Automotive Marketing Feasibility Study

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F EASIBILITY S TUD Y A utomotive Manufacturing Centers in Fayetteville/Cumberland County, NC Cumberland County Business Council 800-396-4210 www.ccbusinesscouncil.org Prepared by Business Facilities Planning Consultants, LLC Atlanta, GA

Transcript of Automotive Marketing Feasibility Study

Page 1: Automotive Marketing Feasibility Study

FEASIBILITY STUDYA u t o m o t i v e M a n u f a c t u r i n g C e n t e r s i nF a y e t t e v i l l e / C u m b e r l a n d C o u n t y , N C

C u m b e r l a n d C o u n t y B u s i n e s s C o u n c i l 8 0 0 - 3 9 6 - 4 2 1 0

www.ccbusinesscouncil.org

Prepared by Business Facilities Planning Consultants, LLC Atlanta, GA

Page 2: Automotive Marketing Feasibility Study

T ABLE OF CONTENTS

Executive Summary 1

Introduction 3

Overview of Fayetteville 4

Community Features 4

Economic Background 5

Quality of Life 6

Advantages of Fayetteville 7

Overview of US Automotive Parts Manufacturing Industry 7

Why Locate in Fayetteville? 8

Exhibit X 9

Economic Advantages of Living in Fayetteville 10

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EXECUTIVE SUMMARY

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The Fayetteville Metro Area in North Carolina isan especially attractive location for auto parts andcomponents manufacturing facilities.

This unique and very desirable opportunity has been docu-mented by Business Facility Planning Consultants, LLC, aleading site selection and location strategy consulting firm.BFPC has conducted an in-depth economic study of theFayetteville area. A key objective of the study was toidentify businesses which can benefit from locating in Fay-etteville.

Automotive manufacturing facilities were selected fortheir particular ability to benefit from the special businessand operating conditions in Fayetteville. Reasons for thisrecommendation include:

· Selected automotive production plant operatingcosts $5.7 million per year below the national aver-age, a potential savings of 31 percent. This cost isalso significantly less than that in some other locations inthe Southeast.

· An excellent regional market for automotiveparts and components. A large number of OEM as-sembly and plants are located in and near North Carolina.Four out of five US/Canadian motor vehicle assembly plantsare within 600 miles of the State. The Southeast is thenation’s fastest-growing in business, population and pur-chasing power, which leads to an excellent market for af-termarket auto parts and supplies.

· Proven success of automotive suppliers inCumberland County and a long track record of smoothoperations by existing companies like Kelly-Springfield/Goodyear, Purolator and TBC.

· Good availability of production personnel,due to a well-established economic base, excellent localtraining facilities, the ability to draw workers from a widesurrounding area with less industria-lization and people af-filiated with or retiring from local Army and Air Force fa-cilities. Local population growth is strong, contributing toa good flow of new entrants into the workforce. A higher

percentage of the Cumberland County population is in atraditional family household than in some faster-growingurban areas with a more transient population, suggestinggreater work force stability and commitment to the Fay-etteville community; this is important to automotive firmsthat invest in staff training and thus wish to retain their em-ployees. The regional population is young, with a medianage of only 32, well below that of the state and nation andeven below that of major university communities such asRaleigh-Durham-Chapel Hill.

· Highly regarded educational and research in-stitutions relevant to automotive. Fayetteville Techni-cal Community College (the state’s third-largest with about13,000 students) has academic programs applicable toautomotive manufacturing. Local universities such as Fay-etteville State and UNC-Pembroke have relevant pro-grams. North Carolina State University (about an houraway from Fayetteville in Raleigh) has some of the nation’sbest-regarded engineering programs through the post-doc-toral level and conducts research in areas such as smartpower chips for automotive systems, airbag technologyand materials and other fields.

· Extensive business and public/private organiza-tions to promote and support automotive businessdevelopment activities. North Carolina is a global centerfor the auto racing industry, which has generated over $1.5billion in automotive business activity in research, design,performance and other areas. The North CarolinaMotorsports Association, chaired by NASCAR legendRichard Petty, promotes the State for new investment inthis growing field. The US Energy Department has awardedover $5 million in grants to North Carolina institutions forR&D in automotive technologies, heavy vehicle technolo-gies, fuels, and other areas.

· Excellent access and connectivity for peopleand materials. Fayetteville, halfway between New Yorkand Miami, is central to major population and businesscenters of the eastern United States. Fayetteville is withintwo trucking days of over 70 percent of the US popula-tion, including parts of the nation with the fastest-growingdemographics, industrial base and purchasing power.

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______________________________________

More about Fayetteville and its advantages for your company is available from the

CUMBERLAND COUNTY BUSINESS COUNCILTelephone (800) 396-4210

www.ccbusinesscouncil.org

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Within 700 miles of Cumberland County are over 150million consumers and 70 percent of US industry. It hasan enviable transportation and communications infrastruc-ture with multiple Interstate highways, a local commercialairport, railroads and over 1,000 trucking companies.Many local manufacturing facilities are electronically linkedwith other corporate facilities, customers and suppliers,which demonstrates the high quality telecom infrastructureand connectivity that Fayetteville offers. The US DefenseDepartment and other demanding local users have justi-fied development of serious local transportation and com-munications capacity.

· Readiness for development. Fayetteville hasprepared a choice of industrial parks and sites and hasboth new and previously-occupied manufacturing build-ings ready for quick occupancy. The FAEDC has con-structed a new 125,000-square foot shell building on a34-acre site.

· An attractive package of industrial develop-ment incentives and a very favorable business cli-mate. North Carolina has won uncountable economic

development accolades including three consecutive yearsrunning designations as the nation’s “Number 1 BusinessClimate Ranking” from Site Selection Magazine in 2001,2002, and 2003. It is a right-to-work state.

· A high quality of life that supports transfer,recruitment and maintenance of employees. TheFayetteville area has a size and scale that many peoplelike—big enough to have a wide range of business, hous-ing, shopping, entertainment, health care, academic andother services and amenities, but small enough to have anapproachable local government, modest costs in manyareas, and generally low crime and congestion. The localcost of living is typically 6 percent to 7 percent below theUS average and as much as 10 percent below some othermetro areas in the region. Within an hour or two are theRaleigh-Durham-Chapel Hill metro area, Atlantic Coastbeaches, multiple championship golf courses and otherrecreational opportunities. Local schools, cultural facili-ties and civic organizations have been widely praised.

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I NTRODUCTION

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Fayetteville, North Carolina, an attractive metropolitan areaof about one-third of a million people, shows great poten-tial as a location for automotive-related manufacturing fa-cilities. Its moderate costs, location within a huge marketfor automotive supplies, availability of well qualified em-ployees at moderate costs and proven success of existingautomotive manufacturers are major assets. Substantialeconomic analysis documents the attractiveness of Fay-etteville for automotive product manufacturing facilities, andcommunity leadership has selected this business as a keytarget for further economic development.

The Fayetteville Area Economic Development Corpora-tion has retained a site selection firm, Business Facility Plan-

ning Consultants, LLC, to investigate this phenomenon anddocument the specific reasons why Fayetteville makes goodsense as an automotive production facility location. Fay-etteville and North Carolina were already well-known fortheir strong general business climate and many positive at-tributes as a place to live and do business, but this studydug deeper and documented a series of quantifiable ad-vantages.

This report provides tangible evidence that Fay-etteville is an especially attractive and successfullocation for automotive manufacturing facilities andrelated facilities. These compelling reasons are docu-mented on the following pages.

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O VERVIEW OF FAYETTEVILLE

Community Features

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Geography. Fayetteville is an attractive, economicallydiverse, medium-sized metro area in central North Caro-lina. With about a third of a million residents, it is the state’sfourth largest metro area and the largest metro area out-side the I-40/I-85 corridor that has historically containedmost of North Carolina’s population and development.Fayetteville is the seat of government of CumberlandCounty and the central city of the Fayetteville Metropoli-tan Statistical Area (MSA) which consists of Cumberlandand Hoke Counties.

Cumberland County’s central North Carolina location isalong the border between two geographic regions, theCoastal Plain and the Piedmont. This region’s gently roll-ing hills and year-round mild climate make it a center foroutdoor recreation and other activity such as world-classgolf courses in nearby Pinehurst and Southern Pines whichoften host the US Open Championships.

Downtown-to-downtown, Fayetteville is about 140 mileseast of Charlotte, 90 miles northwest of Wilmington andthe Atlantic Ocean and 60 miles south of Raleigh. Dis-tances between the edges of the respective metro areasare obviously much less. Interstate Highway 95, one ofthe nation’s busiest north-south arteries, neatly bisectsCumberland County; I-40 crosses I-95 a few miles northof Cumberland County; and I-20 connects to it in SouthCarolina about 85 miles to the southwest. Two new orgreatly expanded Interstate Highways, I-73 and I-74,were authorized by Congress in 1991 and are planned tobe constructed near Fayetteville.

Business Environment. North Carolina has consistentlybeen among the nation’s most aggressive and successfulstates in its economic development programs. More thana century ago, it began working hard to move away froma purely agricultural base, establish a quality business cli-mate and actively recruit new economic activity. By thefirst half of the Twentieth Century, it had become one ofthe most industrialized states, initially in relatively basic in-dustries such as textiles but rapidly moving forward into

higher added-value businesses. Its decision 50 years agoto establish the Research Triangle Park (about 70 milesnorth of Fayetteville) showed the world the state’s deter-mination to invest in itself for the purpose of advancingopportunities for its citizens and businesses. That actionwas the catalyst for making Raleigh-Durham-Chapel Hilla world leader in automotives, electronics, biotech andother advanced technology. North Carolina’s Global AirTranspark, a dedicated air cargo center and industrial parkin Kinston (two hours east of Fayetteville), is another ex-ample of the state’s will to promote new industry. In No-vember, 2003, North Carolina won recognition as thenation’s “Number 1 Business Climate Ranking” from SiteSelection Magazine for the third consecutive year.

Reflecting this vigorous state effort, some parts of NorthCarolina have experienced explosive growth. Both theRaleigh-Durham and Wilmington MSA’s ranked amongthe nation’s fifteen fastest-growing metro areas betweenthe 1990 and 2000 Censuses. In many respects, suchrapid growth is very desirable, but admittedly it also con-tributes to some problems such as increased living andbusiness costs and congestion. So while compliments aredue to parts of the state that grew in the 20-40 percentrange over this decade, there is also a benefit to a moremoderate and steady pace.

The Fayetteville MSA population grew 10.3 percent be-tween 1990 and 2000, faster than the rate of the largestMSA located in or partly in North Carolina (Norfolk-Vir-ginia Beach, which grew 8.8 percent) but more sedatelythan some other North Carolina urban areas. The com-munity has a well-rounded mix of economic activities in-cluding manufacturing, distribution, offices, health care andgovernment/ military facilities which have assisted in main-taining good economic balance and in avoiding major vola-tility. The wisdom of Fayetteville’s commitment to bal-anced, diverse growth has been born out by its stableeconomy.

Fayetteville thus provides businesses and people the op-portunity to benefit from North Carolina’s assets by locat-ing in a growing, well-rounded, medium-sized, lower-costurban center, which also has easy access to services andamenities of larger cities. The Fayetteville metro area isbig enough to offer a wide variety of housing, shopping,

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Economic Background

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cultural/entertainment, health and other essential services.At the same time, the State Capitol of Raleigh is about 60minutes from downtown Fayetteville (in fact the closestpoints in each metro area are only about a 15-minute driveapart). Duke University and its medical facilities are withinan hour and a half drive. Atlantic Ocean beaches are about90 miles to the east and the highest mountains in the east-ern US are in Western North Carolina.

History. Settled in 1739 by Scottish Highlanders comingup the Cape Fear River to its head of navigation, Fay-etteville is among many US places named in honor of theMarquis de Lafayette; however, it is the only one whichthe Revolutionary War hero actually visited. The commu-nity was one of several that served as North Carolina’searly centers of government and was the location at whichthe state legislature chartered the University of North Caro-lina in 1789 and ratified the US Constitution. The regiongrew rapidly as a center of agriculture and industry (de-spite a huge fire in 1831), including manufacturing facilitiessuch as the Fayetteville Arsenal, completed in 1839. Trans-portation also assisted local economic development. Theinitial railroad was planned in the early 1830’s and wasintended to provide access to the Cape Fear River at Fay-etteville from various points in the interior of North Caro-lina.

Among the noteworthy residents of Fayetteville in the early1800’s was Omar ibn Said, a native of Senegal who hadbeen a scholar before being captured, enslaved and trans-ported to the US at about age 40. He escaped from aplantation and fled to Fayetteville where he was befriendedby General James Owen. Ibn Said’s knowledge of Ara-bic language and literature and his extensive writingsbrought fame to him and his adopted home town. One ofhis best known scholarly manuscripts went missing earlyin the 19th Century, but was rediscovered in 1995 and isnow on public display.

Fayetteville, like many other important southern cities, wasa target of Union General Sherman as he moved northafter his march through Georgia. By the time Shermanreached Fayetteville in mid-March, 1865, however, thewar was clearly approaching its end and Sherman’s de-struction was focused mostly on military facilities such as

the arsenal. Many of Fayetteville’s distinguished struc-tures, mostly built following the 1831 fire, survived the warand are in place today, forming the basis for the community’sseveral historic districts.

Fort Bragg and Pope Air Force Base. In World War I,the US Army selected a 20-square mile site northwest ofFayetteville as the location for what would become FortBragg. A modest airport, Pope Field, was added in 1919.In 1934, Fort Bragg began experimentation with a newmilitary technology in which soldiers parachuted (initiallyfrom balloons) into the field. The post grew slowly untilWorld War II, when it became a major military trainingcenter and at one point housed 67,000 uniformed person-nel. Fort Bragg trained most of the nation’s airborne orparatroop forces during World War II and following thewar became the permanent home of the 82nd AirborneDivision and the XVIII Airborne Corps.

Pope Air Force Base was expanded to provide mobilityand support services. It is now home of the Air MobilityCommand’s 43rd Airlift Wing, which operates two squad-rons of C-130 “Hercules” transport aircraft, the 23rdFighter Group which flies the A/OA-10 “Thunderbolt II”close air support aircraft and other units.

Today there are about 51,000 soldiers and 9,000 airmenand -women assigned to Fort Bragg and Pope AFB. Vir-tually all are professionals who have chosen the military asa major part of their career and have received high levelsof training. The 7,000 persons leaving the military hereeach year have provided an important boost to the Fay-etteville economy—as entrepreneurs starting new high-techfirms; skilled, dedicated and disciplined employees forexisting companies; and other contributions.

Current Conditions. Fayetteville today is a well-roundedmetropolitan area with a wide range of economic activitiesand an emerging star among North Carolina’s distinguishedcities. The Cumberland County economy provides over86,000 jobs, according to US Commerce Department datareleased in 2003 for the year 2001, not including mostgovernment or agricultural employees or the self-employed.

Cumberland County has a large manufacturing base em-ploying over 12,000, with half a dozen plants employingone thousand or more. Some companies such as DuPonthave chosen to locate multiple facilities here.

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Q uality of Life

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The community is the retail and services center for a widesurrounding area of North and South Carolina. Cumber-land County’s retail sector employs nearly 16,000 andgenerated nearly $3 billion in sales for 2002.

Health care services are a rapidly growing activity here.The County-owned Cape Fear Valley Health System in-cludes four major hospital facilities, ranging from emer-gency rooms to long-term rehabilitation. Womack ArmyMedical Center is one of the nation’s largest military hos-pitals and is the Army’s global center for several special-ized medical practice areas. There is also a major Veteran’sAdministration hospital and a facility affiliated with DukeUniversity. About 525 physicians are in active practice inCumberland County, including about 85 in various federalpositions.

Current details about the Fayetteville and CumberlandCounty community and economy are available from theFayetteville Area Economic Development Corporation.

The local quality of life can make a critical contribution toa company’s staffing stability. Fayetteville offers an ap-pealing quality of life that helps automotive manufacturingfacilities recruit, transfer and maintain quality employees.It was one of only 10 cities in the United States in 2001 toreceive the “All-America City” award from the NationalCivic League, a designation that reflects excellence acrossa wide range of conditions. Fayetteville previouslyachieved “All-America City” status in 1985.

The Natural Environment. The climate of Central NorthCarolina is moderate, with the variety of four seasons butlittle extreme weather.

The Right Size. Most residents like Fayetteville’s size,scale and relationship to nearby cities and attractions. TheFayetteville MSA is an attractive, balanced medium-sizedurban area, big enough to provide key services and ameni-ties, but small enough to have reasonable business andliving costs, accessible governments and freedom from traf-fic congestion, high crime rates and some other problemsof large cities. Both beaches and mountains are acces-sible. Fayetteville is an excellent place from which to en-

joy North Carolina.

Health Care, Education, Culture. The Fayettevillearea’s hospitals provide a high quality of health care. Somelocal facilities have relationships with medical centers inlarger cities, such as the Duke University Medical Center,that help when a patient needs special services. Local spe-cialized health care facilities provide services normally avail-able only in major metropolitan areas.

The Cape Fear Valley Health System’s Cancer Center isone of few accredited as a Community HospitalComprehensive Cancer Program. It has a variety of fa-cilities such as a linear accelerator, a simulator and a 3-DRadiation Oncology treatment planning system, which sup-ports precise treat-ment plans for individual patients. ItsBehavioral Health Care is one of the most comprehensivepsychiatric systems in North Carolina. Its Heart Centerhas been conducting open heart procedures for a dozenyears.

Cumberland County Schools are in process of implement-ing a $40 million capital improvement program which hasresulted in seven new schools in the past four years. NorthCarolina has made a vigorous effort to upgrade publicschools, with quantifiable results; for example, the state’sschools rank first in the nation in the percentage of highschool student taking upper level mathematics course (http:// w w w . n c r e p o r t c a r d s . o r g / s r c /stateDetails.jsp?Page=1&pYear=2002-2003).

Cultural facilities include the Fayetteville Museum of Art,the Museum of the Cape Fear, and the Airborne & Spe-cial Operations Museum. Downtown Fayetteville has un-dergone a major resurgence, with new and tastefully reno-vated historic structures centered on the 1832-vintageMarket House.

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ADVANTAGES OF FAYETTEVILLE AS A DISTRIBUTION CENTER LOCATION

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Cost Of Living. The cost of living in Fayetteville aver-ages 6 to 7 percentage points below the average of some300 cities, which includes most US MSA’s. Fayetteville’sindex is well below that of several other cities in the re-gion, according to ACCRA (the American Chamber of

Commerce Researchers Association). In a Tax Founda-tion study released in November, 2003, using ACCRAand other data, the “Income Required to Pay for a Me-dian Standard of Living” in Fayetteville was cited as 93.7percent that of the national average (http://www.taxfoundation.org/SR125.pdf).

Fayetteville is a particularly attractive location for a widerange of automotive part and component manufacturingfacilities.

To show why, this chapter starts with a review of selectedbusiness conditions and technological trends as they affectthe site selection needs of contemporary automotive manu-facturing facilities. It then points out how Fayetteville isespecially well suited to serve many of these needs.

The US automotive parts and components industry hasabout three-quarters of a million employees, 5,500 plantsand $100 billion in sales. The following exhibit summa-rizes the auto parts manufacturing industry at the six-digitlevel of the North American Industry Classification Sys-tem, as shown by the most recent edition of the US Com-merce Department’s County Business Patterns:

O verview of the US Automotive PartsManufacturing Industry

NAICS Code Products Manufactured Employment Establishments336311 Carburetors, pistons, piston rings, and valves 18,345 138336312 Gasoline engine and engine parts 79,837 846336321 Vehicular lighting equipment 16,126 100336322 Other MV electrical and electronic equipment 88,643 934336330 Motor vehicle steering and suspension parts 44,251 204336340 Motor vehicle brake system 39,484 260336350 Vehicle transmission and power train parts 105,316 507336360 Motor vehicle seating and interior trim 50,433 338336370 Motor vehicle metal stampings 115,931 740336391 Motor vehicle air-conditioning 19,406 69336399 All other motor vehicle parts 161,895 1,390

TOTAL 739,667 5,526

Some of these parts and components plants are owned byOEM’s, some are not, and the situation is constantly chang-ing as shown by the spinoffs of Delphi and Visteon fromGM and Ford. DaimlerChrysler has sold its auto elec-tronics plant to Siemens, but at the same time has acquiredmajor new production facilities in the Carolinas that manu-facture chassis systems and fire/rescue equipment.

In addition, other companies and facilities supply auto OEMassembly plants and aftermarkets with more generic parts,components and supplies such as paint and hardware. Alsonot included in the above list are some closely related in-dustries such as Motor Vehicle Body and Trailer Manu-facturing, NAICS Code 3362. The difficulty of classify-ing auto parts suppliers is illustrated by the fact that thelargest component of the NAICS list above is the “other”category, which includes wheels, airbags, environmentalcontrols, and many other items. Nonetheless, it is clearlya large industry.

Since employment in the nation’s auto, light truck/SUVand heavy truck final assembly plants is about 210,000,

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W hy Locate an Automotive Manufacturing Plantin Fayetteville?

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this means that there are about 3.5 workers making partsand components for every one doing final assembly. Thisratio has increased recently and is likely to continue to doso. Facilities that supply components and parts directly tothe OEM’s (termed “Tier 1” suppliers) are being asked toprovide components at a much higher level of completionthan was traditionally the case. At one time, US auto as-sembly plants were highly integrated. For example, Ford’shistoric River Rouge Plant itself made virtually everythingthat went into a car. Now, however, assembly plants relyon their suppliers to provide subassemblies that representmuch of the value and effort of producing the finished ve-hicle. This has resulted in a more important and sophisti-cated role for the Tier 1 suppliers. In the 2004 Fortune500 rankings, which lumps together both parts and finalassembly firms, seven of the top ten automotive compa-nies are suppliers. This blue chip list includes Goodyear(ranked seventh in its industry by Fortune) andArvinMeritor (tenth), the parent companies of Kelly-Springfield and Purolator respectively, both of whom havelarge plants in Fayetteville. (http://www.fortune.com/for-t u n e / s u b s / f o r t u n e 5 0 0 / i n d u s t r y s n a p s h o t /0,19721,43,00.html)

The auto parts manufacturing business is highly dynamic,with many new facilities being developed but also someolder ones declining or going overseas. The general trendof US plants has been upward and, although there will beups and downs in development of new facilities, most ex-perts forecast continuing growth. Clearly one element ofthis trend is the development of global partnerships be-tween OEMs and suppliers. DaimlerChrysler, parent com-pany of Freightliner Truck and Thomas Built Bus plants inNorth Carolina, clearly has such an approach. At the sametime, however, many traditional North American suppliershave risen to the opportunities provided by the new non-US-owned auto assemblers and have been very success-ful in earning their business.

It is also important to recognize that, while there has beensome relocation of auto parts production capacity to lo-cations outside the US, North American plants export bil-lions of dollars of automotive products per year includingparts.

In summary, the automotive business has been volatile, butcontinues to show much growth in North America. In the2004 Fortune ranking of motor vehicles and parts, theMotor Vehicles and Parts industry ranked 14th out of 39industries in growth of profits over the past year, an im-

pressive 27.1 percent; 17th out of 47 in revenues per dol-lar of assets; and 6th out of 47 in revenues per dollar ofequity. It ranked 7th out of 46 in Best Investments ByIndustry: Total Return to Shareholders (1 Year), where itwas the fourth-best manufacturing industry performer.

Fayetteville offers several unique advantages as a locationfor automotive production facilities.

The good results of existing companies are one reason.North Carolina and the Fayetteville area have proven them-selves successful locations for manufacturing a wide rangeof automotive products. About 33,000 North Caroliniansare employed in the transportation equipment business,which ranges from small specialized parts facilities to full-scale assembly plants. Of that number, over 19,000 workin facilities which manufacture automotive parts.

In Cumberland County, Purolator employs about 1,350 inthe world’s second-largest automotive filtration productsplant. Kelly-Springfield employs about 2,700 in a plantthat manufactures car and light truck tires. Both have beenin the Fayetteville Area since the 1960’s. Their presencehas contributed to development of related facilities. Forexample, tire wholesaler TBC has a local distribution cen-ter of over a half-million square feet.

Fayetteville is well-positioned to serve automotive assem-bly plants in and near North Carolina. Exhibit 1 illustratesmajor OEM-owned auto plants in the Southeastern US.One favorable geographic feature of Fayetteville is that itis close to many, but not dominated by any one majorautomotive assembly plant. Parts and components ven-dors need to be reasonably close to their assembly plantcustomers in order to deliver products on an efficient, just-in-time basis. Many believe, however, that it is undesir-able to be too close. Seeming to be locked into one givenassembly plant may limit the parts suppliers’ ability to sellto other assembly plants. It would also put them in theposition of competing for people and other resources withtheir larger neighbor. North Carolina is within a one-daydrive (600 miles) of 80 percent of the US and Canadianmotor vehicle assembly plants.

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SELECTED MAJOR AUTO, TRUCK, AND COMPONENT PLANTS IN THE SOUTHEASTERN UNITED STATES

State Location Company Product Comments

AL Huntsville DaimlerChrysler Electronics Sold to SiemensAL Huntsville Toyota EnginesAL Lincoln Honda VansAL Montgomery Hyundai AutosAL Vance DaimlerChrysler/Mercedes SUV’sDE Newark DaimlerChrysler SUV’sDE Wilmington GM/Saturn AutosGA Atlanta Ford AutosGA Atlanta GM VansKY Bowling Green GM AutosKY Georgetown Toyota AutosKY Louisville Ford SUV’sKY Louisville Ford Medium TrucksLA Shreveport GM PickupsMD Baltimore GM Vans Closing 2005MD Hagerstown Volvo EnginesMS Canton Nissan PickupsNC Cleveland DaimlerChrysler/Frtliner Heavy TrucksNC Gastonia DaimlerChrysler/Frtliner ComponentsNC High Point DaimlerChrysler/Thomas BussesNC Mount Holly DaimlerChrysler/Frtliner Medium TrucksNC Sanford Fiat ComponentsNC Swepsonville Honda Small EnginesSC Charleston DaimlerC/Am.LaFrance Fire & RescueSC Gaffney DaimlerChrysler/Frtliner ChassisSC Greenville BMW AutosSC Timmonsville Honda ATV’s, Personal Water VehiclesSC Winnsboro Renault/Mack Heavy Trucks Not Now in UseTN Dechert Nissan EnginesTN Dickson Fiat ComponentsTN Kingsport Fiat ComponentsTN Madison Pacccar/Peterbilt Heavy TrucksTN Smyrna Nissan AutosTN Spring Hill GM/Saturn AutosVA Dublin Volvo/Mack Heavy TrucksVA Norfolk Ford PickupsWV Buffalo Toyota Engines

E xhibit X

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Fayetteville provides automotive manufacturers the poten-tial for major reductions in capital and operating costs com-pared with national average or typical costs for such facili-ties. This section illustrates some of those potentials. Itestimates certain costs for a production facility and com-pares them with national average or typical costs for plantsin the automotive manufacturing industry.

This hypothetical plant consists of a 150,000-square footbuilding on a 20-acre site and is assumed to employ 300personnel.

Staffing Costs. Recruiting and maintaining qualified em-ployees are significant costs of operating an automotivecomponents manufacturing plant. BFPC used interviewswith existing Cumberland County plants along with the mostrecent payroll data from the US Commerce Department’sCounty Business Patterns series to estimate these expenses.

The national average annual direct wage cost for workersin the “Motor Vehicle Parts Manufacturing” industry cat-egory (NAICS Code 3363) is over $21 per hour. A con-servative estimate is that comparable personnel could berecruited in the Fayetteville area for $14.50 per hour. Thisrepresents a mix of basic production staff with skilled se-nior maintenance personnel, set-up operators and super-visors.

Benefits and overhead costs are estimated to cost an av-erage of an additional 35 percent in both locations. Thusthe total annual cost for 300 employees in the hypotheticalFayetteville automotive manufacturing plant would be$12,214,800 while the national average would be$17,690,400. An automotive parts production plant inCumberland County could thus save its owner nearly $5.5million dollars per year in personnel costs relative to thenational average for this industry.

Real Estate Costs. The physical structure required forautomotive components production is estimated to cost$60 per square foot to construct, on a national averagebasis. For a building of 150,000 square feet, the totalcost would thus be $9,000,000. R.S. Means Construc-

tion Cost Data indicate that construction costs in Fay-etteville are about 75.6 percent of the national average.Therefore, the cost for an equivalent building in this areawould be about $6,804,000.

A recent national average estimate for above-average qual-ity industrial sites was $31,000 per acre. In the Fayettevillearea, good sites can be purchased for $18,000 per acre.If a 20-acre site is purchased, the national average costwould be $620,000. In Cumberland County, a price of$18,000 per acre would lead to a total land cost of$360,000.

Based on the above assumptions, the national average costfor building and land together would total $9,620,000;while in the Fayetteville area, the comparable cost wouldbe $7,164,000. The difference in favor of Fayetteville isnearly $2.5 million dollars. Most companies would lookat this cost spread over a period of years. Based on a 6percent interest rate and amortization over a 15 year pe-riod, annual payments for the national-average facilitywould be $990,502 and for the Fayetteville facility wouldbe $737,625. This represents an annual real estate sav-ings in Fayetteville of over $250,000.

E conomic Advantages of Fayetteville

Summary of Cost Items. The capital and operating costsassociated with an automotive parts plant, as discussedon the previous pages, are summarized below:

Nat’l Avg or CumberlandCost Item Typical Plant County Plant

Wages $13,104,000 $9,048,000Fringe Benefits 4,586,400 3,166,800Land & Bldg Amortization 990,502 737,625

TOTAL $18,680,902 $12,952,425

Index (Nat’l Avg = 100) 100.0 69.3

Thus the total of these selected costs in Fayettevilleand Cumberland County is about 31 percent belowthe national average for a comparable facility.

These costs are highly generalized estimates for a hypo-thetical automotive parts manufacturing plant. Most basedata are derived from actual figures developed by the USCommerce Department and other governmental agencies,industry organizations and BFPC’s experience with cli-ents in this business.

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The overall finding is very compelling. The Fayettevillearea shows great promise as a location for automo-tive component plants, based on a wide range of costand other advantages.

______________________________________

More about Fayetteville and its advantages for your company is available from the

CUMBERLAND COUNTY BUSINESS COUNCILTelephone (800) 396-4210

www.ccbusinesscouncil.org