Four high-level state Commerce Department officials spent last week crisscrossing the sprawling city of Tokyo, with its vast rows of office towers, glittering high-fashion districts and packed subways beneath the world’s largest metro area.
But their thoughts were on tracts of mostly vacant fields back in North Carolina – one of them in Siler City – where efforts are accelerating to recruit a large-scale automobile plant, or something like it. The administration of Gov. Pat McCrory is backing the recruiting in a serious effort to land a large-scale factory.
North Carolina Commerce Secretary Sharon Decker made it clear in an interview as she wrapped up four days of meetings in Tokyo: The state is “aggressively” jumping in to secure what she called a “catalyst-for-jobs” factory.
The automotive industry is the prime target because its assembly plants generate thousands of jobs at above-average wages. Suppliers also build near the plants to provide parts and other components, generating more jobs.
Automakers are widely forecast to be adding production capacity in coming years as demand picks up, which is expected to lead to at least two or three new plants in North America.
But the state faces competition from other Southeastern states as well as a new threat – Mexico, which has won the last six auto plants announced or opened in North America on the strength of low wages, improved utility infrastructure and wider free-trade deals. Kia was the latest, last month choosing to build a $1 billion plant near Monterrey.
Incentives are another potential hurdle. North Carolina has for years come up short as lawmakers in both parties balked at packages offered elsewhere in the hundreds of millions of dollars.
Last week, Decker led the group of commerce officials, including two officials who are based in Japan, in a series of private meetings with undisclosed business interests.
She conducted other informal talks in conjunction with an annual meeting among government and business officials from Southeastern states and Japan that wrapped up Saturday. Honda and Toyota officials who work in North America also made the rounds here.
Decker said she met with “several auto and auto-related” businesses.
“We are talking with companies of a variety of sizes and capacity,” she said. “We’ve talked with both suppliers and manufacturers.”
At the conference’s opening session, top officials from other states in the Southeast touted the jobs, wages and investment in their states at auto factories. Japanese companies also spoke highly of workers in the Southeast, and there were talks of more than just auto plants. South Carolina has a major all-terrain vehicle plant, for example. Honda Jet is headquartered in Greensboro.
Decker said she leaves Japan with signals from manufacturers that “there is opportunity for us in automotive.”
“We’ve got to catch the wind – the economy is recovering,” she added. “And we need a couple of ‘catalyst’ opportunities that are a magnitude enough that we can get strong multipliers to get the job creation moving.”
North Carolina probably came closest in a similar attempt at an auto plant two decades ago, almost reaching an agreement with Mercedes-Benz to build a factory near Mebane.
In 1993, Mercedes went to Alabama instead. The land off Interstate 85/40 that is still called the “Mercedes site” by some in Mebane has recently sprouted an outlet shopping center and, soon, a Wal-Mart distribution facility.
At the time, BMW had just put a plant in South Carolina, and Honda, Nissan, Hyundai, Toyota and Volkswagen would follow with plants across the South.
North Carolina was often outbid in incentive packages and hampered by a lack of large-acreage sites that were already prepared on the scale needed for a big plant.
Both those issues have been addressed, Decker and others said in interviews, which will give the state a better shot at future plants.
Sites ready to go
Three large scale “megasites” are in various stages of preparation, including one on the edge of Siler City. Its owners say it’s essentially ready now for a company to start construction.
Decker said she’s been able to point to that site, in Chatham County, as well as sites in development north of it, in the town of Liberty, and a 1,200-acre tract near Rocky Mount.
“We’re finding that, as we’re talking with some now, that you’ve got to be in a position that you can get to the market fast,” she said. “And we have that now.”
Tim Booras, a Greensboro beer and wine distributor, and D.H. Griffin, a major construction contractor, have teamed up to offer a huge swath of about 1,800 acres they own near Siler City as a possible “megasite” for an auto plant.
It’s mostly been quail hunting grounds, Booras said on a recent tour. His truck bounded along the dirt roads that slice up the timbered land until he reached a high point with sweeping views.
On the ground was some orange spray paint that marked a makeshift helicopter landing pad. He said state officials, who have permission to market the property, had just used it days earlier, bringing three unidentified company representatives to take a look.
“I couldn’t even know who they were,” he said. “It’s kept secret.”
Booras has set up a “war room” in his spacious garage nearby, complete with maps and other information about why it makes sense for an automaker – or another large-scale user – to choose his site. He said numerous studies have found no problems with the tract’s ability to hold a large plant. It has water and sewer capacity, a nearby rail line, ample power, and other such infrastructure.
Separately, economic developers in nearby Randolph County are piecing together a site near the town of Liberty.
And officials in Edgecombe County have assembled a 1,200-acre site that they think fits well for auto.
Mike Randle, who covers the industry in the South for a trade publication, SouthernAutoCorridor.com, said he believes the Piedmont in North Carolina is a likely place for the next new plant in the South. He said the state’s effort should be taken seriously.
“Mexico emerging has really curtailed our chances,” he said. “They’re kind of on a roll that we can’t seem to stop. But I do think there will be one or two or three in the next five to seven years that will land in the South. We’ll have to see who they are.”
What will we spend?
In speeches around the state, Decker has openly asked the key question this type of recruitment raises: Are lawmakers willing to pay incentives in a mix of cash, tax rebates and training at a level needed to secure a deal?
In the General Assembly session that just ended, legislators refused to give Decker control of a $20 million “closing fund” she could have used to seal the deal on projects with 500 or more jobs.
It was a setback in the administration’s effort to line up the type of funding that will be needed. Decker said she remains optimistic that lawmakers would back an auto plant if a deal is close.
The price of incentives for a major factory is generally $200 million to $400 million in various forms of rebates and other benefits, Randle said.
Decker said her office has been lining up funding options from existing sources, including local governments, in anticipation of making a final deal. She said the state has a range of options.
The Southeast already has its own corridor of auto plants, stretching generally along Interstates 65 and 75 from the Gulf of Mexico north toward Detroit.
But Mexico has had recent success, which represents a significant shift in the auto landscape in North America, said Mike Mullis, a site location specialist who has advised auto companies on dozens of projects in the U.S. and has an office in Mexico.
“As these projects are growing, Mexico has become a very, very formidable competition to the United States,” Mullis said. “There will be other assembly plants. There’s no doubt about it. From the Southeast U.S. perspective, it will be more competition with Mexico than with other states.”
Labor at auto plants in Mexico is running at $5 to $6 per hour compared with about $15 to $20 an hour in the South, Mullis said.
Officials in Louisiana, Mississippi, Alabama, Georgia, Tennessee, Kentucky and South Carolina are all pitching sites they say are ready for future auto plants. Still, Mullis said North Carolina can compete and is in a position now to “go after those projects aggressively.”
Already, the state ranks high in auto parts suppliers, with more than 25,000 employed in that sector. Aisin AW in Durham, for example, is a major automatic transmission maker.
Decker said 35 of the roughly 150 major suppliers in the world now are operating in the state, which also has helped grab interest.
Assessing the odds
Mullis said the state’s chance at landing an auto plant in the next three to five years was probably “50-50.” He declined to identify any automakers he is representing that are studying locations.
“North Carolina has the workforce, the attitude of business, the training programs that can achieve winning such a project,” he said. “One of the challenges has been, historically, they didn’t have the real estate to support the need.”
But he said that has changed, too, with land development work going on at three different locations.
“I would say in the past years, North Carolina was not in the mix,” Mullis said. “For whatever reason, we couldn’t get it to the altar.” Now, “North Carolina is a player. But the legislature will have to step up.”
State Sen. Bob Rucho, co-chair of the Senate Finance Committee, had helped write bills in the last session to cut back on incentives. But he said in an interview that he believes lawmakers would act on a big factory.
“Most incentives don’t deliver,” he said. But he said key lawmakers have agreed that the state would “invest $100 million or $200 million or $300 million” on a major project because the return on the investment could be there.
Rucho said key senators, including Senate leader Phil Berger, are open to incentives on a large-scale project, though specifics would always decide it.
“It’s not a pie-in-the-sky decision,” he said. “It needs to be a large facility.”
Lawmakers in the House have been against incentives recently, and there is more uncertainty about their position since Speaker Thom Tillis is giving up his seat to run for the U.S. Senate.
Decker said she thinks local leaders will play a more important role in future incentives offerings, which has been “something missing” in past efforts. Decker said she talked with numerous officials who were involved in past attempts to figure out what happened.
“I heard the same stories – can’t get your act together, can’t get the legislation, can’t get a decision,” she said.
Decker said she thinks that’s about to change.