Transcripts

Detroit South - Part 1 (Assembling in the South)

JEFF YASTINE: In other earnings today, Toyota Motor posted record quarterly results today as its sales in the United States surged. The maker of the Camry sedan and Prius hybrid saw its earnings grow by 7 percent to $3.6 billion during its fiscal third quarter on $51 billion in revenues. That's the best quarterly performance in Toyota's 74-year history. U.S. sales jumped 19 percent during that period, as Toyota's fuel-efficient vehicles continued to grab market share from its Detroit rivals.

YASTINE: The woes of the big U.S. auto makers are well known, as they shut down assembly lines and lay off workers. In contrast, foreign auto makers have been on a hiring and building spree, with much of that activity taking place in the southern United States. Tonight, my series "Detroit South" begins with a look at how Japanese, Korean and German car companies are remaking the south.

This is music to the ears of southerners, the sound of vehicles being assembled, the sound of money being earned and spent by thousands of recently employed auto workers. The economy of the new south continues to expand, as the likes of Nissan, Toyota, Hyundai and others add plants at the same time U.S. auto makers are downsizing. It's the kind of virtuous cycle of investment, employment and economic growth that economists love to analyze. And for nearly 20 years, it's been the story of the south, gradually remaking entire state economies, refocusing them away from a withering textile trade and agriculture and in the process, creating something the south has never really had before -- economy growth based on industrial manufacturing. No one has watched the developments with more interest than Mike Randle, publisher of an industry web site, southernautocorridor.com. Randle says the unemployment rate in Alabama, roughly 3.3 percent, is evidence enough of the auto industry's impact on the state.

MIKE RANDLE, EDITOR, SOUTHERNAUTOCORRIDOR.COM: When has Alabama's unemployment rate has consistently been a point and a half below the national average? Never, OK, it's never happened. In fact, there was a period earlier this year where not a single county -- and I'm talking about the most rural counties you've ever seen in your life -- did not have an unemployment rate of over 8 percent. That's -- that's never happened in the state's history.

YASTINE: Low operating costs are helped by state laws and sentiments, which generally make union organizing a hard sell in the region. But assembly plant workers here are hardly what you'd call cheap labor. Most make upwards of $60,000 a year, more than double the average wage in much of the south. Mercedes-Benz and BMW opened their first-ever U.S. assembly plants in the late 1990s in Alabama and South Carolina. Honda, which already had one plant in Ohio, expanded to Alabama in 2001. Nissan followed with a Mississippi plant in 2003. Then Hyundai opened an Alabama plant in 2005. And last year saw Toyota open a pickup truck plant in Texas, while Kia broke ground for a new factory on the Alabama-Georgia border. It hasn't hurt that state governments aren't shy about using big doses of tax incentives to nail down deals. Neal Wade, now head of Alabama's economic development office, helped recruit Mercedes-Benz in 1993, with an incentives package worth $253 million.

NEAL WADE, DIRECTOR, ALABAMA DEVELOPMENT OFFICE: We were criticized for that. But I think everyone has now admitted that it was the right thing for Alabama to do, to jumpstart its economy. In 1993, Mercedes chose the state. Just several years later, Honda chose the state and then Toyota, and Hyundai. So all of a sudden we have four assembly plants in Alabama. In 1995, we were producing no vehicles. This year, we will produce over 800,000.

YASTINE: A formula that's changing the south's economy, converting skeptics into believers and cow pastures into car factories.

Tomorrow, we'll look at Honda's newest automotive assembly plant and how it's changing one small Alabama town.