Automakers’ drive into Southeast misses Florida
Car companies, attracted by incentives, invest $6 billion to build plants in other Southeast
Lured by lucrative incentives and the promise of cheaper, non-union labor, carmakers invested $6 billion to build eight plants in five states — Georgia, South Carolina, Alabama, Tennessee and Mississippi. Those plants today employ 27,000 people, plus tens of thousands more at companies supplying vehicle parts for the plants.
Jacksonville, and the rest of Florida, got none of that action.
Cecil Commerce Center, which fits the bill as a site for a mega-manufacturer, sits stuck in neutral.
Florida’s shortage of manufacturing jobs has spurred examination at both the state and local level about how to catch up. Think tanks have weighed in, saying export-driven manufacturing would diversify an economy reliant on agriculture, tourism and construction. Jacksonville Mayor Alvin Brown has embraced development of Jacksonville’s port, which would make the region more attractive for manufacturers.
“If somebody could figure out what the silver bullet is for it, I would buy that silver bullet,” City Councilman Ray Holt said. “It’s just a slam dunk to bring manufacturing to Jacksonville.”
Cecil Commerce Center is shovel-ready for a mega-plant, and the city’s port gives access to international markets, said Ed McCallum, senior principal at McCallum Sweeney Consulting, a Greenville, S.C., firm that has worked for automobile companies selecting plant sites.
“For so many years, the state didn’t think it had a chance,” he said of Florida. “I don’t think that’s the case anymore.”
Depending on who is asked, the financial incentives steered to the car companies — state and local tax breaks, construction of roads and utilities to serve the sites, and money to train workers for the manufacturing jobs — were smart investments or “giving away the store.”
But once vehicles rolled off the assembly lines, they typically expanded production and surpassed the original job projections.
The BMW plant in Spartanburg, S.C., opened in 1993 with $89 million in financial incentives for a $300 million plant targeted to have 2,000 jobs. Today, 7,000 people work there.
Alabama was next to jump into the game when Mercedes-Benz opened a $300 million plant in 1998, aided by $253 million in incentives for the 2,000-employee factory.
The Alabama deal set the pace for other states vying for plants, said Jerry Mallot, president of JAXUSA Partnership, the regional economic development group for chambers of commerce.
“It was a shocking number at the time,” he said. “But it paid off.”
Employment at the Mercedes-Benz plant now stands at 4,000. Just as importantly, Alabama later recruited Honda and Hyundai plants, creating a cluster of automobile manufacturers, said Keivan Deravi, an Auburn University Montgomery economics professor who has authored economic impact studies.
The plants attracted dozens of smaller companies that supply vehicle parts used to make automobiles. Deravi compares the economic impact to an aircraft carrier that comes with a group of support ships.
“We didn’t bring in companies,” he said. “We brought in an industry.”
A 2008 report by the Alabama Automobile Manufacturers Association found almost 49,000 people worked in that industry. The Mercedes-Benz, Honda and Hyundai plants accounted for about 11,000 of the jobs, but the bulk were in smaller firms with an average of 101 employees.
As the industry grew in the Southeast, the competition heated up, too. In the past two deals, Georgia put up a $400 million package for a Kia plant that opened last year and Tennessee paid $577 million in incentives for a Volkswagen plant that opened this year.
In Alabama, it usually takes state government eight to 10 years to reach the break-even point on the cost of incentives, Deravi said. He said it takes longer for local governments to come out on top for their share of incentives, usually in the range of 12 to 15 years.
In South Carolina, a 2002 study by the University of South Carolina’s Moore School of Business found the BMW plant generated $30 million a year for the states, after accounting for the cost of the incentives and providing government services stemming from the plant.
Four counties around the plant netted $2.4 million a year, and the local schools gained $3.2 million per year, that study found.
Competing for plants
Jacksonville has been a frequent bridesmaid.
In 2002, it made a short list with Savannah, Ga., and Charleston, S.C., for a $750 million Sprinter van plant that would employ 3,300 people. Florida offered $262 million in corporate tax credits, a $20 million training center and $40 million in road and utility work, according to Times-Union reports at the time.
DaimlerChrysler went with Georgia’s $330 million incentive package, but the company didn’t follow through with construction of the Savannah plant.
Cecil Commerce Center twice gained serious consideration for large aviation plants. In 2002, Boeing considered a plant for its 787 Dreamliner passenger plane. One factor that worked against Jacksonville: Boeing needed to ship large aircraft parts by rail from the port. The jumbo-sized aircraft parts would have required widening nine railroad bridges in Jacksonville at a total cost of about $200 million, said John Haley, JAXUSA senior vice president.
Boeing ultimately opted to build the Dreamliner in Washington. But Boeing invested in another aircraft manufacturing plant in North Charleston, S.C., and that city got another look a few years later when Boeing opened a $1 billion Dreamliner plant this year.
In 2008, Spirit AeroSystems looked at Jacksonville for a plant that would hire 1,000 people and build jet fuselages. Florida and Jacksonville put together a $175 million incentives package. North Carolina won with $183 million in state incentives; news reports put the value above $200 million when road, rail and taxiway improvements were added.
Mallot and McCallum, the site selection consultant, said Florida hasn’t been willing to go as far as other states in offering large-scale incentives.
But McCallum said the state and city have set the stage for attracting a mega-manufacturer by building roads and utilities at Cecil Commerce Center. Mallot said when it was considered for the Sprinter plant, the lack of direct access to Interstate 10 was a black mark, even though the state pledged to build a new interchange. It finally opened in 2009.
In 2006, CSX hired McCallum Sweeney to examine the viability of Cecil, which is near a CSX line, as a site for auto plant.
McCallum said the consulting firm looks at Cecil the same way a manufacturer would view it and certified it as a “mega-site” — the only one in Florida — which means Cecil at least gets considered whenever companies look at sites because they know they can move quickly to construction and production.
“You can do it as fast there as anyplace in the country,” he said.
State Rep. Lake Ray, R-Jacksonville, said he plans to introduce bills in the 2012 session aimed at boosting incentives for manufacturing plants and creating a faster regulatory approval process. Ray, president of the First Coast Manufacturers Association, said roughly 6 percent of the state’s jobs are in manufacturing, but other Southeast states have twice that amount.
He said it could be better to focus on statewide programs that support manufacturing and expand the capacity of the state’s ports, rather than pour resources into landing a single huge manufacturer.
Mallot said Florida has been successful at attracting small and mid-sized manufacturing plants, such as the $200 million Saft battery plant that opened this year at Cecil with $20 million in state-city incentives. He said future announcements of manufacturing will probably be for those mid-sized factories.
“It’s not a question of not wanting to invest,” he said. “It’s about the best use of what we can do with limited dollars.”
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