She discussed market conditions with News Editor Lindsay Chappell. Here are edited excerpts.
Q: Did the pandemic and travel restrictions bring automotive site searches to a halt this year?
Segers: Some site selections were put on hold at least until the beginning of 2021. For companies (that) already have a plant in North America, it was easier to continue new searches as they have local staff to work it out with. One European client's site selection was ongoing when the pandemic reached North America. It stopped for some time, but after it became clear that it would not be possible for the owner to come to the U.S. for site visits, he relied on his U.S.-based team. We were able to finalize the site selection without the owner having seen the selected site in person.
For sure, that will not become the norm. In-person site visits are very important. We have faced many surprises, good and bad, when visiting sites. Even though we analyze every site in detail before it's selected, to walk a site and see the surroundings and community is priceless. From endangered species, like red woodpeckers and an Alabama turtle family running around, to hidden blue-line streams, gravestones, unexploded ordnance and unknown mineral springs, we have found it all during technical on-site due diligences.
Q: But the pandemic was not the only thing creating challenges, I imagine?
Segers: Even prior to the pandemic, the past year hasn't been easy. The uncertainty of the tariff issue has impacted many project decisions. Also, the threat by the Trump administration to issue 20 to 25 percent tariffs on cars being imported from the European Union did not help clients feel comfortable announcing an automotive-related project in the U.S. The upcoming election in November is also causing a lot of uncertainty.
Q: What new opportunities are out there?
Segers: I think many economic development agencies have used the lockdown to work on their available sites and update their reports and marketing materials. In addition, some states have signed new incentives into law—for example Georgia's new PPE (personal protective equipment) credit, which is similar to the existing Job Tax Credit.
Q: How do you think things will evolve after the pandemic?
Segers: Some new factors will come into play. Companies will evaluate how communities handled the pandemic. Sites in more rural and suburban markets will probably become popular. Larger cities were hit hard by COVID-19, and many people are moving to more suburban areas. Those areas are also more cost-efficient for manufacturing as sites and utilities are less expensive, as well as cost of living.
Q: When it comes to automotive investment, what factors are propelling the search for sites in North America?
Segers: Several OEMs are currently planning to build electric and even autonomous vehicles in the U.S., and site searches are underway. We will also see more battery plants being built. Korean-based SK Innovation is currently building a 2.4 million-sq.-ft. plant in Commerce, Ga., and others like China's largest EV battery manufacturer, CATL, might be looking for a plant in the U.S. soon, after announcing Europe's largest battery plant project last year in Erfurt, Germany.
Q: How big of a factor in new investment is the industry's desire to localize content?
Segers: 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.
Q: What are the biggest changes over the past decade in how companies go about obtaining a manufacturing plant site?
Segers: 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.