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BUSINESS

THE SOUTH RISES AGAIN … FOR MANUFACTURING JOBS

Posted on December 20, 2012 at 8:05pm by Guest Post
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[Editor’s note: The following is a cross post that originally appeared on CNBC.com]:

Apple CEO Tim Cook’s announcement earlier this month that the company will start building Macs closer to home in 2013 was seen as a milestone that could help jump-start U.S. manufacturing.

But over the past few years, factories in the American South from the Carolinas to Alabama to Kentucky have already experienced this.

Both U.S. and foreign companies have opened plants in south eastern states in recent years, many since the end of the recession. Others are expanding existing plants or have plans to break ground in 2013.

In South Carolina, Boeing builds 787 Dreamliners just north of Charleston, and Starbucks roasts coffee beans in St. Matthews, outside Columbia.

CNBC: Manufacturing Jobs Making a Comeback in Southern U.S.

A technician assembles a General Electric jet engine in Durham, North Carolina. (Jim R. Bounds, Bloomberg / Getty Images)

General Electric is once again making water heaters and refrigerators at its gigantic Appliance Park plant in Louisville, Ky. A Mobile, Ala., shipyard run by Austal USA is growing so quickly that in the past two years the Australian company’s workforce has swollen from 800 to 3,300.

Over the past year, North Carolina’s Secretary of Commerce Keith Crisco says about 80 percent of the new companies coming to the state involved some form of manufacturing.

“That’s a big number for us, and the jobs are better than they were,” he said.

Companies are taking advantage of state- and local-funded business incentives and convenient transportation routes, as well as the Southeastern U.S.’s lower cost of living and a largely non-union labor force that’s inexpensive relative to other parts of the country.

Although hundreds of thousands of factory jobs have disappeared in the South and across the country over the past two decades due to automation and outsourcing to cheaper labor markets in China, Vietnam, and elsewhere, the United States remains a manufacturing powerhouse.

The country still produces 18.2 percent of the world’s manufactured goods, edging out China’s 17.6 percent, according to the latest figures from the National Association of Manufacturers and World Bank.

Today, however, even Chinese companies are building factories in the Southeast, ducking rising labor costs at home, and to be closer to customers and take advantage of the region’s pro-business policies. One of the first was appliance maker Haier Group, which opened a $40 million refrigerator factory in Camden, S.C., a dozen years ago.

(Getty Images)

One of the latest is Lenovo Group, which operates a fulfillment center in Whitsett, N.C. In October, Lenovo announced plans to begin making ThinkPads there in 2013, adding an estimated 115 jobs to an existing workforce of 2,200.

While factory jobs haven’t returned to pre-recession levels, they’re getting there. In Georgia and Tennessee, manufacturing employment grew 3 percent in the 12 months ending in October, nearly twice the national average of 1.6 percent, according to the Bureau of Labor Statistics.

Factory employment was above average in Alabama (2.9 percent), South Carolina (2.4 percent) and Mississippi (2 percent) as well.

“It’s a business climate like you won’t find anywhere else,” says Doug Woodward, an economics professor at the University of South Carolina and incoming president of the North American Regional Science Council, which studies local economies.

Low-cost labor is one of the region’s big draws. Economists cite the lack of a large union presence as a benefit since it allows companies to move factory workers from job to job as needs change. In seven Southern states, union members account for less than 5 percent of the workforce. That’s less than half of the 11.8 percent national average, according to the Bureau of Labor Statistics.

Photograph by Bill Pugliano/Getty Images

“It’s all about flexibility,” Brian Jones, Austal’s chief financial officer, told NBC News. “Because we treat our people properly — benefits, pay, safe working conditions — there’s not a need for representation.”

However, critics point to academic and economic research showing that in right-to-work states, wages and benefits are lower.

“They’re just not as well compensated,” says Matthew W. Finkin, an employment law expert and professor at the University of Illinois’ law school. “So they’re creating more jobs and giving more work to people, but they’re not giving the benefits and other aspects of employee protections (workers would) have in other states if they were in (a) union.”

The local chapter of the Sheet Metal Workers International Association has been unsuccessful in three attempts to organize Austal’s Mobile, Ala., shipyard. A representative of Local 441 could not be reached for comment. A representative of the SMWIA’s national office declined to comment.

A Boeing manufacturing plant in South Carolina. (AP Photo)

Crisco maintains that manufacturing jobs coming into the South pay more because they require more technical skills.

He argues that right-to-work laws are only one factor drawing companies to the region, along with generous workforce training programs and incentives such as tax breaks that South Carolina gives to companies making substantial capital investments in the area.

“Sure, it’s controversial about incentives, but in terms of locating manufacturing jobs here, it’s been fairly successful,” Woodward says.

Here’s a look at activity in a handful of southern states where manufacturing jobs are on the rise:

SOUTH CAROLINA:

South Carolina’s manufacturing industry lost 100,000 jobs during the 2000s before the 2007-2009 recession wiped out another 40,000,Woodward says.

Recent moves by Boeing, BMW, Michelin, and other tire and auto parts manufacturers and durable goods makers to open or expand factories have reversed that trend. Boeing alone created 8,000 new jobs in the past two years, Woodward says.

“We’ve gained 10,000 to 15,000 jobs,” he says. “Our immediate prospects are very good, but it’s going to be a long road if we’re going to recover” historic manufacturing employment levels.

In January, BMW said it would add 300 people to an existing workforce of 7,000 at a highly automated auto manufacturing plant in Greer, the company’s largest factory outside of Germany. The expansion will to boost annual production to 350,000 by 2014.

“The deep roots of the workforce here in manufacturing are really helpful and we developed a close relationship with the local tech colleges to improve our workforce,” BMW Manufacturing President Josef Kerscher said in a late November talk at the University of South Carolina’s Darla Moore School of Business. “I’m really satisfied seeing how well prepared our workforce is for advanced manufacturing.”

NORTH CAROLINA

The textile and apparel makers that made up the bulk ofNorth Carolina’s traditional manufacturing sector “left and are not coming back,”Crisco says. They’re being replaced with companies like Lenovo, which is movingThinkPad manufacturing to the state from Mexico.

Jeld-Wen, an Oregon-based window and door maker, announced on Dec. 13 that it is moving its North American headquarters to Charlotte,adding 142 management and administrative jobs. The company already operates two manufacturing plants in the area with 2,200 employees.

In 2012, manufacturing accounts for 20 percent of North Carolina’s gross domestic product, and that doesn’t include recently announced deals that will add to manufacturing employment in the near future, Crisco says.

ALABAMA

In Mobile, Austal is building high-speed, aluminum ships forthe U.S. Navy, made to quickly deliver troops to a war zone or disaster area.

Austal is one of many foreign companies that have opened factories in and around Mobile in the past decade, a group that includes Mercedes Benz, Honda, Toyota and Hyundai. In 2013, Airbus will join the list.

The European aircraft manufacturer is expected to break ground on a $600 million complex in 2013 and begin assembling planes there two years later, creating 1,000 jobs, according to the Mobile Area Chamber of Commerce.

Though mega deals like the one with Airbus get the most attention,94 percent of factories in the tri-county area around Mobile are domestic, says chamber spokeswoman Susan Rak-Blanchard. Attracting smaller companies that bring 50 to 150 jobs to the area has been “our bread and butter over the years,” she says.

KENTUCKY

The number of people working at GE’s famed Appliance Park industrial complex in Louisville peaked at 23,000 in the early 1970s before starting to drop a decade later and hitting bottom in 2011 at less than 2,000,according to a recent report in The Atlantic.

In February, the company returned to the plant, making low-energy water heaters there instead of having them built by a Chinese contractor. A month later, GE moved a refrigerator assembly line from Mexico to the plant, according to the report. (GE is a minority owner in NBCUniversal.)

So far, GE has poured $800 million into revamping manufacturing operations at the facility, including $150 million on a new dishwasher assembly line. According to the company, factory workers helped design the line to be faster and safer, and as a result per-unit production time has dropped 65 percent.

“Companies are looking for a lower cost place to do business and a skilled workforce,” said David King, Central South Carolina Alliance marketing vice president. “It doesn’t get more basic than that.”

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