There is some serious money on the table in almost every state in the region regarding clean(er) energy projects

By Michael Randle

In calendar year 2021, the South experienced a collapse of sizable economic development projects that had the potential to change for the better even mega-communities, and economically transform small towns’ futures for decades. That year (2021) was still a hangover period from the pandemic that ravaged so many companies and communities in 2020 and 2021. 

The electric vehicle craze quietly arrived in the Southern Automotive Corridor a few years back, if one does not count the originator, Telsa, which relocated its world headquarters to Austin in 2021 and broke ground on its “Gigafactory” in 2020.

Tesla’s plant features the largest rooftop solar farm on the planet. After just a couple of years, the Gigafactory now houses about 13,000 workers building vehicles, producing batteries for those vehicles, as well as grid energy storage. 

However, Tesla wasn’t enough at the time to prop up the South’s big deal list that year. Apprehension among big spenders to expand in 2021 remained a year after the gutting of the COVID-19 economy in 2020.

But, 2022 was different. It was an amazing year for major developmental projects. It was a correction, yes. But more than that, 2022 was the year that solidified the South — again — as the most active region in job and investment deals as well as GDP in the largest economy on Earth — the United States of America. And the gap is widening, not shrinking, between the U.S. and China, at least in 2022.

According to our data and other data from numerous sources, more billion-dollar-plus projects were announced in the South in calendar year 2022 and 2021 than any two-year span ever. Yes, right now there is some serious money on the table in almost every state in the region regarding clean(er) energy projects.

We counted 48 projects where private industry announced investments in the South in 2021 and 2022 of $1 billion or more. Some had no jobs announced. Others had so many jobs announced (10,000 here, 8,000 there, multiple times) that you may say to yourself, “There is NO WAY that company can fill that many jobs for a single project. Not with a labor shed that is so puny.”

Almost all of those billion-dollar-plus deals were announcements in clean(er) energy projects — from EVs and batteries, to carbon capture, solar farms and wind farms to LNG. The most billion dollar deals in the South’s history when there are headwinds? Yep!

This for an economy that by now was supposed to be in recession.

This for a time in our nation’s history when birth rates are at there lowest level ever.

This for a time when labor is almost nonexistent, unless you steal it from other Southern states, which is actually happening.

This for a time when our political leaders cannot create a comprehensive immigration policy to deal with a labor shed that has essentially vaporized.

This when the pandemic devastated hundreds of thousands of business of all sizes in America.

This for a nation that is most likely more divided politically than at any time since the Civil War.

This should not be happening, at least not on this scale.

But it is, at least in the South, the third largest economy in the world.

The numbers in 2021 and 2022

Economic development announcements of 200 jobs and/or $30 million or more in investments in 2021 sank to a new low of 364 projects. Those 364 big deals in 2021 meeting or exceeding our two thresholds were three projects lower than in the recession-ravaged year of 2009, which had reigned as the worst SB&D 100 year. That year saw only 367 Southern deals making our grade. So, in 30 years, 2009 and 2021 were the only two years the South couldn’t muster at least 400 game-changing projects.

So, the data proves that when it comes to economic development transactions that can perhaps single-handedly transform economies for states and communities in the South, the pandemic years of 2020 and 2021 and the Great Recession years of 2008 and 2009 were the worst four years in 30 years of the SB&D 100 ranking.

Economic transformational “Big Buffaloes”

When writing “game-changing projects,” or deals that can, by themselves, transform economies for states and communities in the South, I am talking about Exxon moving its headquarters from New York City to Irving,
Texas, in 1989. I am talking about Toyota planting its flag in Kentucky in 1986, or Saturn, a GM subsidiary and a union plant, starting up in what was then considered to be rural Tennessee just south of Nashville.

According to Wikipedia, “The company (Toyota) had planned to announce it was establishing a plant In Georgetown, Ky. (then known as Toyota Motor Manufacturing USA) and another in Cambridge, Ontario as Toyota Motor Manufacturing Canada in news conferences on December 11, 1986 in Kentucky and December 12 in Canada. Instead the news was leaked early by Sen. Mitch McConnell on December 8, 1986.” Yes, Mitch was around back then as a player in the country’s political and economic system.

What about BMW in South Carolina (1992) and Mercedes-Benz in Alabama (1993)? Tell me those deals did not reconstruct the two state economies in the Southern Automotive Corridor, essentially by themselves because more automakers followed.

Or Nissan in Tennessee. . .oh, and then Nissan’s headquarters right down the road in the Nashville MSA in Williamson County; or Toyota moving its headquarters and 4,000 jobs to D/FW from California.

Then there was the massive Cheniere LNG terminal and plant southwest of Lake Charles, La., in Cameron Parish. That company built the facility to be an LNG “import” port at a cost of billions. Then it reversed course, spent tens of billions more to make it a LNG “export” facility as a result of the fracking frenzy that took over this country’s mining industry. That deal didn’t just revolutionize Louisiana’s economy, it changed the world’s economy.

More recently, Tesla and Oracle relocated their headquarters from California to Austin, UPS to Atlanta, and on and on. I am sure I am missing some big ones, like Amazon’s HQ2 in Northern Virginia and 25,000 new jobs. But you get the picture.

The big comeback; a manufacturing renaissance in the South

Then again, like the rebounds of 2004, 2005, 2010 and the record years of 2015 and 2016 in the South, large manufacturing projects returned to the region in droves in 2022, and there was little warning considering the U.S. has been in a “recession watch” for quite some time.

How many times have we all heard (after major comebacks from recessions and the incredible inflation of the early 1980s; to the recessions in the early 1990s and in 2001; to the Great Recession of 2007-2009), “Recession? What recession?”

There was always a rebound from each downturn. Technically, the definition of a recession is two straight quarters of negative GDP growth. Using that rule of thumb, the U.S. was in recession as a result of COVID-19 in 2020.

Yet, that was really not the case. It was simply a pause in the economy, not a recession. There was nothing anyone could do about the pandemic. So many died; so many lost their jobs; so many small businesses disappeared.

It took a massive bailout by the federal government to right the ship, two-and-one-half times the amount of money that had been infused during the Great Recession from 2007 to 2009.

The COVID-19 bailout, however, centered on keeping small businesses afloat as opposed to the bailout at the end of the first decade of the 2000s. That and much of that financial parachute back then was to save the financial services industry and domestic automakers.

More on the rebound from 2021, the comeback of “NOW”

After only 364 deals making our list in calendar year 2021, calendar year 2022 saw 549 projects announced meeting or exceeding 200 jobs and/or $30 million in investment. That is a whopping 185 more big deals in the South than the previous year, the second largest one-year increase ever in 30 years of the SB&D 100.

The largest one-year increase of our 30-year ranking came when the South, led by the automotive industry (again), burst out of the Great Recession. And, in 2022, it was mostly next-generation automotive that led the way in another remarkable comeback from the economic remnants of the pandemic. 

A vibrant EV and battery hub being established in the South

So, what is behind such a dramatic increase in major project activity in the region? Think manufacturing, hundreds of billions of dollars of it in the blink of an eye.

Think two unique drivers that are occurring at the same time; the inconceivably swift development of electric vehicle and battery production, of which the South has captured about 80 percent nationwide in the last three years by my count. And then there is reshoring.

Both miracle events are going on, right now, at this time, and in concert. And it’s the South that is reaping the benefits.

You don’t have to be an economist to see it. You can be a demographer or just an avid reader, researcher or a reporter. It is no different than in the mid-1970s when people from all three U.S. regions migrated to the South. That has been the case for decades now.

Migration has given the South a larger available labor shed than the other three U.S. regions. The reason? Tens of millions of people have moved to the South from other U.S. regions over the decades.

We are talking about folks of all ages, from working ages 16 to 64, as the Federal Government tracks it, or retirees who want to remain in the workforce, even part-time. After all, no one retires in the South and moves up North.

Success in economic development equals a growing population

You cannot find a better example than this when it comes to demography. When I was born in 1955, the South’s population (13 states plus D.C.) was about 55 million. The Midwest’s population (13 states) was about 56 million. The Northeast’s population (12 states) was approximately 57 million in 1955, or very similar in size. The West (12 states) only had about 30 million residents in 1955.

Today, here are the U.S. regional populations:

South  @ 120 million
West @ 78 million
Midwest @ 70 million
Northeast @ 66 million

Source: Census, Economic Development Administration

A family from Michigan, California, New York or Illinois knows where the jobs are. And they know where the lower cost places are to live. Combine the two and that is why people, even young families, pick up and move to the South. 

This manufacturing surge is not happening much at all in the Northeast. You would think the Midwest would be seeing some of it, with its long history of automaking, and would cash in on this incredible trend. . .and they have, to an extent.

As for the West, there is some manufacturing movement in big deals there, but it is chump change compared to what is occurring in the South. For example, who has ever heard or read about a
$5 billion automotive supplier deal? The South has seen several in the last 32 months.

Reshoring

It was Hal Sirkin, Michael Zinser and Douglas Hohner of the Boston Consulting Group who were primarily credited with inventing the word “reshoring” in their report, “Made in America, Again,” published in 2011.

However, it really doesn’t matter who takes credit for creating that word. The only thing that matters is reshoring is actually happening and for sound
reasons.

As I have written many times, reshoring is not considered a word by Microsoft’s spell check. Offshoring is a word that was invented first, when the first batch of manufacturers left the U.S. and made their products in cheaper locales such as China and Mexico in the late 1980s.

That period in the South’s rich manufacturing history was total collateral damage to so many, especially low-wage earners. While the politicos believed they were advancing “free trade,” that tact, to me, after 40 years of reporting on the subject, was more negative than positive.

Sure, without free trade we could not buy a massive wide screen television for a few hundred bucks today. But NAFTA and other free trade measures, in hindsight, did more damage than good. 

The following is part of a 2015 report by the International Economic Development Council (IEDC) titled Defining the Reshoring Discusion:

“After a decade of significant offshoring in the 2000s, the cost savings that American firms had enjoyed began to erode around the year 2010. Changing macroeconomic factors, such as labor and transportation cost increases, absorbed much of the savings from which manufacturers had previously benefitted.

“Also, after experiencing offshoring firsthand, many companies found that hidden costs often outweighed the cost benefits of manufacturing overseas. Some of these hidden costs that were not always considered include factors such as increased costs of monitoring and quality control, uncertain protection of intellectual property, and lengthy supply chains.

“As a result of increasing costs and other factors overseas, some of the manufacturing that previously took place away from U.S. shores has already returned — and continues to return — to the United States.

“This act of returning manufacturing, IT and service jobs to U.S. soil from offshore locations can be termed ‘reshoring.’ While the term reshoring is now becoming common and has been receiving increased coverage in the media, there is still limited understanding of what reshoring actually is and what factors can help encourage it to benefit the U.S. economy.”

Well, there are a few flaws in that part of the report on reshoring by IEDC. For one, the author, Mishka Parkins, wrote, “After a decade of significant offshoring in the 2000s, the cost savings that American firms had enjoyed began to erode around the year 2010.”

Actually, here in the South, offshoring first began as early as the late 1970s, as the first of thousands of apparel and textile plants of all sizes began to close. Those low-wage jobs in the South were being sent off to even lower wage
countries.

Mexico got some of those, but shortly afterward, China became the location of choice to manufacture goods like towels, shoes, clothing and such for global consumption. Now it’s Vietnam and other countries in Asia, Central America and South America where those jobs proliferate.

Ironically, some of the largest reshored textile and apparel plants from China to the U.S. and Mexico are owned by the Chinese in another testament to the “make it where you sell it” trend. And many of those reshored plants have returned to past locations in the Carolinas, Virginia and Alabama.

Free trade or that “giant sucking sound”

When the North American Free Trade Agreement (NAFTA) was passed on January 1, 1994, there was very little movement of manufacturing production to Canada from the South. Yet, there sure was movement to Mexico.

One author, James Pethokoukis of the Washington, D.C.-based American Enterprise Institute, claims this is what may have created “that giant sucking sound” as it relates to offshoring to China and elsewhere in the 1980s and 1990s, not so much the 2000s as IEDC’s report claimed. 

It was the late Ross Perot who said, “We have got to stop sending jobs overseas. It’s pretty simple: If you’re paying $12, $13, $14 an hour for factory workers and you can move your factory south of the border, pay a dollar an hour for labor, have no health care — that’s the most expensive single element in making a car — have no environmental controls, no pollution controls and no retirement, and you don’t care about anything but making money, there will be a ‘giant sucking sound’ going South. . .when [Mexico’s] jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it’s leveled again. But in the meantime, you’ve wrecked the country with these kinds of deals.” Perot said that several times when he ran for President of the United States in 1992.

Back to James Pethokoukis of the Washington, D.C.-based American Enterprise Institute’s claim about when and why American and Southern manufacturers made a beeline to China in a herd mentality pre- and post-NAFTA. “What do nationalist populists think was elite, globalist America’s original sin? The Immigration and Naturalization Act of 1965 and the 1994 North American Free Trade Agreement are strong candidates.

“But just as bad, maybe even worse, in their view was the U.S.-China Relations Act of 2000 that granted China ‘permanent normal trade relations’ and helped usher it into the World Trade Organization. Both events are widely considered the triggers of what economists David Autor, David Dorn and Gordon Hanson have termed the ‘China Shock’ — the flood of Chinese imports that caused the loss of 2.4 million American jobs between 1999 and 2001. And through that economic harm, the China Shock may have helped cause the rise of today’s populist politics in America.”

Like all opinions on trade across the board, regardless of what economists, politicians, far-left, far-right, the middle and others believe, in my 41 years of writing about economic development in the South, this I know: Manufacturing today is all about “make it where you sell it.” And yes, that is why reshoring is occurring.

COVID-19 interrupted supply chains all over the world. But, that just sealed the reshoring deal, or the return of thousands of manufacturers of all sizes over the last 13 or so years to the U.S. and Mexico from Asia. 

I have written about it before many times and I am writing about it again. It was the earthquake and tsunami that struck Japan on March 11, 2011, called the Great Tōhoku Earthquake and the Great Sendai Earthquake, that shook American manufacturers to the core because of the massive issues that disaster created in supply chains from Asia.

One U.S.-based manufacturing CEO told me in 2012 at a restaurant in Atlanta, “So, I asked them, ‘Why are we making our products for U.S. consumption halfway around the world?’ ” His team did the numbers. That CEO was right. It was no longer cost effective to do so because China’s labor costs and shipping costs were rising dramatically at the time.

That means, it’s about lower costs, the ease of the supply chain and, of course, innovation that improves the quality of the product. Yet, I believe reshoring and EV manufacturing is mostly about “make it where you sell it.”

Then again, the U.S. is the world leader in innovation. But, I am beginning to believe that South Korea is right there, especially in next-generation mobility, as in this surge in electric vehicles, specifically batteries and electronics.

Yes, reshoring and electric vehicles and batteries are driving this real surge in advanced manufacturing in the South. They have come to roost in the South for some of the same reasons low-wage jobs left the Northeast and settled in the South 100 years ago. It was the best place to locate and establish a beachhead.

Next-generation automotive has chosen the Southern Automotive Corridor

Why? Many point to the Inflation Reduction Act and the current administration’s big bet on renewing the U.S. manufacturing machine through incentives for cleaner products, such as electric vehicles and all of its components.

The bet is that these incentives for clean(er) energy will speed progress toward decarbonizing the U.S. electric grid by 2035. So far, the bet seems like a good one, as an entire new Battery Belt is forming from the Midwest through Kentucky, Tennessee, Alabama, Georgia and the Carolinas.

Georgia, not Michigan (historically the home to auto making) is the U.S. leader in clean energy factory investments with over $20 billion in announced projects. South Carolina is second with over $10 billion and Michigan, Kentucky, Tennessee, Alabama, Louisiana, Texas and North Carolina have captured billions as well in next-generation energy
investments.

Many of these expansions of existing automotive plants have seen their first-phase EV assembly and battery assembly lines completed, such as Mercedes-Benz and Hyundai in Alabama, BMW in South Carolina. Joining Kia in Georgia and Hyundai near Savannah (which is building one of the largest EV/battery complexes in the world) are the South Korean-based companies. Along with battery maker SK, who has partnered with Ford in West Tennessee and in Central Kentucky, Korea seems to be the country that has gotten out of the U.S. EV assembly gate the fastest.

Even before the incentives of the Inflation Reduction Act came into play, SK built a $2.6 billion, lithium-ion battery plant in Jackson County, Ga. That $2.6 billion facility is the trailblazer for next-generation auto production in the U.S. It hit its employment target two years earlier than expected and the facility is expected to house 3,000 workers by year-end.

The Georgia plant makes EV batteries for a variety of automakers, including Volkswagen in Chattanooga and Ford’s EV pickup model, the F-150 Lightening. It will make more for Ford in Kentucky and Tennessee once those campuses totaling over $11 billion are completed. SK is underway now with construction of other battery plants in the Southern Automotive Corridor, including two more in Georgia. The biggest is its partnership with Hyundai on a massive plant near Savannah.

The major EV players are numerous in the Southern Auto Corridor, including Redwood Materials, Ascend, Rivian, VinFast, Toyota, GM, Qcells, Silicon Ranch and a host of battery recyclers and steel and aluminum plants throughout the region. Many of them are in Mississippi, Arkansas, Kentucky and Alabama.

All in all, the South — maybe not the world — has never seen this kind of massive value in clean energy investments, all in roughly less than three years. Three years from now we will all see how this plays out. There is just way too much money on the table for it not to succeed.

EDITOR’S NOTE: In this SB&D 100 section, you will find a sampling of more than 100 of the largest projects announced in this year’s SB&D 100, as well as many of the communities that have captured those investments.