Today’s Courier Herald Column:
Audi CEO Rupert Stadler has told Automotive News that the luxury German car manufacturer intends to build a U.S. Assembly plant, confirming rumors that have been circulating among the automotive community for years. In an interview published yesterday, Stadler said “It is totally clear that we need new production capacity in the U.S. The only question is when.” All decisions, including the critical decision of the plants location, are expected to be made within three years.
Those working on economic development for Georgia have likely already made initial inquiries to Audi, which is the upscale division of Germany’s Volkswagen group. Volkswagen has recently started producing cars in its only U.S. plant just north of the Georgia state line in Chattanooga, Tennessee. Auto manufacturers tend to like to keep plants somewhat close to each other in order to share supplier bases.
Stadler also indicated that an engine and transmission plant was likely, with components shared between the two manufacturing facilities. Producing the engines and transmissions locally would not only cut down production costs, but significantly increase the amount of domestic content for the cars manufactured in Tennessee and the new Audi plant, allowing them to be considered “domestic” vehicles.
Georgia successfully lured Kia to its current West Point location as part of a second plant strategy. Kia’s parent company, Hyundai, operates a nearby plant outside of Montgomery, Alabama. The West Point plant recently assembled its 300,000th vehicle, and now builds Hyundai SUV’s in addition to the Kia Sorrento SUV and Optima mid-sized car.
Georgia chose not to compete with Tennessee for the Volkswagen plant, instead supporting its location just across the state line, hoping for additional economic benefits from suppliers and jobs for nearby Georgians. Some were upset to learn, however, that the initial hiring for the new plan was limited to Tennessee residents. Scoring a nearby Audi plant would make that reality something that would be quickly forgotten.
Winning the new plant will not come cheap, however. Georgia’s incentive package to Kia was thought to be a record at the time, topping $400 Million. Tennessee managed to top that by $100 Million for Volkswagen, offering a total package valued at roughly a half billion dollars. Though many of the incentive dollars are tax abatements, which forgive taxes over time that would otherwise not be collected if the plant had not been built, states are now offering direct costs for land, construction, site and transportation improvements, and job training as part of their offers.
With the country still mired in a deep economic slump, expect competition for the new plant to be fierce. No governor facing sustained unemployment wants to explain to voters why a couple of thousand direct manufacturing jobs and thousands more indirect jobs that would be created went to a neighboring state who offered just a bit more. Economic development teams should be prepared to dig deep.
Georgia may have another advantage in this competition other than its proximity and previous cooperation in landing the Tennessee location for Volkswagen. Porsche recently worked with state and local officials to relocate its North American Headquarters from rented office space to a permanent home on the site of Ford’s Hapeville Plant, adjacent to Hartsfield-Jackson Airport. The development will feature not just offices, but a demonstration race track as a destination feature for Porsche.
Porsche and Volkswagen have shared a long association, and the two are now navigating a complex merger arrangement. The familiarity between Georgia’s economic development officials and Porsche will hopefully bring insight and familiarity needed to make Audi’s site selection officials comfortable with Georgia as a host location.
Georgia offers a good location near Volkswagen’s biggest U.S. investment ever, a proven track record of landing Kia which has already expanded less than 2 years after producing its first vehicle, and a demonstrated ability to work with leaders of a sister company to attract investment and a North American Headquarters. Now let’s just hope we can make the numbers work when it comes time for the incentive package to be negotiated.