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Are We Ready For The Impact Of New Trade Agreements On North American Auto Manufacturing?

By Danny Games, CEcD, Director, Business & Economic Development, Entergy Arkansas

Posted December 12, 2018 in Site Selection

As a young congressional aide working on Capitol Hill in 1993, I watched Ross Perot and Vice President Al Gore on Larry King Live debating the risks and merits of a North American Free Trade Agreement. Not long thereafter, NAFTA was approved by Congress and phased in accordingly.

Little did we know then how the automotive landscape would change over the next 25 years – not just for North America, but for the world.

Since the full implementation of NAFTA, we’ve seen the Big Three restructure and refinance. We’ve seen numerous automakers establish assembly plants in the U.S. and Mexico. And we’ve seen increased U.S. market share among Asian and European automakers become the new normal.  New supply chains have been established, unionization rates have declined, and the global trade routes have been re-established – just in time for NAFTA 2.0, rebranded as the United States-Mexico-Canada Agreement (USMCA) and recently signed by the leaders of all three countries.

Today, while we’re on the verge of reshaping the next 25 years for the North American car industry, trade and tariff uncertainties are causing foreign automakers to consider how they can establish some degree of trade predictability for the near future and beyond. They’re likely to find that investments in central North American operations serving Canada, the U.S. and Mexico will be a sound strategy.

In fact, a recent column in the Wall Street Journal reports that some foreign car makers are already considering moving more production to the U.S., most likely starting with engine and transmission production that would substantially increase the percentage of a car’s content made in the U.S. and align with provisions in the USMCA.

Key assets for auto manufacturing are right here

If automakers choose to shift more production to U.S., they’ll need assurances that we’re ready to help them make operating here a good investment. Speaking for Entergy, I say we are ready. Our service region – spanning Arkansas, Louisiana, Mississippi and Texas – has a skilled workforce, Right-to-Work laws, access to raw materials, transportation networks and very competitive utility costs.  Our central location in North America is especially advantageous for automotive markets and interests.

This geography- and business-friendly environment has made our region home to the largest industrial base in the U.S. and gateway to global markets. Read more about our assets for auto manufacturing.

Prime example: megasite in Arkansas, shovel-ready for construction

Arkansas has the perfect example of regional readiness for manufacturing America – an 1,800-acre megasite at the I-40 & I-55 crossroads in West Memphis. This site is ideal for auto assembly, other manufacturing or distribution operations. And to put its size in context, when you drive along I-40, you see the southern border of the site for 1.6 miles.

A higher level of readiness – Select Site Certification

While acreage and location are obvious assets, the Select Site Certification indicates a higher level of readiness for industrial development. This comprehensive review program is an economic development tool created by Entergy Arkansas over a dozen years ago. We recently relaunched the program because we saw opportunities to improve and tighten up the criteria, making it even more relevant to the demands of today’s industry and site location decision makers.

The West Memphis site recently achieved Select Site Certification and was the fourth certified site in Arkansas to be announced in late 2018. These sites satisfied the 50-point certification process and shovel-ready due diligence requirements of prospective companies and site location consultants, including ownership and control clearances, environmental, utility, geotechnical and other preliminary work. It’s really many months of work boiled down to one easy-to-review three-ring binder.

Readiness requires local buy-in

Over the 20+ years of my career in economic development, this West Memphis development project is one of the best examples I’ve seen of having the right people at the table with the right resources and the right level of collaboration among local and state officials.

Local officials formalized their efforts this July when the cities of West Memphis and Marion (the site spans the two cities) and the Crittenden County Quorum Court passed a joint resolution to work together on the development and promotion of the site, with the support of the Arkansas Economic Development Commission and Entergy.

Having state officials at the table early on is an advantage because Arkansas has a very large super project incentive bonding capacity that can be used to help fund site development and workforce training related to a project.

At a press conference on Nov. 13 recognizing Crittenden County for achieving Select Site Certification for their megasite, I had the pleasure of presenting a check from Entergy Arkansas for $17,500 to the city of West Memphis to offset costs associated with study requirements. That day was a celebration of the state, utility and local partnerships that collaborated so successfully. These partnerships will be there to serve the site’s new owner well in every phase of planning, financing, construction and ongoing operations. 

If auto manufacturers are searching for a location in the U.S. with all the resources lined up, we welcome them because we’re ready.      

For detailed information about the West Memphis I-40 Megasite, visit the Entergy Arkansas Site Selection Center, and please feel free to contact me for more information about Entergy’s services to this site.

Key Industries

Automotive Manufacturing

Danny Games is responsible for directing the company’s private sector economic development initiative in Arkansas. He focuses on new business recruitment, company expansion and community site improvements to attract businesses.