Labor is always one of the top two or three factors, said Buzz Canup of site location and economic development consulting firm Canup & Associates. Jackson, Miss.,-based Canup & Associates has done site location studies for auto and truck giants, including Navistar, Volkswagen, Audi and Honda.
“Typically, you start with labor quality, and that includes work force trainability, which in some cases relates to educational levels,” he said. “You also need to have work force productivity, and typically you do that by evaluating existing businesses and industries in the region to look at turnover, absenteeism and production quality.”
Canup said that it doesn’t make sense for a manufacturer to build a new assembly plant near other assembly operations.
“One site location criteria we use is proximity to a competitor plant,” he pointed out. “In many cases, you don’t want to be within X-number of miles of a competitor’s operation. These facilities typically hire between 2,500 and 4,500, and you need a work force density such that you can attract at least 90 percent of that employment level locally.”
Automakers should insure that a prospective site has the right skill sets, urged Catherine Madden, a market analyst for Global Insight, an economic consulting firm based in Waltham, Mass.
“When BMW started producing the X-5 sports activity vehicle in Spartanburg, S.C., there were some issues with the stamping,” Madden said. “[The company] had to transfer some of the stamping material to the Detroit area to have die-makers do the work. The company simply didn’t have enough staff who were trained in that vocation.”
Job-training incentive packages, either from state or local governments, are one way to insure the right skill sets at a new plant, according to Madden, who added that incentive packages are high on site-selection checklists.
“I think tax incentives weigh heavily in the process, and governments are happy to comply, because the new facility will generate jobs that may be the best-paying jobs in the community,” she said.
Another issue for site selectors is whether to build a new facility in a union or non-union environment.
“Some producers start out with a preference for establishing and maintaining a non-union operation, so that will dictate where they even start to look,” said Mark M. Sweeney, senior principal for McCallum Sweeney Consulting of Greenville, S.C.
Whether a plant is union or non-union may be less important from a cost standpoint, Canup said.
“If you look at the wage structure of a Honda or Toyota or Nissan or Mercedes or BMW, you’ll find that the base wage rates for their operators and maintenance technicians either equal or exceed the UAW wage, and they have benefits packages that typically equal or exceed UAW benefits,” Canup pointed out. “And all of these manufacturers have either invested in new plants or expanded significantly in the past decade.”
Michael Keating is senior research editor for Expansion Management. He can be reached at mkeating@penton.com.
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