CNN: Manufacturing boom is in the Right-to-Work South

• June 8, 2012 2:23 pm


CAROL COSTELLO: You could say the South is in the middle of a hiring surge as big name businesses head to the region bringing thousands of new jobs with them. Here's just a few of the companies: Hyundai is adding a third shift at an assembly plant in Alabama, while in Tennessee, Volkswagen has opened its only U.S. plant, spending a billion dollars to do it; Caterpillar is actually moving a plant from Japan to Georgia, and in Kentucky, GE has invested millions to reopen and revamp an appliance factory. Poppy Harlow has been all over this story joining me now. Automakers have been doing this for years and now GE and Caterpillar—what's next?

POPPY HARLOW: I’ve been down to most of those plants to see it firsthand. There are four main reasons why this is happening. A big one is that most of these states, not all but most, are non-union states—they’re right-to-work states—that typically makes labor cheaper for a company. Secondly, the tax rates are incredibly competitive. I took a look this morning at all of the corporate tax rates in all 50 states; if you look at Alabama, Kentucky, Georgia, Tennessee, Mississippi, none of them have a tax rate over 6.5 percent. But if you look at Illinois, Minnesota, Rhode Island, Pennsylvania, none of them have a tax rate below 9 percent. So you're talking about a huge difference here, more than 3 percent, typically when you compare the South, those states to the north and Midwest. So, that makes it cheaper for companies to build there. Also, China actually—it’s costing more to make things there. The labor costs in China are going up about 20 percent from where we were last year. That's a good thing for U.S. in terms of jobs. Finally, what I saw firsthand at the GE plant in Kentucky, they are building water heaters there. That was a plant shuttered and idle and they would spin off that business totally but it became more expensive to make these things overseas and then ship them. So they decided we'll make them here—they’re big, heavy items. Make them here so they are closer to transport to customers in U.S. rather than shipping them. They also told me and this is key, they won't make microwaves or air conditioners smaller items in the U.S. because they don't cost as much to ship so they will be made in China for the foreseeable future. But there is a big shift happening and it’s happening in the South.

KING: Interesting. Okay. Let's put it all in perspective. Manufacturing is improving. No doubt we'll hear that from President Obama on the campaign trail. We're still nowhere near where we need to be, right?

HARLOW: We're nowhere near. If we go back to 2000 and take a look at manufacturing jobs in the United States, we had over 17.3 million manufacturing jobs in the U.S. then. Take a look at March of this year—we're just under 12 million, 11.9 million. We're still at a loss of 5.3 plus million manufacturing jobs. A lot of analysts say those are not necessarily going to come back. When we look at the improvement we've seen in manufacturing jobs, it's getting better than the recession but it's slowing. If you take a look at March, we added 42,000 manufacturing jobs but then if you look at April, we added 9,000 and may 12,000. There is this fear that there was a lot of ramping up as this recovery got under way, and companies are pulling back a little bit. We're not where we were, but there is this trend happening in the south and it's not just automakers. I saw it firsthand at VW, building that billion-dollar plant in Chattanooga, Tenn., a lot of this comes down to these very, very lucrative packages for companies. I talked to the CEO of Caterpillar when they decided to open that big, big plant in Athens, Ga., near where you are and why they chose that state out of 400 different cities that had bid for this, take a listen to why Caterpillar says that is:

DOUGLAS OBERHELMAN: Because of the, I guess, the flow, the competitiveness we see and everything else going on with global trade we put those where the market is right here in the United States and I’m very happy about that. We looked at Georgia in a climate that's very friendly to expansion, and I would give the state of Georgia a lot of credit for a very competitive package.

HARLOW: You can read through those words: Competitive package means big tax breaks, right to work and non-union plant. That’s the trend we’re seeing. I will say one thing that surprised me: These companies are having a hard time finding skilled labor. They are looking for people that can innovate on the factory floor and cut costs on the floor. So they’re looking for a higher bar.

Published under: Obama Economy, Right to Work, Video