The U.S. car industry: not just Detroit anymore

"I just want to tell you that I truly believe that we have, in Volkswagen, the very best manufacturing partner that this state and this county and this city could ever have, and I want to thank them so much."

That is a quote from Tennessee Senator Bob Corker in July drawing a line in the sand, essentially.  And that sentiment goes a long way toward explaining why many Southern lawmakers have been opposing the bailout for the automakers.  Foreign companies like Toyota and BMW represent one-third of all car manufacturing in the United States.  They have built enormous operations in Southern states, and have offered tax breaks and a non-unionized workforce.

"Newsweek’s" Daniel Gross has been reporting on this story, and offers his analysis on the influx of foreign auto manufacturers setting up production lines in the U.S.  "It has been growing slowly, and kind of under the radar for the last 15 years, but it just burst into the public consciousness with the politics of the bailout where you had all of these Southern senators, Corker from Tennessee, Shelby of Alabama, opposing the bailout.  

"They don’t like the Big Three because they’re unionized, but they also see that these foreign auto makers are huge employers.  Together they employ about 90,000 people directly.  They’ve seen these guys function without the type of work rules, without the legacy costs.  They are major corporate citizens in these states.  A lot of these senators don’t see the big three as their constituents, but they do see Toyota, Honda, BMW, and Mercedes as their constituents," says Gross.

Inherently, there is a conflict here.  These are the republicans who opposed any federal money going to Detroit, but their states have offered billions of dollars in subsidies to those foreign car makers.  

"There was a race for incentives in the early 90s that is continuing today because the Southern states want these manufacturing plants.  They are very high paying jobs, they bring a lot of other investment and companies into the region."  Gross outlines what these incentives look like, from tax abatement on the property, free electricity, road building, and more.  In turn, the manufacturers’ presence spawns other companies that will supply the assembly lines.  The states view the incentives as a good investment.

These incentives have taken the state of Alabama from creating zero cars in previous years to 800,000 last year.  The state saw their manufacturing jobs in textiles and other industries move offshore.  With jobs flowing out of the state, the incentives to set up auto manufacture from scratch proved successful.

In closing, Gross says, "We used to think that the auto industry was the big three.  But, basically, we have two auto industries.  One is the Big Three; it is unionized, it is in the Midwest, and in mostly Democratic states.  And then you’ve got Detroit south, which is non-unionized, foreign-owned, mostly in Republican states, and you can see how their interest are diverging."

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