The Shape and Future of Auto Growth
Expansions lead the growth in Alabama’s automotive sector, and new technologies steer the future of design and worker training.
Faces of the industry — among those gathered for AAMA’s winter meeting were (top, left to right) EDPA’s Steve Sewell; Richard Payne of Faurecia, and Tony Comella of SCSI; (bottom, left to right) Bill Canary of the Business Council of Alabama; Jack Sisk, an industry consultant based at the University of Tennessee, and Ellen Bennett of Hargrove Controls.
Last June, Eissmann Automotive, a vehicle parts supplier headquartered in Bad Urach, Germany, announced that it would invest $14.5 million to expand its manufacturing facility in Pell City.
The company wants to make room for a new manufacturing process. The expansion will include a new 130,000-square-foot building, as well as the installation of new advanced manufacturing equipment. Company officials say the expansion would also result in the hiring of at least 200 more employees at the facility.
Workers at the Pell City facility manufacture products such as vehicle interiors and trim components for automakers like Mercedes-Benz, Audi, Tesla, Jeep, Porsche and Volkswagen.
Eissmann is just one of several auto industry-related companies in Alabama to announce expansion plans in the last couple of years. In 2015, Mercedes-Benz U.S. International (MBUSI) revealed its plan for a $1.3 billion expansion of its vehicle assembly plant in Vance. The following year, Hyundai Motor Manufacturing Alabama reported that it would invest $52 million to enlarge its Montgomery plant, which would result in 38 additional jobs at the facility once completed.
“And that’s the real story of growth,” says Steve Sewell, executive vice president of the Economic Development Partnership of Alabama (EDPA). “There’s a lot of fanfare when a new company comes to the state, but the significant growth has come from expansions of existing automotive companies in Alabama, and we’ve had a lot of expansion in the last couple of years that have been driven by the success of the manufacturers in the state.” A recent report by the EDPA shows that Honda Manufacturing of Alabama (HMA), MBUSI and Hyundai Motor Manufacturing Alabama (HMMA) together produced around 1 million vehicles in 2015, which set an auto production record for Alabama. Engine manufacturing in the state has also thrived, the report says. Toyota Motor Manufacturing Alabama (TMMAL), along with HMMA and HMA, assembled approximately 1.66 million auto engines in 2015. In addition, as of 2015, Alabama was the fifth largest producer of cars and light trucks in the United States. Moreover, the EDPA report found that export dollars for vehicles and vehicle parts rose to more than $8.2 billion in 2015
We’re continuing to see strong demand for our products,” says Ron Davis, president of the Alabama Automotive Manufacturers Association. “Our industry continues to grow and prosper in Alabama.”
The question, says Sewell, is how to maintain the industry’s good fortune in the years to come.
“The story of the automotive industry in Alabama is one of success,” says Sewell, “and we’re looking now at how do we continue that momentum? What does this industry need? What kind of support and what is important to the industry’s sustainability and growth as we look at the next 10 to 15 years?”
One factor that Davis says has helped Alabama’s auto industry has been the increased sales of some larger vehicles in the United States due partly to lower gas prices. In fact, Kelley Blue Book reported in December that mid-size SUVs and crossover vehicles were closing in on becoming the fastest growing segments that month, helped along by low gas prices and high consumer demand.
“The same goes for the low interest rates,” he says. “If you can buy a car at 0 percent interest or at a low interest rate, that makes the deal to buy a new vehicle more attractive than buying a used vehicle where you have a higher interest rate.”
Industry watchers like Davis and Sewell also are waiting to see how the rapid development of new technologies in the automotive industry will impact the vehicles themselves, as well as how companies will manufacture vehicles in the years to come.
“There will be, in the future, autonomous vehicles,” says Davis. “You’re seeing more and more electronics going into cars than in the past. You’re seeing vehicles with improved fuel economies and improved safety features on the cars and more use of computers.”
And as the technology in vehicles become more complex, says Sewell, educational programs must be able to develop skilled technicians who can produce such products.
“So, for us, the question is, what skill sets are going to be required in the future with the changes in technology and the production environment?” says Sewell. “For instance, in the last 20 years, we’ve seen so much more automation in our automotive plants in the state, so that requires a different level of technology and a different kind of worker who can program, maintain and repair equipment and who can work in that kind of manufacturing environment. So those are the things that we can control somewhat. We can’t control the technology, but we can control our preparedness in terms of giving our citizens the skill sets and putting the right kind of programs and curriculum in place so that they are prepared to seize the opportunities that are going to come with new technology.”
Sewell points to several ongoing initiatives, such as the Consortium for Alabama Regional Center for Automotive Manufacturing (CARCAM), which consists of community colleges and technical schools around Alabama that offer coursework and auto manufacturing degrees, as well as apprenticeships with auto manufacturers and suppliers, to prepare students for work in advanced manufacturing. And last fall, the Alabama Workforce Council debuted a statewide rebranding initiative called AlabamaWorks, which includes a new web portal that offers a more unified way for companies and skilled job seekers to connect and help students and workers to identify education and training opportunities in their local communities.
“AlabamaWorks is a great program that we have now to address the needs of all industries, and the automotive industry is a big part of that,” says Sewell. “We’re learning about the skill sets that companies need in order to grow in the future, and the programs and partnerships are in place with the automotive industry to create that pipeline of skilled workers that companies are going to need to sustain the growth and success that they have had.”
While Alabamians have celebrated the jobs, investments and overall economic impact of the auto industry, Sewell says what is less well known is the impact these companies have had on the state in other ways, from environmental practices to community programs.
Toyota in Huntsville, for example, has an ongoing program in place to recycle and reuse rainwater and conserve energy at its plant. Honda has supported local charities and Hyundai encourages its workers to participate in local community projects. In addition, Mercedes has been a sponsor for West Alabama’s annual Worlds of Work event in Tuscaloosa that teaches local school children about various career options.
“They’ve really had a tremendous impact on Alabama in the standards they set and how they operate,” says Sewell. “That’s the intangible that gets lost when we’re looking at the numbers and jobs and the numbers in terms of economic impact.”
Gail Short and Art Meripol are freelance contributors to Business Alabama. Both are based in Birmingham.