In 1993, Mercedes-Benz announced that it would open an automotive manufacturing plant in Alabama. Since then,
several companies have opened similar plants in order to tap into Alabama’s vast industrial resources. Mercedes-Benz executives chose Alabama to establish its first automotive plant outside of Germany because Alabama has an extensive skilled workforce and a business-friendly environment. The state has few environmental regulations and provides immense tax incentives to companies who choose to locate factories within the state. Since the company’s decision, three other auto companies have established plants that created $7 billion dollars worth of vehicles and $1.2 billion dollars in parts for export in the last year alone. In 2015, Mercedes-Benz, Toyota, Honda and Hyundai shipped over $6.6 billion worth of vehicles to 99 different countries and established automotive vehicles and parts as Alabama’s #1 export. Businesses in Alabama related to the industry hail from 30 different countries and host four different Original Equipment Manufacturing (OEM) plants in the state. The different actors in the automotive industry within Alabama have made the state the 4th largest American automotive manufacturing location and the 3rd largest state in automotive exports in the United States. In sum, Alabama has become a major player in the international auto industry through attracting high-quality manufacturers and industry players to the state to perform industrial activities.
Thomas Barnett
Sources: http://www.madeinalabama.com/industries/automotive/
In September 2015, Alabama auto supplier workers voted to form a local chapter of the UAW, which later spread to the Mercedes and Honda plants in Alabama as well. How are auto industries in the South planning to combat the UAW’s effort to reach the South’s emerging auto industry workers, and how can a situation like Detroit be avoided?
Source: http://www.al.com/business/index.ssf/2015/09/workers_at_alabama_auto_suppli.html
How long are the tax exemptions expected to continue? Is there a timeline of when exemptions run out leading to the possibility of movement out of the state?
Mercedes did a very successful job of shopping for incentives, from memory $350 million. On a net present value basis my assumption is that it has been a bad deal for taxpayers. That’s a good term paper topic. How much did other firms garner in incentives? The up-front money looks better if the end result was a host of other firms locating in Alabama that did not receive bountiful up-front incentives. These can be hard to document if they include a combination of infrastructure investments (buidling a new road), the provision of land already owned by the state, training programs at local community colleges, and not just various tax benefits.
Heard from an insider today at the Industry Studies Conference that Tennessee has done even better, I’ll spare you the details but VW really put the screws to Bob Corker, who got suckered into a fictitious bidding war that will cost taxpayers $500 million [total incentives are more, that’s just the increment]. After providing welfare to a foreign corporation he then turned around and undermined VW’s efforts to bring in the UAW, who lost by 44 votes. Next week I’ll be at VW, but given the context am not likely to hear more. That likely won’t lead VW to shift business elsewhere, but it certainly has left a bad taste in German mouths about an unfriendly day-to-day business climate.