Mobile: U.S. South Winning War For Foreign Investment

July 3, 2012 -- Airbus' choice of Mobile, Ala., as the site for its first-ever U.S. aircraft manufacturing plant is but the latest Southern victory in an economic war between the states: The fight to win direct economic investment from overseas, in manufacturing especially.

"For 10 years now, 39 percent of all direct foreign investment in the U.S. has gone to the South," says Michael Randle, owner, editor and publisher of Southern Business & Development, the economic development magazine of the South, based in Birmingham. "It's part of a trend you're going to see more of. If you want to sell to North America, it makes sense to make your products here."

Though an increasing number of foreign manufacturers, says Randle, want a foothold in U.S., "They don't want to throw their money around. They want a good deal." They're extremely conscious of costs, he says, and costs for lots of things--including land, infrastructure, electricity and labor—tend to be cheapest in the South. "Plus, there's the work ethic that the South is famous for."

Starting in the early 1990s, he says, Alabama made a huge commitment to winning aerospace and automotive manufacturing from Europe and Asia. After the state persuaded Mercedes-Benz to build a plant in 1993, it "knew it was on to something."

Other wins for Alabama (besides the decision by France's Airbus) include a $5 billion investment by Germany's ThyssenKrupp, which operates two steel plants in the state, and an announcement by Mercedes that it will produce its new GL-Class sport utility vehicle at its Alabama factory. Honda, Hyundai and Toyota have plants in Alabama as well.

As for Airbus's decision, economic development experts in Alabama and elsewhere say Mobile had an all but unbeatable advantage over other locations. Asked what city was the number-two competitor, Leigh Perry Herndon, vice president of marketing for Mobile's chamber of commerce, says simply, "There wasn't one."

The city's attributes, says Greg Canfield, Alabama's Secretary of Commerce, include a former airbase with long (9,600-foot) runways, two nearby freeway intersections, port access, an abundance of cheap land, low taxes and a local workforce skilled in aerospace manufacturing.

"The fact that Alabama is a right-to-work state, I think, too, was very important," he says.

Mobile already had a seven-year relationship with Airbus, dating back to when Airbus was in competition with Boeing for a contract to build air-tankers for the U.S. Air Force. Airbus competed out of Mobile for that contract, which they lost. Now they again have chosen Mobile as the base from which they will go up against Boeing for the commercial aircraft market.

Kudos to Mobile have come from a surprising quarter: Washington State, original home to Chicago-based Boeing and still the site of Boeing manufacturing.

"We congratulate them," says Alex Pietsch, director of the governor's office for aerospace development in Washington. Rather than seeing Airbus' decision to manufacture in the U.S. as a cause for war, Pietsch sees it as good news for his state's 720 aerospace suppliers.

"As Airbus grows its presence," he says, "we know our companies are going to be part of that supply chain."

A win for Alabama, he says, is a win for Washington State and for the U.S. aerospace industry in general--further confirmation that "U.S. manufacturing is back."

That generous attitude is not shared by Boeing, which in a statement denounced Airbus' decision: "While it is interesting once again to see Airbus promising to move jobs from Europe to the United States," said Boeing, "no matter how many are created, the numbers pale in comparison to the thousands of U.S. jobs destroyed by illegal [European] subsidies."

Alabama, by the way, is kicking in $158 million in incentives for Airbus to locate to the state.