Alabama
calling
Paul
M Swamidass and Satish Subramanian review Alabama’s assembly plants
that are luring a strong supplier force for the world’s leading auto
giants
Large
auto assemblers are transforming the economic landscape of southeast
America. Alabama has now become a high-profile auto-assembling hub because
of the presence of major operations in the state owned by Mercedes-Benz,
Honda and Hyundai. The Toyota engine plant is another plus. Up to 15
tier-one suppliers (out of the 50-plus that are actually required) are
expected to start new facilities in Alabama, to supply the new Hyundai
plant.
In this report, we present some findings from a sampling of 51 auto
suppliers from 564 automotive companies in Alabama. Additionally, we
review the supplier base for Mercedes-Benz and Honda in Alabama. A similar
review of the Toyota plant in Kentucky serves as a benchmark.
PROCESS
CAPABILITIES OF SUPPLIERS
Figure
1 illustrates the major process technologies employed by the sample
of 51 auto suppliers (both tier 1 and others) in Alabama. Moulding,
stamping, assembling and machining are the four most common process
technologies used by auto suppliers. According to Figure 2, 29 per cent
of auto suppliers out of the sample 51, are certified both in ISO 9000
and QS 9000 series. About 16 per cent are certified only in ISO 9000
series, and 8 per cent in QS 9000. The TS 16949 certification is new
and it is now replacing QS 9000 certification.
SUPPLIERS
TO HONDA MANUFACTURING ALABAMA (HMA)
Honda’s
comprehensive facility worth $440 million located in Lincoln, Alabama,
began its production in November 2001 with a capacity for 120,000 vehicles.
Honda promptly went for an increase in production to 150,000 vehicles.
This expansion represented an additional investment of $580 million
and a total employment of 2,300. Honda has announced plans to expand
it’s capacity to 300,000 with the addition of an assembly line worth
$425 million, that would employ another 2,000 employees.
SUPPLIERS
TO MERCEDES-BENZ, US INTERNATIONAL INC
The
Mercedes-Benz facility worth $380 million located in Vance, Alabama,
produced 80,000 vehicles in the year 2000 and provided an overall employment
to 1,942 personnel. By late 2003, with an additional investment of $600
million, the facility was slated to produce a total of 160,000 vehicles,
and approximate employment of another 2000 personnel.
LOCATION
OF SUPPLIERS
a) Nine of the critical parts suppliers are located within 100 miles
radius of the Mercedes assembly plant b) Twenty two per cent of the
suppliers to MB are located within a 200 mile radius. Of the 125 regional
suppliers to MB, 54 were located in the Midwest region and another 54
were located in the South, nine in the West, three in the Mid-Atlantic
and five in the New England states. In Figure 3, while Tennessee leads
with 36 suppliers to Honda, Alabama leads with 23 suppliers to Mercedes-
Benz. Since Honda had manufacturing facilities outside Alabama before
setting up the Alabama plant, it had well-established suppliers located
outside Alabama.
Since
Mercedes-Benz built its first US plant in Alabama, it has built its
biggest supplier base in Alabama. Therefore it is reasonable to expect
most of Hyundai’s suppliers to be located nearer to its first US plant
in Alabama. Logistics cost are relatively high when transporting parts
to Alabama from Michigan, Indiana, Illinois, Massachusetts, and California.
........CONTD
