Friday, July 14, 2006

Tennessee could benefit from GM, Nissan alliance, analysts say

Sunday, July 09, 2006
Tennessee could benefit from GM, Nissan alliance, analysts say
Kristin M. Hall / Associated Press

NASHVILLE, Tenn. -- Economic analysts say the possible alliance between General Motors Corp., Nissan Motor Co. and Renault SA could boost Tennessee's reputation as a new hub for automotive manufacturing.

GM's board of directors voted Friday to start exploratory discussions with Renault and Nissan on a potential alliance between the three automakers, with GM Chairman and Chief Executive Rick Wagoner leading the talks.

Nissan recently moved its North American headquarters from California to the Nashville area, and both Nissan and GM have manufacturing plants nearby.

Despite the Tennessee plants' proximity, analysts say it's unlikely that the Music City could become the next Motor City.

"It's clear that over the last several decades there's been a significant shift of automotive production south," said Bill Fox, director of the University of Tennessee's Center for Business and Economic Research. "This alliance would just build on what's already been taking place."

Many foreign automakers, such as Nissan, BMW AG and Honda Motor Co., have been quick to capitalize on this shift, according to a 2003 study from the Center for Automotive Research.

"The fact that some of these companies like Nissan have been more successful in recent years, I think, has enhanced the movement out of the Detroit area," Fox said.

An alliance between two major companies with facilities in the state could help Tennessee market itself as burgeoning center for automotive production, said David Penn, director of the Business and Economic Research Center at Middle Tennessee State University.

"The major impact will be increased visibility for Tennessee in the national and international markets," Penn said.

Many smaller suppliers for GM and Nissan have sprung up in the state, Fox said, and a bigger consolidated business would likely increase that type of indirect economic gain for the state.

The proximity of the GM plant in Spring Hill and the Nissan plant in Smyrna -- with only about 30 miles between them -- would be very cost effective if an alliance is reached between the companies, Fox said.

"If you have a merger, it's because you're looking for some kind of gains that result from a synergy between the companies," Fox said. "I've always believed that GM expected those kind of synergy issues when it selected the Spring Hill plant."

While the state benefits from an increased interest from automakers, analysts say most of the economic gain has been through vehicle production, not as a competitive marketplace for automotive conception or design.

Detroit has traditionally been the center for the U.S. automotive industry and that isn't likely to change just because production has moved, said Bob Schnorbus, chief economist for J.D. Power and Associates.

"Automotive companies in Detroit can tap into a large pool of talent, which is hard to recreate in Nashville," Schnorbus said. "That's still a big advantage that Detroit will have in the future."

Keeping the design, marketing and strategic planning of automobiles in Detroit is a better idea, "than to get Detroit planners to move down to the South," Schnorbus said.

A collaboration between the companies would likely be directed from Detroit, where GM has its global headquarters, Penn said. "With GM's huge presence in Detroit, it will be hard to make a lot of decisions from Tokyo or Nashville," he said.

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