Lexington, KY - In recent years, the auto industry took a drive south in the ledgers, along with the economy. Now, in order for the industry to head north financially, auto insiders feel it still needs to head south geographically.
Over the last quarter century, the automotive industry has found a home in manufacturing in the South: from Toyota's North American headquarters in Erlanger. Ky., and the automotive manufacturing facility in Georgetown, Ky., to a BMW plant in South Carolina, Nissan in Tennessee, and Hyundai and Honda in Alabama.
As "foreign" cars become more and more "American," officials in Southern sates are looking to capitalize on the auto industry's desire to build where they sell. To discuss the industry that accounts for 10 percent of Kentucky jobs and 3.88 percent of the state's gross domestic product, according to Federal Reserve figures, officials from all over the South gathered in Lexington in early June for the Southern Growth Policies Board 2010 conference, Driving the Next 20 Years: Creating the New Automotive Industry in the South.
The automotive manufacturing industry has long had a home in the commonwealth of Kentucky. Ford first opened operations in Louisville in 1955 and brought more in 1969 with the christening of the Kentucky Truck Plant. Chevrolet converted a Bowling Green Chrysler plant that made air conditioning units into the sole production facility for their flagship, the Corvette, in 1981, and Toyota changed the economy of Scott County and central Kentucky in 1986 when it announced the opening of its first manufacturing facility in the United States.
"The auto plants and suppliers now actually go along the I-75 corridor, affectionately known in the auto industry as 'Auto Alley.' Most of the new plants that you've seen over the last 30 years Ö (are) happening in the South," Kim Menke, Toyota Motor Manufacturing of Kentucky's manager of community relations, told a recent meeting of the Lexington Forum in the lead-up to the Southern Growth automotive conference, held at the Griffin Gate Marriott.
Toyota, according to Menke, is weathering two storms: the large-scale recalls of vehicles early this year, and the industrywide plummet in new automotive sales. After the industry managed to sustain a high of 17.4 million cars sold nationally in 2000 with more than 17 million sold in 2005, it took a hard hit starting in 2007, falling all the way down to a rock bottom of 10.4 million cars sold in 2009. At that rate, Menke said, new car buyers in 2009 would have to hold onto their cars for 20 years before they'd be able to replace them.
Beyond concern for sustaining and once again growing manufacturing and supply-side jobs centered in the Southern states, Menke said the South has started to focus on the research and development (R&D) jobs. "Pretty much right now, a lot of the R&D in automotive is all done in the Michigan area or out on the West Coast Ö How do we bring those jobs, the high-tech jobs, to the South as well?"
John Dodson, NASCAR team relations director at the NASCAR Technical Institute, told the Southern Growth Conference the organization his family has been a part of since his grandfather was a bootlegger and moonshiner holds many of those answers.
"The automotive industry depends on NASCAR racing and what we do," Dodson said, citing increased safety through better seatbelts and seat design as well as improved suspensions. "NASCAR racing is known as the NASA of the automobile industry."
For years, the axiom in NASCAR has been "what wins on Sunday sells on Monday," Dodson said. But what sells is not just the brand of the winning car; it is the technology that helped it win.
"These are very innovative people, and it hasn't changed. Now they're innovative and educated," Dodson said.
R&D in the automotive industry is finding its way to the South. Examples of this include the University of Kentucky, University of Louisville and Argonne National Lab's project to study lithium-ion batteries for cars and the creation of the Clemson University International Center for Automotive Research (CU-ICAR) and the Center for Advanced Vehicular Systems (CAVS) at Mississippi State University. On top of efforts to do some homegrown R&D at MSU and Clemson, Robert Geolas Jr., CU-ICAR's executive director, said there is interest, mainly from European carmakers, to come to the South.
"I do see a lot of interest from Europe to move R&D to the United States, but they want an opportunity to do that in a way that limits their risk," he said. "So one of the things we try to do at Clemson is to provide an environment that's very friendly to them, putting a small operation in place to kind of test the waters, if you will - to build up from there."
CU-ICAR is already home to BMW's only R&D facility outside Munich, Geolas said.
One of the ways that's being done is with competition from CAVS, CU-ICAR and NASCAR grads who are now working in the industry and with race teams, according to Dodson. Research at CAVS helped develop magnesium engine compartments that offer similar or better tensile strength as conventional metals and are used on the Corvette in Bowling Green.
Currently, NASCAR teams are all experimenting with carbon fiber. Featherweight and strong as steel, carbon fiber can also be as expensive as gold. It's used for automotive bodies, in ultra high-priced cars, but with NASCAR teams trying to find ways to make it cheaper, Dodson said he expects to see wide use of it for consumers.
"Now a lot of the teams are creating their own carbon fiber shops. Everyone wants to do everything in-house when they are competing, so then they're diversifying that industry," he said. "So not only will Penske Racing develop their fiber for their racing cars, but they're looking for customers outside."