Jack Weaver, an 82-year-old retired dairy farmer whose house sits on a Civil War battlefield, lives near General Motors’ Spring Hill plant in Tennessee.
Michael Wayland / CNBC
SPRING HILL, Tenn. – Jack Weaver can point to a cannon on a Civil War battlefield from the comfort of a shaded bench in his backyard — a visual marker of his land’s wealthy past. As he speaks about his small town, it’s over the loud rumble of cars and trucks on the intersection in front of his farmhouse red home.
The 82-year-old retired dairy farmer has lived in Spring Hill nearly his entire life. He’s watched the once-quiet town in middle Tennessee grow right into a burgeoning Nashville suburb. The evolution of Spring Hill has come along with a population boom within the state in addition to the introduction of latest industries — specifically, auto corporations — which have poured billions of dollars in latest investments into the state.
“It’s good and it’s bad,” says Weaver, who complains about cars hitting his fence and the traffic General Motors’ Spring Hill plant has brought because it opened in 1990. “I’m not against development in any respect. I’m not. I believe a person outta do what he wants along with his own land.”
Detroit is the town that “put the world on wheels,” but it surely’s towns like Spring Hill and others in neighboring states which might be attracting essentially the most investments from automakers lately, as production priorities shift to a battery-powered future with electric vehicles.
Firms greater than ever wish to construct EVs where they sell them, since the vehicles are far heavier and more cumbersome to ship than traditional models with internal combustion engines. In addition they want facilities for battery production to be close by to avoid supply chain and logistics problems.
Among the many first to take a position in southern states was Ford Motor within the Fifties and Nineteen Sixties in Kentucky, followed by foreign-based, or transplant, automakers starting with Nissan Motor, which established a plant in Smyrna, Tennessee, in 1983. Others comparable to General Motors, Subaru, Toyota Motor and BMW followed suit through the Nineteen Nineties. More have followed since then, including recent announcements by Hyundai Motor and Rivian Automotive to construct multibillion-dollar plants in Georgia.
As more corporations look to the American South, the investments are changing the landscape of towns across the region and of the automotive industry’s workforce, supply chain and logistics. Firms first to establish shop within the South earn early benefits over their northern competitors, and future newcomers, in response to officials.
Auto executives say they’re investing within the South for a mix of reasons: lower energy costs, available workforce and livability amongst them. Many southern states also include other advantages, potentially controversial, comparable to all-in lower pay for employees, hundreds of thousands in tax breaks and a largely non-unionized workforce in lots of the Republican-controlled, right-to-work states.
However the shift brings unique challenges, too. Because the Motor City moves and expands south, it has to grapple with preservation of historic plantation farms, unearthing of slave burial grounds and pushback from residents and native politicians who aren’t used to the traffic or industries.
Investments shifting
Automakers have announced $45.9 billion of investments in southern states since 2017, in response to The Center for Automotive Research, a nonprofit think tank based in Ann Arbor, Michigan. That is the first yr the South outpaced the Midwest, or Great Lakes region, for announced investments since a minimum of 2010.
Midwest states comparable to Michigan, Ohio and Indiana saw $39.9 billion in announced investments in that very same timeframe.
Many of the money heading south – $34.2 billion, or 74% – has are available in since last yr from traditional automakers comparable to GM, Hyundai and Ford Motor in addition to EV startup Rivian. Others comparable to Volkswagen and Nissan proceed to take a position and expand their operations within the South, largely for brand spanking new electric vehicles.
“We’re mainly undergoing the only biggest industrial transformation, I might say, to not understate it, within the history of America,” Scott Keogh, CEO at Volkswagen of America, told CNBC in June on the automaker’s latest battery lab in Chattanooga, Tennessee. “It’s happening at once on this area.”
Scott Keogh of Volkswagen of America on the VW plant in Chattanooga, TN, June 8, 2022.
Michael Wayland | CNBC
Keogh singled out energy capability and costs as the highest priority for the corporate’s investments in Tennessee, including the potential for brand spanking new assembly and battery facilities that the corporate is “actively” scouting locations for. He and other executives have also cited incentives, tax support, labor and workforce training as other key elements.
Ford CEO Jim Farley put the same emphasis on the price and availability of energy in September, announcing an $11.4 billion investment in latest vehicle and battery plants in Tennessee and Kentucky.
“We would like to work with states who’re really enthusiastic about doing that training and supplying you with access to that low energy cost,” Farley told the Associated Press then.
Tennessee has among the many lowest electricity prices within the country, in response to essentially the most recent data from the U.S. Energy Information Administration. The state’s average industrial price of electricity per kilowatt-hour was 6.31 cents as of May. Michigan’s industrial energy cost was 8.72 cents per kilowatt-hour, and the national average was 8.35 cents.
Mississippi and South Carolina were under 7 cents, while Georgia was 9.05 cents – amongst the very best in area, in response to the U.S. Energy Information Administration.
While those cost differences seem minimal, they add up quickly. Ford’s latest battery plants can have an annual capability for 43 megawatt-hours of production. There are 1,000 kilowatt-hours of electricity in a megawatt-hour, meaning tens of 1000’s of dollars in savings per yr.
The expansion south is anticipated to proceed for years to come back, in response to AlixPartners. The worldwide consulting firm expects investments from automakers and suppliers in southern states comparable to Alabama, Georgia and Kentucky to total $58 billion for electric vehicles between 2022 and 2026. That is nearly 4 times the $15 billion that is expected in Midwest states, and $20 billion elsewhere within the country.
“It definitely will change but at once there’s rather a lot more interest and activity happening within the Southern states, particularly with all these automakers making investments on the EV front,” said Arun Kumar, a managing director within the automotive and industrial practice at AlixPartners.
Southern hospitality
State economic development officials from Tennessee and Georgia say their states have made the automotive industry a priority due to the provision chain jobs that typically follow. In addition they say electric vehicles have helped to level the playing field for brand spanking new investments.
“This is nearly like a seed field of opportunity, as this industry changes because we’re constructing the provision chain in america for electrification from scratch,” said Pat Wilson, commissioner of Georgia’s economic development unit. “There is a huge amount of opportunity.”
As of July, EV-related projects contributed greater than $12.6 billion in investments and greater than 17,800 latest jobs in Georgia since 2020, officials said.
Tennessee reports automotive corporations have added greater than 43,800 latest jobs and invested $16.5 billion in private capital within the state since 2012, representing nearly 30% of personal capital investments during that point.
Nissan’s Smyrna Vehicle Assembly Plant opened in 1983, marking Tennessee’s first major auto facility. The plant employs greater than 7,000 individuals are produces a wide range of vehicles, including the Leaf EV and Rogue crossover.
Michael Wayland / CNBC
With billions of dollars on the road and tens of 1000’s of latest jobs, states have offered enormous incentive packages for the businesses within the types of land, tax abatements/incentives and other support comparable to installation of utilities and roadways.
For instance, Tennessee approved an $884 million incentive package for Ford’s plans to spend $5.6 billion within the state, in addition to in-kind services and a $2 million grant for training services. Ford’s investment features a latest electric truck plant and battery facility with supplier South Korea-based SK Innovation.
Bob Rolfe, who oversees The Volunteer State’s economic development, said such actions are needed to compete with others. He said to draw Ford last yr the state spent years accumulating enough land for an “electric vehicle mega site” ahead of securing the automaker’s commitment.
“We tell our team day-after-day to proceed to recruit. Is enough, enough?” Lewis said ahead of a visit to Japan for automotive recruitment in June. “The more great corporations that decision Tennessee home, the softer the landing once we do hit the subsequent wind shear that is going to be developed around the subsequent recession.”
Unique issues
But not all agree that the automotive industry must be expanding South into rural areas. Rivian has faced notable pushback since announcing plans last yr to construct a $5 billion plant about 45 miles east of Atlanta, Georgia.
While hailed by many politicians, including Gov. Brian Kemp, local news outlets report residents of the agricultural area are concerned with how it’ll impact their community. Others, including politicians, oppose a $1.5 billion in tax breaks and other incentives that state and native officials have offered Rivian.
Haynes Haven is a historic landmark in Spring Hill, Tennessee that has been maintained by GM for the reason that automaker built an assembly plant near the location within the Eighties.
“[Union Army General] Sherman and his troops destroyed our community. Now this supposedly green company is coming to destroy it again,” JoEllen Artz told NBC News in May. Artz is president of the grassroots No2Rivian group, which says it has raised over $250,000 and hired Atlanta lawyers to fight the plant. “We would like to maintain it similar to it’s.”
Constructing massive assembly plants in traditionally rural areas may involve a singular set of challenges.
A long time ago, when GM was constructing its Spring Hill plant, the corporate unearthed an unmarked slave graveyard. GM paid for the stays to be moved to a close-by burial site.
“After we spend money on properties, we’re also investing in communities, their history and culture,” GM said in an emailed statement to CNBC. “With any constructing or renovation project, we expect to come across the unexpected, and we attempt to work with community members to seek out solutions to suit the unique needs of every situation. In lots of cases, like in Spring Hill, the unexpected finds turn into intertwined in our own history, as well.”
It wasn’t the primary time GM has operated around such a site. On the property of its Detroit-Hamtramck plant, there’s an energetic Jewish graveyard that the corporate agreed to construct around when it built the plant within the Eighties.
There was reportedly one other cemetery moved in Smyrna, Tennessee – situated about 28 miles northeast of Spring Hill – when Nissan’s plant and railroads were built there within the early Eighties.
GM maintained and updated a historic plantation in Spring Hill, Tenn. called Rippavilla as a part of a deal for land to construct an assembly plant in the town within the Eighties.
Michael Wayland / CNBC
Since GM’s Spring Hill Assembly plant was built, the corporate also has maintained two historic plantations as a part of land deals struck through the construction. It still maintains one called Haynes Haven, whose historic horse stables were became a welcome center and used for other events. The encircling area is currently getting used for worker parking during construction of the corporate’s latest $2.3 billion battery plant, next to the unique plant.
The opposite site, called Rippavilla, sits across the road from the plant and was donated by the corporate to the town in 2016. It’s now being run by a nonprofit organization, The Battle of Franklin Trust, committed to Civil War preservation and education.
“The last those that owned Rippavilla were pretty insistent that they wanted it to be a historic site. They didn’t wish to occur to what happened to Haynes Haven, which Haven is owned by GM and capable of use nonetheless they see fit,” said Eric Jacobson, CEO of the organization.
Jacobson credits GM with saving and maintaining the location in the shape of $100,000 a yr up until 2016, when a 10-year deal to take care of the property ended. GM said it continues to support the location.
Battling the union
While the automakers could have to navigate battlefields of the South, they do not have to fret as much about battling unions.
The United Auto Staff has didn’t successfully organize a non-Detroit automaker plant within the South, despite a long time of attempts. The outstanding union also now faces challenges of organizing three way partnership battery plants from GM and Ford within the South.
“It’s a really critical time for the UAW,” Ray Curry, president of the union, told CNBC. “This transformation piece is about our future. It’s about 86-plus years of longstanding history.”
Ford’s greater than $11.4 billion investment to construct latest U.S. facilities in Tennessee and Kentucky is anticipated to create nearly 11,000 jobs to provide electric vehicles and batteries.
Each GM and Ford officials have said the choice of whether to unionize at their U.S. battery plants, that are joint ventures, might be left to the employees.
While the labor cost gap has narrowed between the Detroit automakers and other non-unionized automotive plants, organized labor costs are higher for the businesses.
At the top of a current four-year contract between the Detroit automakers and UAW in 2023, the Center for Automotive Research estimates average hourly labor costs per employee might be $71 for GM; $69 for Ford; and $66 for Stellantis, formerly Fiat Chrysler.
“There’s quite a little bit of anti-union attitude that prevails within the international carmakers,” said James Rubenstein, a professor emeritus on the University of Miami Ohio, who focuses on the automotive industry. “It’s slightly bit easier to do this down South, to maintain the union out.”
Correction: A graphic in an earlier version of this text misrepresented industrial energy costs from the U.S. Energy Information Administration. They need to have been in cents, not dollars.
