By Mark Williams
South Carolina stands out like no other state as the preferred location for automotive manufacturing investments.
In 2015 alone, multiple key automotive manufacturers announced significant investments in South Carolina. Volvo announced in May that it would build its first U.S. manufacturing facility in Berkeley County, a plant that is expected to bring 4,000 jobs and billions of dollars a year to South Carolina’s economy. That announcement followed news in March that Daimler is investing an additional $500 million in its Charleston facility to build next-gen Sprinter commercial vans, a move expected to create 1,300 new jobs.
In tandem with these 2015 announcements, BMW is constructing a billion-dollar expansion of its Spartanburg County plant, significantly boosting capacity to meet strong demand for crossover vehicles. A recent economic impact study conducted by the Darla Moore School of Business estimated the plant’s economic impact on South Carolina is $16.6 billion annually.
The surge of new automotive manufacturing in South Carolina translates into tremendous opportunities for growth of automotive suppliers. Existing suppliers in the Palmetto State will have opportunities to expand, and new companies undoubtedly will be taking a close look at South Carolina or neighboring states for new locations. Now, perhaps more than ever, South Carolina communities have the opportunity to compete for and win new supplier projects that can generate job creation and capital investment.
As someone who has helped numerous automotive suppliers and other companies find the best locations in South Carolina and around the United States, I can tell you that there are some very specific steps communities can take to compete for automotive suppliers.
Identify and prepare great sites. Automotive supplier executives are focused on finding new sites that will optimize operational efficiency, reduce risk and generate the best financial return. Communities need to have one or more sites ready or close to ready to build on. These sites need to meet the following criteria:
· Suitable size, shape, and topography; room for future expansion; site buffer should provide protection from residential and commercial neighbors. Industrial parks often provide good locations for multiple users with similar buffer and utility requirements.
· Appropriate elevation with a low risk of flooding.
· Suitable geotechnical status, including appropriate soil bearing capacity and low seismic risk.
· Suitable environmental status, with verification that wetlands, if present, will not inhibit construction footprints and that ground contamination from previous users or other sources does not exist; the absence of endangered species and archeological remnants also should be verified.
· Good road access, with acceptable ingress and egress for employees, inbound raw materials and outbound finished product.
· To accelerate initiation of production, companies often begin their site searches with an investigation of existing available buildings. Having a spec building in place can generate a competitive advantage; spec buildings should be in the 65,000-100,000 square-foot size range and have ceiling heights no less than 28 feet.
Proximity and accessibility. As communities are identifying automotive supplier sites, it is important that those sites have proximate access to an interstate or four-lane highway.
Access to reliable utilities. Reliable and reasonably priced utilities are critical. Utility capacities (water, sewer, gas, electricity, and telecommunications) that meet both near-term AND expansion requirements for auto suppliers should be verified along with redundancy.
Qualified labor. Finding an educated and technically trained workforce with a track record of safety, productivity and positive work ethic are a driving force in site selections and long-term expansions. Automotive supplier investments are increasingly capital-intensive and are rapidly accelerating the need for a workforce prepared for a more technically oriented environment.
Business climate. Companies are drawn to communities they believe are “pro-business” – that have thriving community support for manufacturers and suppliers. Citizens, elected officials and local businesses play a huge role here, by providing incentives, encouragement and opportunities for these companies. This includes discouragement of third-party labor organization activity, accepting international companies, and providing local support for culture and education. Also, a significant advantage belongs to communities that have nearby educational institutions – especially those that provide excellent workforce training to support global manufacturers.
Low start-up and operational costs. Costs as land acquisition, site preparation, geotechnical or environmental remediation, connection to utilities, drainage and transportation infrastructure, permitting and tap fees, and construction costs all must be known and kept to a minimum.
Maximize value. Communities must attract companies with a fairly comprehensive and complex set of incentives. Often, these packages combine incentives from the state and local levels, as well as utilities. It is vital for a community’s leadership to have a clear understanding of the costs, risks and returns associated with the incentive packages.
It’s a thrilling time for the automotive industry in South Carolina, and the potential for creating new jobs and capital investment during the next few years is significant. The Volvo, Daimler, and BMW projects will no doubt result in tremendous automotive supplier growth in South Carolina. The window of opportunity for communities to compete for new projects is limited and it is critical that communities are prepared to show their advantages.
Published in Feb. 15, 2016 issues of the Business Report
Mark Williams is president of Strategic Development Group, a site selection firm based in Columbia. He has more than 25 years of experience in helping companies around the globe with site selection and incentive negotiation. Williams can be reached at email@example.com.