CAR study – South Competes with Mexico in Automobiles

The Southern Automotive Research Alliance (SARA), including Alabama and five other Southern states, recently funded research to determine strategies for boosting the region’s attractiveness as a location for additional automotive plants.

The Center for Automotive Research (CAR) study, released this past November, was commissioned by SARA because Mexico has been luring more and more automobile manufacturing plants, says Jay Baron, Ph.D., president and chief executive officer of CAR, based in Ann Arbor, Michigan.

“Three years ago at the Southern Automotive Conference, we started discussing the trend, ” Baron says. “Announcements for seven new assembly plants planned in Mexico were made during a two-year period and none for the South since 2009. When assembly plants are announced, suppliers follow, creating additional jobs.”

Each assembly plant job creates 11 additional jobs, according to the CAR study. Alabama and other Southern states have had plant expansions in recent years, but expansions generally add only a limited number of additional assembly jobs compared to the establishment of a new plant, Baron says.

Automotive production growth in the SARA region — Alabama, Kentucky, Louisiana, Mississippi, South Carolina and Tennessee — is expected to be modest within the next four to five years, only about 10 percent, according to the study. About 3.5 million units were produced in 2014 versus 4 million projected for the year in about four or five years. “That’s good news, but in the long term, the South needs and wants to attract more automotive plants, rather than stagnating as Mexico moves ahead, ” Baron says.

- Sponsor -

Why are the new plants going to Mexico? According to the CAR study, which polled more than 40 companies, a major reason is Mexico’s numerous free trade agreements with countries across the globe, lowering the cost of buying a car and attracting more buyers. Another is low wages, approximately $5 an hour in Mexico. While those advantages would be challenging for Southern states to overcome, the study does provide four key recommendations that could help lure more automotive jobs to Alabama and other Southern states in the future. 

First, the South can become more competitive by increasing the number of its skilled workers. “The lack of skilled automotive workers is a global problem, but is something the South could address, ” Baron says.

Manufacturers included in the CAR study said their greatest employment challenge is qualified maintenance associates, who install and service equipment and perform other technical functions. Such workers typically need training provided at a community college or vocational school, as well as apprenticeship training at a vehicle production facility. “There are a number of apprenticeship programs in the South but not near enough, ” Baron says.

The second key study recommendation is for Southern states to work together to attract more automotive suppliers, particularly automotive tooling companies, to the region. Because auto plants are so spread out in the South, rather than located in clusters, suppliers need to be courted regionally.

Third, a competitive analysis of the Mexican automotive industry should be conducted so the South can get a better insight into how to better compete with Mexico for future automotive plants.

Finally, the South must work together to rebrand the automotive industry, including getting students and their families into the plants for tours. Otherwise Southerners won’t fully appreciate the value of the industry to the region, including how it offers multiple employment options, even international business. “Many people think of the automotive industry as a dirty, unsafe and unstable work environment, ” Baron says. “But the truth is that today the automotive manufacturing is high tech and provides excellent wages and job opportunities.”

Kathy Hagood is a freelance writer for Business Alabama. She lives in Homewood.

text by kathy hagood

The latest Alabama business news delivered to your inbox