How big of a factor in new investment is the industry’s desire to localize content?
Many auto plants had to suspend production due to a lack of parts caused by the coronavirus outbreak. Worldwide, auto plants experienced shortages in components and were having various difficulties transporting finished vehicles to destination countries in a timely manner. Auto supply chains are among the most complex in the world, with each vehicle containing more than 20,000 parts from thousands of different suppliers.
The tariff discussions as well as the COVID-19 pandemic will change the thinking of many companies. It seems to be much safer to manufacture closer to where they sell their products. Production that is targeted for the U.S. and currently executed in China will be brought back or nearby. Canada, with its strong labor market and friendly immigration policies — as well as Mexico, which already has a trade agreement with Europe in place — will benefit from a near-shoring location trend. And the U.S. is also still very attractive with its competitive energy costs.
What are the biggest changes over the past decade in how companies go about obtaining a manufacturing plant site?
Ten years ago, projects took much longer than nowadays. A project team was established and the site selection could take up to a year, followed by at least six months of design, followed by the construction. Due to fast-changing market situations, clients now make investment decisions at the last minute. They monitor market and demand, and when running out of manufacturing capacity, investments are approved. Suppliers receive requests from OEMs on very short notice, and then they have to meet the OEM’s start-of-production date. But suppliers wait with investment decisions until the contract with an OEM is in place.
The Polaris [all-terrain-vehicle] project in Huntsville, Ala., with the creation of about 2,000 new jobs, was one of the fastest site selections I’ve ever done. The selection required lots of studies and assessments, and we looked in 14 different states. But the entire process took only three months to make a final site decision. For a project of this magnitude, this is extremely fast. Because leadership was very much involved in the project, decisions were made very fast.