Case Study: Mississippi’s Rise in the Auto Industry
Interview with Buzz Canup, Automotive Manufacturing Consultant
Mississippi grabbed the attention of the world’s automotive industry in late 2000 when Nissan North America announced it would locate a $930 million assembly plant just north of Jackson. Such was not merely luck. In 2002, the state again celebrated an automotive coup when Nissan expanded its planned operation, bringing the total project investment to $1.4 billion.
What Nissan saw in Mississippi was an economic environment and business climate well prepared to usher in the state’s largest-ever automotive manufacturing operation. Mississippi was chosen over states with well-established automotive track records. While Nissan is Mississippi’s first full scale automaker – bringing with it up to 25 to date supplier companies – the state was hardly a stranger to automotive manufacturing.
Mississippi has a proven track record for attracting national and global companies that have located in the state a variety of operations including aerospace, communications and polymer science. In the automotive industry, Mississippi has quietly become home to 90 separate automotive-related manufacturing and distribution operations in recent decades. These include operations for such companies as Mazda, Cooper Tire & Rubber, Caterpillar, and Delphi Automotive Systems.
Prior to Nissan, more than 30,000 Mississippians already worked in an automotive-related industry. That number will rise sharply in the years to come.
By 2010, more than 26,000 additional high-wage jobs will be created including those directly employed by the manufacturing facility, suppliers, retailers, service, and support operations needed to accommodate the overall operation.
When Nissan USA President Carlos Ghosn announced Mississippi as the next home of Nissan’s manufacturing operations, which will produce the next generation of Nissan’s sport utility, minivan and full-sized trucks, he underscored the magnitude of Nissan’s investment in Mississippi.
“We're building this vehicle assembly plant to support our growth in North America,” Ghosn said. He said the Canton, Miss. facility – which will employ 5,300 workers and assemble 400,000 vehicles per year - represented Nissan’s future in the United States.
Mississippi had landed a major deal, but the subsequent expansion of the facility was not a given. After its announcement to locate in Mississippi, Nissan was considering sites in Canada and Mexico for an additional manufacturing line. Again, state officials went to work, and ultimately, the auto giant made another half billion-dollar investment in Mississippi. That deal, known as Phase II, greatly increased the facility’s square footage, added 1,300 jobs and increased the projected output from 250,000 to 400,000 vehicles per year. “This announcement further increased our exposure nationwide and worldwide. It is further confirmation that Mississippi is a serious competitor. Other industries are taking notice of the outstanding opportunities here in Mississippi for their company and their employees,” said Steven Hale, executive director, Mississippi Development Authority.
Mississippi’s emergence as a player in the automotive industry stems from an unprecedented collaborative effort to enhance economic development. Government officials, business leaders and educational institutions combined to provide incentive programs, infrastructure commitments and a skilled workforce for attracting automotive-related manufacturing facilities.
It comes as little surprise that Mississippi is targeting the automotive industry in its economic development strategy. The automotive industry is the largest manufacturing sector in the United States, and the U.S. automotive industry is the largest in the world in both production and sales. Over the past decade, the U.S. has produced 13 million of the world’s vehicles, compared to less than 10 million produced in Japan. Across the nation, states are competing aggressively to grow their shares of this industry.
Putting Down Roots
Last year BMW began construction on a regional parts distribution center in north Mississippi, citing its proximity to major transportation corridors and air transport hubs, a qualified labor pool and quality of life as factors in its decision to locate there. Advance Auto Parts operates a distribution center in central Mississippi, one of a growing number of automotive companies along the Interstate 20 corridor.
Joining Nissan is a number of major supplier companies, including Johnson Controls, Calsonic Kansei, Tower Automotive, and Lextron/Visteon. State officials expect even more service and support companies – referred to as ‘second tier and third tier companies’ – to locate operations throughout Mississippi in support of the Nissan project.
Companies that depend on efficient transportation methods find Mississippi an attractive location from which to ship. The state’s coastal ports are highly regarded and conveniently located, as are rail and truck routes.
According to a study by the University of North Carolina at Charlotte, Mississippi’s highway system is the best in the South and fourth best among the 50 states, and yet Mississippi is implementing even more improvements to its roadways through a $1.5 billion highway expansion to be completed later this year. In addition to transportation resources, state officials also include other incentives in their strategy for attracting automotive-related companies.
Mississippi’s efforts to land automotive companies – including the Nissan project – have been spearheaded by the Advantage Mississippi initiative, a structured legislative package offering tax incentives, employee training resources, infrastructure planning, government support, and the establishment of key relationships with universities and agencies within the state.
The Advantage Mississippi Initiative helped Mississippi emerge as the eventual front-runner for landing the Nissan project. The program, developed by the Mississippi Development Authority and Governor Ronnie Musgrove, then overwhelmingly approved by the Mississippi Legislature, refined and modified the state’s recruitment incentives not just for Nissan, but also to meet the needs of other prospective companies. Providing tax incentives is just one tactic in the overall strategy. The program also provides resources for training, infrastructure, university research, and special needs such as high-speed data and broadband access.
“We recognized that we needed a change in direction for our economic development strategy,” said Mississippi Governor Ronnie Musgrove. “We are in a new economy that is seamless, borderless and global. We saw that we needed a comprehensive, fact-based approach to economic development.”
Companies that consider Mississippi for their manufacturing operations are finding an existing skilled workforce, programs for providing customized training in the automotive manufacturing field, infrastructure development and support, central and accessible locations, and a strong knowledge of the automotive industry.
The state can offer companies highly specialized technical training and retraining opportunities. This is crucial to addressing every company’s need for a well-prepared workforce. The Mississippi Development Authority, Mississippi Employment Securities Commission, the state’s community and junior colleges, and all other workforce-training delivery systems work to coordinate efforts and make the most of every dollar available for training, retraining and education.
The Workforce Investment Network (WIN) in Mississippi is an innovative strategy designed to provide convenient, one-stop employment and training services to employers and job seekers. With 64 locations throughout the state, WIN provides job training information and access to fax machines, copiers and the Internet to help with job searches.
Even at the elementary level, Mississippi has implemented a “Computers in the Classroom” initiative in which every public school classroom in the state has Internet access. Mississippi is the first state in the nation to provide this program, which helps develop advanced skills at an earlier age among the state’s future workforce.
Especially important to the automotive sector is Mississippi’s university system and its research and development programs for supporting automotive manufacturing operations. Research is an important part of the industry as companies strive continuously to develop new and better-designed cars and trucks, as well as new materials and processes in the way vehicles are constructed. When site evaluators took a close look at Mississippi’s university system, they liked what they found.
The University of Southern Mississippi is a national leader in the area of polymer science. The Polymer Science Institute at USM is home to some of the nation’s foremost polymer science facilities where researchers work with leading industries to develop more advanced plastics products. Mississippi State University has extensive engineering research capabilities and is now home to a new Center for Advanced Vehicular Systems. MSU also houses the High Voltage Laboratory, the largest high-voltage testing facility at any university in the U.S. The University of Mississippi is home to the National Center for Physical Acoustics, the National Center for Development of Natural Products and the Mississippi Mineral Resources Institute. Jackson State University is ranked third in the nation among historically black colleges or universities in the production of African American Ph.D’s in all disciplines. And their School of Business is accredited by the American Assembly of Collegiate Schools of Business. Nationally only 27 percent of business schools hold this distinction. Other Mississippi universities are also pursuing efforts to commercialize technology and enhance research alliances with private industry.
Whatever It Takes
Perhaps the most important aspect of Mississippi’s success in attracting companies is an unprecedented willingness among state and business leaders to help companies succeed in the global marketplace. Buzz Canup, an automotive manufacturing location consultant hired by the state to lead Mississippi’s effort to land the Nissan project, said Mississippi officials were tenacious in their pursuit of the project.
“From a location consultant’s perspective, there was one thing – one common thread – that I saw throughout the recruitment of Nissan,” Canup said. “And that was the positive, aggressive attitudes of all the people of Mississippi involved in this. The state adopted the attitude that they were not going to lose this project.”
In addition, Mississippi officials recognized the need to go the extra mile in providing needed infrastructure. Legislators passed $295 million in bonds for training and infrastructure development including the Nissan site build-up, including highway and interstate access to the site, hiring and training of workers and creating water and sewer improvements. To further improve infrastructure for new and existing companies, Mississippi is making improvements to air, rail, road, port and intermodal construction. State, local and private partnerships are maximizing resources and crafting a long-term plan for continuous improvement in infrastructure across the state.
According to Canup, when it comes to recruiting companies, infrastructure isn’t just important. You either have it, or you are eliminated.
An example of Mississippi’s extraordinary efforts to attract companies to the state was to build on-site rail facilities.
“Our willingness to come in and do that allowed them to save money,” Canup said. “We were willing to go the extra mile to assist the company.”
Years before the arrival of Nissan, the Mississippi Legislature had created the Mississippi Major Economic Impact Authority (MMEIA), which is empowered to perform certain functions that are not typically performed by state agencies. Once a company is committed to investing specific capital improvements with the promise to employ specific numbers of workers, the state reciprocates with commitments of its own. MMEIA is also a means for assuring companies that the state will honor its commitments. MMEIA can purchase, own, design, build, operate, maintain or employ. Its structure allows broad authority to perform certain functions for moving a project forward.
Commitment. Ethics. Integrity. Words that Mississippians live and work by. That helps explain why Mississippi has an unusually low absenteeism rate and a low turnover rate with high productivity.
The arrival of Nissan will create enormous momentum in workforce quality as the state seeks to recruit other automotive operations to Mississippi. Prior to Nissan, approximately 18% of the state’s workforce was employed in manufacturing operations.
The New ‘Detroit’
Southern states have become beneficiaries of a ‘locational shift’ within the American auto industry. When large-scale manufacturing began in the early 1900s, assembly plants were clustered in the Midwest, especially near Detroit, close to company headquarters and in proximity to resources such as steel and coal. From the 1950s through the 1970s, automakers began to decentralize by constructing branch plants near key markets and larger population centers. During the 1980s, changes in supply chain management (outsourcing) decreased the importance of the Midwest as “the” automotive manufacturing region. Outsourcing allowed manufacturers to take advantage of lower labor costs in other regions.
Today, it is the South – particularly along the ‘automotive corridor’ that runs along Interstates 65, 75, 85, 20 and 55 – that is fast becoming the new mecca for automotive manufacturers, suppliers and distributors. In fact, of the South’s top 10 economic deals to occur in 2000, five were automotive plants. Mississippi is particularly well suited compared to other Southern states due to its more central location and proximity to Mexico (and Mexican suppliers). The state is also served by a key axis of the interstate system and the Mississippi River.
Studies of plant location for international vehicle producers have shown the importance of geographic location. The cost of freight-in (parts) and freight-out (vehicles) will now likely reduce the list of competing U.S. states to seven or eight candidates. Clearly Mississippi is now among the states on that list, having recently garnered the attention of site selectors for such automotive names as Hyundai and Toyota.
The state of Mississippi made an enormous commitment to Nissan, and it is already paying off. As the state moves forward, it will continue to garner attention from national and international automotive companies and suppliers, who likely already view Mississippi as an emerging player in the automotive industry.
And the state is prepared to discuss similar proposals with companies worldwide. That point is emphatically stated by Governor Musgrove:
"The Nissan announcement sends a clear, strong signal that Mississippi can handle a project of any size, and it can compete successfully with anyone.”