Mercedes, Nissan, BMW: How the Southeast Became the New Hub for Auto-Manufacturing

By: Brandon Tubby

No place in America has deeper ties to the automotive industry than Detroit, Michigan. A close second could be the town of Smyrna, Tennessee. While much less known, Smyrna became a significant player in the automotive industry when Nissan opened a massive plant in this Nashville suburb in 1982. Its quick success and ascension to the most productive automotive factory in the U.S. convinced other foreign brands that manufacturing in the U.S., while retaining their company’s unique core values and principles, was possible. 

The stories of why both Detroit and Smyrna became the specific locations at specific times for large-scale auto manufacturing in the U.S. are rich and complex histories. However, analyzing these histories through the lenses of transport and geography sheds light on the most fundamental factors that firms consider when deciding the location of their economic activities.

All Roads Lead to Detroit

Detroit’s centralized location in the Midwest Heartland, access to ports and straits serving the Great Lakes Region, and proximity to related manufacturing materials created a specialized web of resources and services that catalyzed the explosive development of America’s automotive industry in the first half of the twentieth century. During this time, the “Big Three” American automotive firms of Ford, General Motors, and Chrysler all clustered in the Detroit area, transforming the region’s landscape into the preeminent hub for the booming automotive industry. Primarily, Detroit was geographically situated in clusters related to auto manufacturing. Henry Ford himself realized the strategic importance connectivity to rail had on his business. In 1920, the Ford Motor Company invested in the Detroit, Toledo, and Ironton line and in improvements to modernize the line (DT&I 2003).

Old DT&I Map. Source: r2parks.net.

All of the raw materials needed for automobile production were easily accessible by the Great Lakes and by rail. In nearby Pennsylvania and West Virginia, coal was extracted from the mountains and transported via rail in a day’s time. Northern Michigan and Minnesota contained iron and copper ore deposits transported via ship, while the steel towns of Pittsburgh, Youngstown, Chicago, and Cleveland were only a few hundred miles from the city (Sugrue 2004). Furthermore, Detroit straddled the lucrative consumer markets in the Midwest and Northeast. However, the economic advantages derived from the location and transport factors Detroit offered diminished during the second half of the twentieth century.

Similar to how textile manufacturers in the Northeast relocated to low-wage markets in the Southeast, the loss of auto manufacturing jobs in the Detroit area has been accompanied by the gradual development of an automotive cluster in the Southeast since the 1980s, breaking ground in Smyrna.

Sun Belt Ascendancy

An inability to effectively adapt to rising oil prices and changing consumer preferences in the 1970s created an opening for more fuel-efficient foreign brands to gain a substantial foothold in the American automotive market. Union contracts were inflexible to changes in consumer demand and created inefficiencies and waste for American firms. Bit by bit, these American firms which once exemplified speed and efficiency, grew bloated, out-of-touch, and vulnerable. The crown of centrality which once belonged to Michigan began to recalibrate towards Sun Belt states that were, geographically speaking, more central to the fully developed continental United States. 

Sun Belt states, comparatively, are blessed with better weather, meaning less road maintenance and flight delays, as well as proximity to ports on the Gulf of Mexico and the Atlantic Ocean. These are all features which, in an era of globalization, work in the favor of firms operating on a large scale. Meanwhile, the agrarian South, a region mocked for its lack of industry, was silently developing a slight edge in its geography and transport systems which would end up reaping great reward.  

Mayor Sam Ridley of Smyrna lobbied early in his days as mayor for the development of a large interchange off the newly constructed Interstate 24. The interchange would be a cloverleaf design with wide, gradual turns to facilitate the movement of tractor trailers and high volume traffic. At the time, Smyrna did not produce nearly enough traffic or activity to warrant an interchange of its size, but Mayor Ridley foresaw the strategic advantages the increased mobility could generate. Garnering state and federal funding for the project, Smyrna’s cloverleaf access to the Interstate and proximity to the L&N line and Nashville International Airport would draw attention from Nissan (Boyer 2009).

Nissan Production at Smyrna, Tennessee. Source: The Wheel Network

Planning Theory at Play

Economic geography theory presented by Rodrigue, et al. (2017) classifies manufacturing as a “secondary economic activity” where location is a cost factor that firms try to minimize (Rodrigue 2017). Location costs can be minimized by efficiently situating in places where labor, energy, and land costs are low. Furthermore, it is in the firm’s interest to be in close proximity to ports and airports, as well as highways and railroads. 

Where Detroit lost, the Southeast won. And such a shift can be explained through economic geography theory, in which geographical relationships and transport networks are regarded as heavy influencers on economic structures. It is understood in economic geography that firms in a market economy are interested in finding a location that will maximize their economic returns. According to Rodrigue, et al. (2017), the location of economic activities in a market economy is dependent on the nature of the activity itself and on several “location factors”. Primarily, these factors operate at each local, regional, and national level and influence the location of economic activities.

Several site-specific characteristics available in the Southeast present an advantage compared to those in the Detroit area. Costs of land are lower and firms would see more economic benefits building a plant from the ground-up with specific modifications rather than reconfiguring an older one. This desire of auto manufacturers to contract new and specialized plants rather than reconfiguring existing plants has been exhibited by both domestic and foreign auto manufacturers (Canaga Retna, 2007). The level of access to local transportation is a crucial edge the Southeast has gained in the wake of globalization. The nearby ports provide access to international markets. Labor costs are lower in the Southeast, where right-to-work laws are the norm while unionized labor dominated auto manufacturing plants in Michigan. The Southeast is also benefiting from high rates of domestic in-migration and growing consumer markets. The availability of capital at a national level is consistent for the two geographies, but taxes and regulations are lower in the Southeast.

The investments in transport systems made in Smyrna demonstrate through economic geography models how effective such investments can prove to be in a globally connected economy. Furthermore, the distinctions between the regional factors such as labor costs and unionization policies demonstrate how auto manufacturing in the U.S. must remain competitive on a global scale. Above all, the geographic positioning of economic activity, no matter how ingrained with a region’s history, is subject to rapid and upending changes. Through the provision of well-connected, freight-friendly infrastructure, planners and public officials can play a pivotal role in the economic development of their cities.

Nissan’s Smyrna, Tenn., Vehicle Assembly Plant. Aerial view. Source: InfinitiNews.com.

Featured Image: Inside Nissan’s Smyrna Vehicle Assembly Plant. Source: Clayco.

About the Author: Brandon Tubby is a senior undergraduate at UNC-Chapel Hill majoring in public policy with a minor in urban studies and planning. He competes for the Tar Heels as a distance runner on the varsity cross country and track teams. Brandon’s running recently landed him in Flagstaff, Arizona, where he spent the summer training at 7000 feet elevation and interning with the city’s comprehensive planning department.

Bibliography

Boyer, P. J. (2009). The Road Ahead. The New Yorker. https://www.newyorker.com/magazine/2009/04/27/the-road-ahead

Canaga Retna, S. (2007, September 13). The Council of State Governments. Retrieved from The Drive to Move South: The Role of the Automobile Industry in the South.

DT&I – The Railroad That Went No Place—Part I. (2003a, December 19). https://web.archive.org/web/20031219203716/http://www.michiganrailroads.com/RRHX/Stories/DT%26I-TheRailroadThatWentNoPlacePart2.htm

Sugrue, Thomas. From Motor City to Motor Metropolis: How the Automobile Industry Reshaped Urban America by Thomas J. Sugrue. (2004). http://www.autolife.umd.umich.edu/Race/R_Overview/R_Overview.htm

The Drive to Move South: The Growing Role of the Automobile Industry in the South. (n.d.). Retrieved February 13, 2020, from https://knowledgecenter.csg.org/content/drive-move-south-growing-role-automobile-industry-south?nopaging=1Rodrigue, J.-P., Comtois, C., & Slack, B. (2017). The Geography of Transport Systems. New York: Routledge.