Regional Report: The South's Automotives, Alternative Energy Sectors Ready to Grow
The alternative energy, automotive, and biosciences industries are helping the southern states retain economic stability and plan for future growth.
Lisa A. Bastian (June/July 10)

As the recession continues across America, the southern states of Tennessee, Alabama, Arkansas, Kentucky, Louisiana, and Mississippi are finding ways to improve their economies. For instance, Tennessee ranked third on Chief Executive magazine's 2010 list of the best states for business. In the past seven years it has added 184,173 jobs, $32 billion in capital investment, and 50 new corporate headquarters. Across the South, several industries are aiding recovery efforts.

State Energy Programs
Southern states are growing green jobs by investing in State Energy Programs (SEPs) funded by the American Recovery and Reinvestment Act (ARRA). While the energy portion of the act grants $61.3 billion to dozens of initiatives, Brian Henderson, Southeast regional coordinator for the National Association of State Energy Officials (NASEO), says about $3.4 billion specifically funds state energy programs. Each state energy office's piece of the pie depended on grant proposals approved by the federal government.

"This is a huge opportunity for states to make a significant impact on expanding their energy efficiency bases," Henderson says. "They hope to get the [stimulus] funds out quickly. Some will use [the money] mostly for energy retrofit jobs. Others will focus more on economic development efforts to attract manufacturers of energy-related products."

NASEO's March 2010 State Energy Program ARRA Update highlighted regional success stories of SEP-financed projects.

• Louisiana: The Home Energy Rebate Option Program, established for consumers in 2000, will also include businesses. It offers a higher cash rebate of up to $3,000 to eligible parties upgrading to higher energy efficiency standards as they build, retrofit, or remodel structures. Total state SEP funding: $71.7 million.

• Tennessee: SEP funds will establish a comprehensive solar energy and economic development program focusing on job creation, education, renewable power production, and technology commercialization through two initiatives. The Tennessee Solar Institute at the University of Tennessee and Oak Ridge National Laboratory will help speed the use of solar photovoltaic technology and create a solar opportunity fund to give $23.5 million in grants to solar energy firms and companies installing solar systems. The 20-acre West Tennessee Solar Farm will be one of the largest such facilities in the South, and operate as a demonstration tool showcasing solar technologies. Total state SEP funding: $62.4 million.

• Alabama: The University of Alabama in Huntsville received $600,000 for the state's auto industry. The school could help up to 40 auto suppliers increase energy efficiency, reduce waste in their manufacturing processes, and retain up to 2,000 jobs. Total state SEP funding: $55.5 million.

• Kentucky: The Green Bank of Kentucky financing program, established with $14 million, makes public buildings energy-efficient and creates green jobs. A $1.3 million loan will save $2.15 million in energy costs for three buildings. Total state SEP funding: $52.5 million.

• Arkansas: Grants of $1.2 million to Pulaski Technical College and $1.3 million to NorthWest Arkansas Community College will provide training for up to 600 green energy jobs. Each college will establish a Building Training Center of Excellence to train energy industry workers. Total state SEP funding: $39 million.

• Mississippi: The $10 million Mississippi Job Protection through Energy Economic Development program funds energy efficiency retrofits and upgrades to cut costs, reduce energy consumption, and create or retain jobs for eligible businesses. Twenty-five firms have already received $21,000 to $450,000 in grants. Total state SEP funding: At least $13.4 million.

Momentum in Biosciences
In May the Washington, D.C.-based Biotechnology Industry Organization (BIO) published the Battelle/BIO State Bioscience Initiatives 2010 report. It contains the latest biotech data on national, state and metro employment and growth trends from 2001 to 2008. According to the report, academic bioscience R&D expenditures for Tennessee totaled $544 million in 2008; in Alabama, $512 million; in Louisiana, $442 million; in Kentucky, $379 million; in Mississippi, $191 million; and in Arkansas, $190 million.

Nationwide investment in bio projects is rising. While the South has "historically not been a hotbed of bio or life sciences activity," says Patrick Kelly, BIO's vice president of state government relations and alliance development, the region is supporting biosciences with added R&D and commercialization. But biotech isn't for every location. Some areas are focusing investment in other industries better suited to their economies.

After Hurricane Katrina, many life sciences facilities and talent left Louisiana, Kelly says. "But they have literally rebuilt or are in the process of bringing back the life sciences to a pre-Katrina level, and I think will ultimately surpass it." Louisiana State University and the U.S. Department of Veterans Affairs show signs of a comeback. The institutions are erecting a joint medical campus in downtown New Orleans, and the VA expects to treat veterans there by 2013.

Huntsville, Alabama's world-class genomics research institute, opened in 2008, is the cornerstone of a 150-acre biotech campus. Alabama has 90 biotech firms, seven research universities, and a talented work force responsible for six FDA-approved cancer drugs. Tennessee has four "life sciences engines" at work, Kelly says: Knoxville's University of Tennessee Medical Center, Oak Ridge National Laboratory, Nashville's Vanderbilt University, and St. Jude Children's Research Hospital in Memphis.

Kentucky, home to hundreds of diverse bio firms, has become "very progressive in the region in terms of attracting and cultivating life science industry hubs," Kelly says. Through Kentucky's Department of Commercialization and Innovation, the state matches both phases of the federal Small Business Innovation Research and Small Business Technology Transfer programs, the only program of its kind in the country. So far 46 companies have received a combined $17.7 million in matching funds.

Auto Zone Players
Tennessee, Alabama, Kentucky, and Mississippi are active in the southern automotive zone, the mammoth car manufacturing and supplier network that begins south of Michigan and spreads down I-75 into the South.

Unlike Detroit's Big Three, the mostly non-union foreign car makers have fared well during the recession. However, two plants in this region are presently "in limbo" due to the dismal economy, according to David Zoia, editorial director of, including Toyota's Blue Springs, Mississippi, plant. "[Officials] say it will take probably 18 months to get it going once they announce products to launch," Zoia says. In December 2008 Toyota announced a delay in finishing construction, which is now about 90 percent complete. Last June General Motors put its ultra-modern Spring Hill, Tennessee, plant on standby. "They haven't said it's marked for closure, but they're keeping it alive without saying what will be built there," Zoia says.

But the industry is revving up again. Volkswagen Group of America is investing $1 billion to build a 1,350-acre auto production facility in Chattanooga. Production will begin early next year on a new mid-size sedan designed just for the North American market. The plant will create 2,000 jobs and initially produce 150,000 vehicles. Chattanooga Seating, Faurecia, Magna, M-Tek, and ThyssenKrupp occupy the adjoining supplier park.

In May Nissan broke ground on a $1.7 billion expansion of its Smyrna, Tennessee plant. The facility will build lithium-ion batteries for the all-electric LEAF car, and will produce the anticipated green vehicle by 2012.

Alabama, well established in the industry, has more than 350 auto-related manufacturers. Hyundai's $1.4 billion, 3,000-employee automotive plant in Montgomery is one of North America's most advanced assembly plants. In May the $1.27 billion Honda plant celebrated its 10th anniversary in Talladega County, where 4,500 workers produce 300,000 vehicles and engines annually. The $1 billion Mercedes-Benz plant in Tuscaloosa County employs 3,000 people and has more than 35 auto-related suppliers in Alabama. Shareholders of Hybrid Kinetic Motors recently voted to build an assembly plant near Bay Minette, Alabama. It will invest approximately $3.43 billion on the project, produce 300,000 vehicles by 2013, and employ up to 5,000 people.

Nearly 10 percent of all cars and trucks produced in America are made in Kentucky. The Commonwealth is home to two Ford assembly plants, a GM plant, a Toyota assembly plant, and a Toyota engineering and manufacturing facility.

Mississippi has almost 200 industry suppliers including Caterpillar, Delphi Automotive Systems, Mazda, and Cooper Tire & Rubber, and 28,000 auto workers thanks largely to Nissan's $1.5 billion plant in Canton. Nissan recently completed a $118 million expansion for production of a new commercial van this fall. The industry's activity has also attracted a new PACCAR truck engine manufacturing facility and Severstal steel mill.

Not a "Jobless Recovery"
Michael Chriszt, assistant vice president of the Federal Reserve Bank of Atlanta, tracks data for most of these southern states. Although "pressure" on their strained budgets may negatively impact employment and programs in the near term, he says, there is good news. Sales receipts now seem to be "stabilizing" and are above 2009 totals - but still not as good as levels from two years ago.

Better news: The nation is no longer in a "jobless recovery," Chriszt says, as the data indicates job growth has finally occurred over the last two months. Since January the South's manufacturing sector (except for Mississippi) has received new orders, expanded production, and increased employment. "We're coming out of the recession at a slower pace," he says, "but activity is definitely picking up."

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