1 July 2019

Electrification will drive the South to rise again

With the news that Mitsubishi Motors is relocating its North America headquarters from California to Tennessee, a move that will bring the Japanese automaker closer to its sister company Nissan and strengthen Tennessee’s, and the southern states of the US’s growing reputation as an epicenter of the automotive sector, it seems that we are seeing further collaboration and rationalisation of OEMs’ activities in North America.

The auto industry is continuing to be welcomed in the American South for several reasons; politicians and the workforce in the South are determined, some would even say stubborn, in their resistance to unionisation and regulation, and under the Trump administration there is an atmosphere of national pride and anti-import feeling - even though the majority of carmakers located in the southern states are foreign OEM transplants.

Bringing partners in the Renault-Nissan-Mitsubishi Alliance closer together is what the Americans call a no-brainer - as Nissan has a production plant in Smyrna, Tennessee, and owns a 34% stake in Mitsubishi Motors, so co-locating the Alliance’s administrative centres makes sense.

As well as the Nissan plant, Volkswagen has a vast facility in Chattanooga, Tennessee and earlier this year VW announced an $800 million investment to expand the plant, which is expected to create 1,000 jobs for electric vehicle production beginning in 2022.

Alongside this large company investment, VW will receive $50 million in state incentives, symptomatic of another strong reason for carmakers to move south from Michigan, Indiana, Ohio, states where the labour rate is more than double that of the south, and where unions are firmly entrenched and where regulation is said by some industry observers to be choking growth.

Recently, Volkswagen workers voted against forming a factory-wide union: another setback for the United Auto Workers’ efforts to gain a foothold among foreign automotive plants in the South, which could be said to have further cemented the Trump-led culture of the determined and independent South.

While no-one wants to see the erosion of hard-won workers rights, plant safety measures and good wages, all measures that were achieved in the new industrialised midwest in the last century, the coming of the fourth industrial revolution - Industry 4.0 - will see a rationalisation of employment in the automotive industry, with far fewer engineering and assembly jobs as electric motors, have about one-tenth of the parts of petrol and diesel engines.

The watchwords for the new auto industry will be electrification, simplification and collaboration and the South will be ideally placed for this revolution - and it will rise again.

Simon Duval Smith

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