USA, a subsidiary of the Australian ship builder Austal. Austal USA recently won a $450 million contract from General Dynamics Electric Boat to expand its production capacity in support of the U.S. Navy submarine industrial base.
And Evonik, a German specialty chemical company, committed to building a new $176.5 million plant at the Mobile location to boost its animal nutrition business line.
And one of Mobile’s most recognized companies is European aviation giant Airbus, with its only U.S. final assembly line in the Port City along with an engineering office.
“In the last three years, we’ve announced 6,000 new jobs, all from foreign direct investments,” Byrne says.
Byrne says one advantage of FDI in the Mobile region is the tax contributions to local schools.
“In most of these cases, they’re getting incentives that are tax abatements, but we cannot, under law in Alabama, abate school taxes,” says Byrne. “So, it has an enormous impact on our school system because of what they’re generating in their taxes for the schools.”
Gail Allyn Short is a Birmingham-based freelance contributor to Business Alabama.
This article appears in the December 2024 issue of Business Alabama.
