. Introduction
Over the past twenty-plus years, the changing global motor vehicle industry enabled the development of a vibrant automotive industry in the U.S. Southeast (Lambert & Miller, 2011). Detroit remains the hub of the U.S. automotive industry. However, instead of an east-west geographical orientation of the industry emanating from Michigan, the geographic distribution of auto assembly and supplier plants now displays a north-south orientation, with a concentration of plants along a corridor running from Detroit southward, principally through Ohio, Kentucky, Tennessee, and into Alabama. Today, there are 11 vehicle assembly plants located in the US Southeast and three more facilities have been announced.
The Southern Auto Corridor—including the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia—has an embedded role within the global automotive industry. It is dominated by foreign owned firms and primarily serves as a production center within the North American Free Trade Agreement (NAFTA) automotive region. Because the newly developed regional industry is so embedded in a global context it makes a fruitful case for studying the impact of globalization.
The global automotive industry is characterized by production being conducted primarily in multi-country regions. The majority of parts production, assembly, and vehicles sales occur in integrated regions. These car production regions include NAFTA, the European Union (EU), MERCOSUR in Latin America, CIS for the former Soviet Block countries, and ASEAN in Asia. There are some countries (i.e., China, Korea, Japan, and India) that have a “go-it-alone” approach and are mostly integrated along national boundaries. Within the regions and countries, the automotive industry clusters in growth poles. In the last ten years, the Brazil, Russia, India, and China (BRIC) regions have significantly increased their share of world vehicle production while the developing country share has shrunk, but the basic geographic pattern of the industry appear to be holding. Sturgeon et al. (2009) have described the geographic and organizational pattern of the automotive industry as nested.
The conceptual model describing possible impacts of globalization on the quality of life (QOL) at the country level developed by Sirgy et al. (2004) is useful for understanding the implications of this globalization driven change in the geography of the U.S. automotive industry. The conceptual model provides the necessary research questions that should be investigated empirically to assess the impact of the globalization of the automotive industry on the region’s quality of life. The model defined globalization as the diffusion of goods, services, capital, technology, and people (workers) across national borders. The diffusion of goods, services, capital, technology, and workers across national borders take form in inflows and outflows. Inflows of goods, services, capital, technology, and workers in a country are those that enter the territory in question and are accounted for using government statistics. Conversely, outflows of goods, services, capital, technology and workers from a country are those that exit the target country and are accounted for using government statistics.
The “Southern Auto Corridor” arose mainly through the flows of capital, goods, and technology. The diffusion of services and people (workers) across national borders was less of a factor so these factors will not be a focus of this chapter. The diffusion of people (workers) that most significantly influenced the QOL of the region was migration of people from the northern parts of the U.S. to the southern states rather than across national boundaries. The foreign firms did send managers and experts, but their impact was more localized (e.g., the teaching of Japanese in some local schools). There was also a flow of services as service providers to the foreign automotive and parts manufacturers followed their customers (e.g., third party logistics providers). However, the story of globalization of the Southern Auto Corridor is mostly captured by understanding how the flow of capital, technology, and goods impact the region.
The diffusion of foreign capital to the region led to the flow of technology and goods. Foreign Direct Investment (FDI) from Japan, Germany, and recently from Korea, was a major force in shaping the Southern Auto Corridor. This capital came in the form of assembly plants and parts suppliers. Along with this capital investment came flows of technology. For example, Japanese manufacturing practices such as Just-in-Time (JIT) and kanban systems flowed into the region. The plants built with foreign capital needed imported parts for production so this lead to an inflow of goods into the region. The foreign Original Equipment Manufacturers (OEMs) use their American assembly plants to a limited extent as an export platform so more goods are flowing from the region. Albeit, because of the regional nested structure of the industry the amount of exports from the NAFTA production region are limited.
2. The Southern Auto Corridor in the changing global automotive industry
The Southern Auto Corridor, including the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia, has an embedded role within the global automotive industry. It primarily serves as a production center within the North American Free Trade Agreement (NAFTA) automotive region. Due to political and industry factors, production in the global automotive industry is dominated by multi-country regional production bases (e.g., NAFTA, MERCOSUR in South America, European Union), albeit some countries (e.g., China, India) constitute their own production region. This structure makes it unlikely that despite globalization and the “flattening” of the world that the Southern auto corridor will become a major global export base, but it is connected with the global automotive industry that is in a state of flux. Nevertheless, the regional nested structure of the global automotive industry, in addition to the characteristics of the foreign-domestic automotive industry in the south, makes the local industry rather globally secure albeit tied to U.S. automotive sales. Thus the flows of capital, technology, and goods that created the Southern Auto Corridor in the last 30 years is only likely to experience minor ebbs and flows despite the turbulent times.
There are massive changes occurring in the global automotive industry. That is, the perceived demise of Detroit, financial crisis resulting in governmental bailouts, the emergence of huge new markets in Brazil, Russia, India, and China (BRIC), alliances, and consolidations, as well as new fuel efficient and alternate energy vehicles. Nevertheless, the basic structural framework of “nested” global, regional, national, local business operations with growth poles at the local level remain. The global changes are likely play out within this structure of nested growth poles. The financial troubles of the "The Big Three" (i.e., GM, Ford, and Chrysler) helped accelerate these trends that had been occurring in the global automotive industry since the 1990s (Hiroaka, 2001). These changes are likely to influence the auto industry in the U.S., and accordingly the QOL in the region, but only peripherally because the industry is dominated by regional production.
2.1. THE RISE OF THE BRIC AUTO MARKETS
The first trend is the traditional global market dynamics are changing as market growth is occurring in emerging markets and the world's automobile manufacturers continue to invest into production facilities in emerging markets in order to tap into the new markets and reduce production costs. Pricewaterhouse Coopers (2008) forecasts that, by 2015, 95%of light vehicle growth will originate from emerging markets. China became the largest auto market in 2009, surpassing sales in the United States. North America sales in 2010 were 13.9 million units, a modest 8.2% increase over 2009 that stands as one of the worst years in the industry's history. While auto sales in China were nearly 18 million units which is up about 30% over 2009. India has been the second-best performing major global auto market over the past decade, with car sales climbing to a record 1.82 million units in 2010. Brazil experienced sales of 3.4 million units, an increase of over 9% since 2009. In 2011, new car sales in China and the other BRIC nations are expected to surpass the combined volumes of Western Europe and Japan, and account for roughly 30% of global car sales (Scotia Economics, 2011).
The U.S. and foreign-domestic automotive companies with facilities in the U.S. Southeast are active in the BRIC markets, but ventures in these markets are mostly in the form of foreign investment rather than exports from U.S based facilities. Some U.S. suppliers found that while they are having difficulties at home, their foreign operations were profitable so more investment is expected in production facilities in the growing markets (Office of Transportation and Machinery, 2009). The export statistics also show that the growing developing markets will not be major export markets. Exports to Canada and Mexico accounted for 73 percent of the total U.S. automotive parts exports in 2008, while the BRIC countries account for a mere 4% of automotive parts during the same period. The U.S. Southeast should experience some increased exports of autos and parts, but the volume will not be dramatic.
The emerging BRIC automotive industries also could be a source of increased imports of autos and parts, but Mexico and Canada should remain the main importers into the region because of the nested geographic structure of the industry. As the major automotive companies esta