Over time, manufacturers discovered that it was more cost effective to contract out the manufacture of certain components and then store them on site until they were needed. This not only reduced requirements for manufacturing space but, more importantly, also provided some significant savings in labor costs. In fact, the manufacturing floor space they no longer needed was often converted to warehouse these parts.

Still, in overall terms these changes basically amounted to fiddling around the edges.

Then these large plants began to grow old and increasingly obsolete, and manufacturers were presented with an opportunity: they could either continue to upgrade their aging facilities, an increasingly expensive proposition; or they could build entirely new plants.

Many chose to build new plants, often deciding to change location and work force while they were at it. After all, many reasoned, if they were going to spend millions of dollars building a new facility, why not also solve the problem of high taxes and onerous (and expensive) regulations, not to mention increasingly uncompetitive labor costs?

This was to manufacturing what free agency was to sports: the jumping off point for some pretty radical changes. For the automobile industry, it has meant a massive migration away from its traditional location to the Southern United States. Even though the majority of U.S. auto manufacturing is still concentrated in the Upper Midwest, the trend is unmistakable.

The South is becoming the Automobile Capital of the U.S. Automakers -- from Ford and GM to Saturn, Toyota, Nissan, BMW and Mercedes-Benz -- have established major assembly plants in the heart of Dixie.

That's just the beginning of the ripple effect ... the pebble striking the water. The waves emanating outward ever larger from the center are represented by the thousands of individual component manufacturers who have followed these assembly plants in their southward migration.

Why have they followed along, rather than just staying in their old locations and shipping their parts to the new southern sites?

One reason is the widespread adoption of new, "just-in-time" (JIT) parts supply systems as a way of further streamlining and cutting costs from the manufacturing process.

Under the JIT system, component parts are scheduled for delivery to the assembly line right before they are needed. Suppliers literally back their trucks up to the assembly line and unload -- in other words, just in time. This allows auto manufacturers to save significant amounts of money in storage costs -- in warehouse space, as well as in personnel to operate and maintain it.

For component manufacturers, this has had enormous consequences. Their product shipments are smaller (remember, they want just what they need right then, not a six month supply) and therefore must occur more frequently, adding significantly to their transportation costs. Timely responsiveness is also critical -- deliveries that arrive too early cause congestion; those that arrive too late can shut down the assembly line.

As a result, component manufacturers are finding it increasingly important to locate somewhere within the region, and the southern states realize this, too. Most are specifically targeting the automotive industry and are offering generous financial incentives to go along with their generally lower taxes, lower labor costs and cheaper cost of living.

If your company manufactures products for the auto industry, and you don't have a presence down South, you may soon be eating your competitors dust, so to speak.

Tennessee's three major vehicle assembly plants -- Saturn in Spring Hill, Nissan in Smyrna, and the Peterbilt truck plant in Madison -- have attracted nearly 500 automotive parts suppliers to the state. Together, they add up to over 95,000 jobs, or 3.5 percent of all jobs in Tennessee.

Not all of them are supplying the Volunteer State's three big plants.

That's because Tennessee is right smack in the middle of the Southern Auto Corridor, with Kentucky and its four major auto plants just to the north, and Alabama (with Mercedes) and Georgia (with its Ford and GM plants) just to the south. Then, of course, there's South Carolina's new BMW plant just to the east ....

Well, you get the picture. Auto plants are springing up throughout the region, and each of the southern states rightly can, and do, claim proximity to each others' auto facilities.

That's why second- and third-tier component manufacturers are steadily streaming into the region.

Denso Manufacturing Tennessee Inc., a manufacturer of automotive components, is investing $100 million in two projects in eastern Tennessee.

The company is building a 110,000 square foot facility in Athens, midway between Knoxville and Chattanooga, that, when completed in 1998, will manufacture fuel injection systems for automobiles manufactured in the U.S.

Denso is also spending $79 million to expand the capacity at its Maryville facility, just south of Knoxville.

Tokai Rubber Industries, Ltd. and DTR Industries, Inc. of Japan are building an 80,000 square foot facility in Greene County, between Knoxville and Bristol, which will manufacture antivibration rubber products and fuel hoses for the auto industry.

Last year Japanese automaker Honda opened a $30 million distribution facility in Loudon, just south of Oak Ridge, for after-market parts. American Honda's 800,000 square foot Parts Distribution will serve as a central parts distribution point for more than 4,000 Honda dealers across the country.

In Clarksville, northwest of Nashville on the Tennessee-Kentucky border, Bridgestone Metalpha USA, opened its new $130 million manufacturing facility and U.S. headquarters last year. Metalpha, the second largest producer of steel cord for radial tires in the world, will manufacture steel cord for radial tires at its Clarksville site.

Belgium-based Bekaert Corp., the world's largest independent steel wire producer, is expanding its Dyersburg facility in northwestern Tennessee. The expansion of the plant, which produces the steel cord to reinforce car and truck tires, will be completed by mid-1997.

Melbourne, Australia-based PBR Automotive, which makes brake systems for Corvettes, Pontiac Firebirds, and Ford Mustang Cobras, is building an $85 million automotive brake manufacturing plant in Knoxville.

"It's central to our suppliers, is in direct road link with major customers, and has a skilled work force for manufacturing precision auto components," said John MacKenzie, PBR's managing director.

Two major auto assembly plants are located on the outskirts of Atlanta. Ford Motor Co. (which has been building cars in Georgia since 1909) manufactures the Taurus and Mercury Sable at its plant in Hapeville, while General Motors (which has been in Georgia since 1947) builds Oldsmobiles at its Doraville plant.

In addition to the car manufacturers, Blue Bird Corp. produces school buses and recreational vehicles at its two Georgia plants. And MetroTrans has been building shuttle buses at its plant in Griffin, south of Atlanta, since 1991.

As a long-time automaker, Georgia's spillover of suppliers is extensive and well-developed. Nearly 170 suppliers have manufacturing facilities in the Peach State. Companies like Delphi Systems, Robert Bosch Corp., Textron, Torrington, Freudenberg-NOK, and Grinnell Corp. all maintain manufacturing facilities in Georgia.

Georgia has also become a major distribution center for the automotive industry, particularly for foreign-made autos.

The International Auto Imports Processing Center in Brunswick -- on the southeastern coast -- is used by Saab, Mitsubishi, Volkswagen, Landrover and Hyundai, among others, to process their newly manufactured vehicles into the United States.

Toyota maintains its Southeastern Distribution Center more inland. The Toyota center is in Commerce, just off Interstate 85 between Atlanta and Anderson, S.C. This northeastern Georgia location puts it in proximity to Toyota's manufacturing facilities in Tennessee, Kentucky and West Virginia, as well as being centrally located to the consumer market.

Across the Ohio River in the southern Indiana town of Princeton, just north of Evansville, Toyota is building a $700 million truck plant that will assemble T-100 pickup trucks. The plant, which will be located on nearly 1,000 acres and employ 1,300 people, is now under construction. Production is expected to begin in the fall of 1998.

Toyota is also building a $400 million engine production facility in West Virginia, not far from the Ohio-Kentucky-West Virginia border.

To oversee its ever-increasing number of plants in the region, Toyota last year established its North American Manufacturing Headquarters in Erlanger, near the Cincinnati/Northern Kentucky International Airport.

Toyota is also drawing other auto industry manufacturers to the Bluegrass State.

Dana Corp. is building a new truck frame manufacturing facility in Owensboro, just southeast of Evansville, Ind., that will supply truck frames for the new Toyota T-100 trucks. Production at the new facility is expected to start in late 1998.

"We are already a supplier to Toyota in California, and we are happy to see that relationship grow," said Michael Greene, vice president and general manager of Dana's Parish Light Vehicle Structures Division. "The Owensboro location is near our customers and has excellent highway transportation service available."

AFG Industries Inc., the largest producer of glass for the residential and commercial window market, is building a $75 million flat glass manufacturing plant in Richmond, just south of Lexington, primarily for the automotive industry. Construction on the plant, which will serve the automotive glass market and other automotive glass fabricators, began in April. The company expects to begin operations in mid-1998.

The Budd Co., a major manufacturer of automotive components, is building a $50 million automotive manufacturing plant in southwestern Kentucky. The Hopkinsville plant will make chassis components and provide suspension assemblies for automotive vehicle manufacturers. In addition to manufacturing, the facility also will include assembly and painting facilities.

Construction of the 235,000 square foot plant will begin in September. The facility should be operational in 1998, employing about 250 people.

"This is the first facility to be built as a result of actions taken by Thyssen Budd Automotive ... to link up its North American and European operations," said Siegfried Buschmann, Chairman of the Executive Board of Thyssen Budd Automotive.

This will be Budd's second manufacturing facility in Kentucky. The other, in Shelbyville, produces steel stamping and assemblies such as fenders, hoods and doors for its automotive customers, and employs approximately 600 people.

Mercedes begins production in Alabama
One of the most widely publicized expansion projects in the 1990s was Mercedes-Benz's decision to build a $300 million auto assembly plant just west of Tuscaloosa, Ala.

The 1.2 million square foot facility, which produces Mercedes' new sport utility vehicle, the M-Class, began production in February of this year and employs about 850 people. At full capacity, the plant will produce 65,000 vehicles annually, with half for North America and the remainder for Europe and other parts of the world.

"This plant is a major milestone in the further globalization of our company," said Jürgen E. Schrempp, chairman of the Board of Management of Daimler-Benz.

Of the 65 systems suppliers that will supply Mercedes, a number have already established new sites in Alabama. Estimates of the number of spin off jobs that will be created by the new plant run as high as 10,000.

Swiss-based Rehau Inc.'s $75 million plant will supply front and rear bumpers, molding and wheel arch covers for the M-Class. Others include Johnson Controls, which has built a $10 million facility that manufactures the seating system; Delphi Packard Electric, which provides automotive wiring assemblies; ZF Industries, a German company that produces front and rear axles; Delphi Packard, which makes cockpit instrumentations; and the Becker Group's $7 million plant, which produces interior trim.

What's important to note about these plants is that they are systems facilities, which means they have their own suppliers, many of which may eventually establish operations in the region.

Another major selling point is the state's extensive education and training system. Alabama Industrial Development Training offers on-site training at no cost to workers of new and expanding qualifying companies.

Japanese-based NCI Manufacturing Inc., a subsidiary of the Shibasho Group, is relocating its U.S. headquarters, as well as a manufacturing plant and distribution center, to the northeastern Alabama city of Scottsboro.

"Scottsboro is a good location to serve Japanese automobile plants and parts manufacturers," said Tatsuo Imai, general manager of the company's international division. The plant will manufacture gaskets for automotive exhaust systems for Japanese automobile manufacturing plants.

"Accessibility to American and German automobile plants will also enhance our potential to supply our unique gaskets to these facilities," he said.

In fact, auto parts employment in the state has increased by 150 percent over the past decade, compared with a rate of 21 percent nationally for the industry.

The crown jewel of the South Carolina auto industry is the BMW plant near Spartanburg. The plant, which began operations in 1994, is the sole manufacturer of BMW's Z3 Roadster. In addition to being BMW's North American headquarters, it is also the company's only non-European manufacturing plant.

In the past three years, the company has invested over $800 million in a series of expansions at the South Carolina facility, where current employment tops 2,000 people.

Since 1992, 18 suppliers have located in South Carolina, investing nearly $300 million and creating some 1,800 jobs.

One of them is Pierburg USA Inc., which manufactures fuel pump systems for BMW at its $21 million Greenville plant. The facility, which began production last summer, also supplies the new Mercedes plant in Tuscaloosa, Ala., and the Volkswagen plant in Puebla, Mexico. About 90 percent of the products from the South Carolina plant will go to the international market.

Some auto industry suppliers, like tire-maker Michelin, have been in the region since well before companies like BMW and Mercedes came to Dixie. These companies have seen their business expand exponentially.

Michelin established its corporate headquarters in Greenville 20 years ago and has expanded its operations there more than 30 times since then. Its most recent expansion was a $500 million project announced in 1995.

In May of this year, the American Honda Motor Co. announced its decision to build a $30 million facility in Timmonsville, near Florence. The plant, which will manufacture all-terrain vehicles (ATVs), should be up and running in 1998.

The Ford Motor Co. assembly plant in Norfolk, which recently underwent a $290 million expansion, was initially established in 1925. Ford currently manufactures the F-150 pick up truck at the Norfolk plant.

Illinois-based Tenneco Automotive is expanding its Hampton Roads regional operation and has selected Virginia Beach for a 20,000 square foot plant.

The expansion follows Tenneco's new contract with the Ford assembly plant in Norfolk to manufacture and supply mufflers for the F-150.

"Proximity was key in the site selection process in order for us to provide just-in-time delivery to Ford," said John McDonald, Tenneco spokesman. "The quality of life in Virginia Beach was a determining factor for our employees, as was the area's high quality labor supply."

Other auto industry suppliers in Virginia Beach include A.R.S. Manufacturing, Olex Industries, and Southland Technologies Inc., all of which make automotive gaskets.

In nearby Hampton, the former Freightliner/Mercedes-Benz medium truck plant was recently bought by California-based Catalina Cylinders. The company has been retrofitting the 150,000 square foot facility since April.

Catalina Cylinders will manufacture pressure cylinders used to deploy air bags.

Sumitomo Machinery Corp. of America, which manufactures power transmission parts, is expanding operations at its Chesapeake facility. The $15 million expansion will more than double the plant's manufacturing capacity, giving Sumitomo the ability to manufacture 10,000 units per month. The plant will manufacture unique power transmission parts for the international gear box market.

The automobile industry is also big in the western part of the state, accounting for much of the area's economic growth. Reynolds Metals Co. recently began production of lightweight aluminum wheels at a $34 million manufacturing plant in Lebanon.

The 55,000 square foot facility is Reynolds' second U.S. wheel plant.

Reynolds is one of the world's leading aluminum wheel producers, with 31 of the company's more than 100 plants worldwide supplying aluminum products to the automobile, truck and trailer industry.

The $34 million plant will initially employ 125 people, but company officials are already talking about a second-phase expansion that could add another 300 positions sometime during 1997.

Other Japanese companies are beginning to follow their fellow countrymen into a rapidly developing Japanese business enclave.

Dynax Corp. of Japan, which manufactures wet-friction clutches for automatic transmissions and has more than 60 percent of the Japanese market, recently chose the Roanoke region as the site of its U.S. headquarters and manufacturing operation for the production of transmission parts for passenger cars. The $17 million facility began production in April.

Last year, Toyota Motor Corp. chose Buffalo, W.Va., in the western part of the state, for its new $400 million engine production facility. The plant will employ about 300 people.

"This new engine plant is yet another step in Toyota's localization of all aspects of the vehicle production process," said Toyota Motor Corp. President Hiroshi Okuda. "It was a difficult decision, but we are confident in our final choice. We chose West Virginia because of its labor force."

The facility, which is expected to begin production in late 1998, will make engines for the Toyota Corolla.

Other Japanese companies have followed Toyota's lead.

NGK Spark Plug built an oxygen sensor plant in Pocatalico, northwest of Charleston, and already has expanded twice. Originally opened in 1995, it now employs more than 200. Last October, the company completed a 33,000 square foot expansion, bringing the facility's total to 112,000 square feet.

Last year, the Katoh Seisakusho Co. built a stamping plant in Ravenswood that created 100 jobs, and Diamond Electric Manufacturing Corp. built an ignition coil plant nearby the Toyota site that will eventually employ 100 people.

One of West Virginia's major attractions for manufacturers is the Polymer Alliance Zone, a three-county area in the western part of the state that is home to the largest concentration of polymer-producing plants in the world.

Collins & Aikman, manufacturer of automotive carpet, automotive interior fabrics, acoustical components and plastic interior trim parts, is investing $10 million to expand its facility in Albermarle, east of Charlotte, creating 200 jobs.

The Albemarle plant, which will manufacture and dye automotive carpet, is one of 18 Collins & Aikman facilities in North Carolina which, together, employ more than 7,000 people. The company has 45 plants throughout the world.

"North Carolina continues to be the perfect home for our company," said Dennis Hiller, president of the Collins & Aikman Automotive Systems Carpet and Acoustics Group. "The quality of our work force and excellent business climate in this state have enabled us to succeed here."

Caterpillar Inc. is building a 153,000 square foot manufacturing facility in Morganton -- east of Asheville -- creating 120 new jobs.

The Morganton plant will manufacture oil coolers and piston pins used in the company's mining and earth-moving machinery, and is expected to be operational by the end of the year.

"The area has an attractive business climate and we're impressed with the availability of skilled workers -- both important factors in our decision to locate here," said Bruce Hershock, facility manager.

This will be the company's fifth in North Carolina. Caterpillar has operations in Johnston, Lee, Brunswick and Macon counties, and employs more than 700 North Carolinians.

ITT Automotive, which manufactures automotive brake systems, invested $65 million in a 200,000 square foot facility in Henderson County, just south of Asheville, creating 200 new jobs.

"The new tax credits and tax cuts, coupled with the cooperation of the local and state governments, convinced us that North Carolina is the perfect place for us to locate," said Ed Anderson, director of manufacturing engineering for ITT Automotive.

From fuel pumps to wiring harnesses to air condensers, Mississippi companies produce a wide variety of parts and components for the automotive industry. Companies such as Cooper Tire & Rubber, Delphi Packard Electric systems (wiring harness components), and United Technologies Automotive (automotive DC motors) have plants in Mississippi that employ more than 1,000 people each.

Last year Mazda opened a 600,000 square foot parts distribution center in the northwestern Mississippi town of Olive Branch, just southeast of Memphis, Tenn. The $20 million facility is Mazda's largest parts center in the world and enabled the company to consolidate the functions of its two Michigan sites into one state-of-the-art structure. The new facility distributes parts throughout the country.

Another Japanese automaker, Nissan Motor Corp., also has a major distribution facility in Olive Branch, from which it distributes parts to all of the company's Southeastern U.S. car dealers.

"Companies of all different kinds and types and sizes are rethinking the way they ship goods," said Jeff Shell, senior managing director of Cushman & Wakefield of Michigan. Cushman & Wakefield is the commercial real estate firm that handled the site selection process for Mazda.

Mississippi's Free Port Warehouse Law affords a major benefit to companies whose entire market is outside of Mississippi, in that their inventory of finished goods can be exempted from property taxes.

For Mazda's parts center -- which could house as much as $75 million in inventory -- the lack of an inventory tax added up to major savings, and was a significant factor in the company's decision to choose the site in Olive Branch.

"A lot of different states will tout the fact that they don't have an inventory tax, but what we found out is, yes, they do, but they just don't call it an inventory tax," said Stuart Morse, director of logistics operations at Mazda's Olive Branch facility. "In Mississippi there really is no inventory tax."

All told, more than 150 companies manufacture motor vehicle parts, or operate facilities such as motor vehicle conversion plants, emergency medical vehicle plant, etc. These establishments are widely distributed throughout the state and employ nearly 6,000 people.

Florida is working aggressively to increase the number of auto industry manufacturing companies. This year the state created the new High Impact Business Performance Grant Program, which is designed for the special needs of high impact industries such as automotive. The program allows Florida to commit to providing a performance-based cash investment to a qualified high-impact business based on the number of jobs created and the company's capital investment.

The Port of Jacksonville, in northeastern Florida, is the largest auto import/export facility in the Southeast U.S., handling more than 400,000 automobiles per year.

Located within the confines of the port is Southeast Toyota Distributors, which is owned and operated by JM Family Enterprises Inc. The company also operates a similar facility in Commerce, Ga.

"One of the main things we're most concerned with is cash out and cash in," said Jeff Giesler, the facility's operations manager. "If they make it in Georgetown (Ky.) on Monday, I'll have it by Thursday." For vehicles manufactured at the NUMMI facility in Freemont, Calif., it normally takes nine days.

According to Giesler, 65 percent of the vehicles they process are manufactured domestically, 35 percent internationally.

"We receive 30 to 40 rail cars a day," said Giesler. "Vessels come in once a week."

The most interesting border synergy in this region, however, is the border between Texas and Mexico, which has boasts a major automobile manufacturing hub in the northern Mexican state of Coahuila. From Texas and Louisiana, suppliers can easily access the auto assembly plants in Monterrey and Saltillo, as well as manufacturers in the southeastern U.S. In fact, Texas manufacturers of auto supplies are within a 12-hour truck trip of nearly 20 assembly plants in the U.S. and Mexico.

The link between northern Mexico's auto industry and the southern U.S. auto industry is growing stronger in the wake of NAFTA, with U.S. companies already exporting substantially more complete vehicles to Mexico.

"Of the more than 140 maquilas in the [McAllen, Texas/Reynosa, Mexico] area, 50 percent involve the automobile industry," says Nancy Boultinghouse of the McAllen Economic Development Corp.