Greensboro News & Record

January 31, 1996

Will Volvo Build Plant in N.C.?

Scott Solomo, Staff Writer

Copyright © 1996, Greensboro News & Record

Economic developers eagerly await Sweden-based Volvo's decision on whether - and where - it will build a U.S. auto plant.

Before North Carolina's industry recruiters start flying the Swedish flag, they should remember one thing: Sweden-based AB Volvo hasn't even decided whether to build a North American auto assembly plant, never mind where.

Rumors have been swirling in recent weeks that Volvo is searching for a U.S. site on which to build a plant to make sport utility vehicles.

North Carolina, Georgia, South Carolina, Tennessee and Alabama have all been mentioned as possible locations for the project, if and when it's built.

The Wall Street Journal even laid out each state's odds of landing the Volvo plant. For the record, North Carolina was a 12-to-1 shot behind Georgia (5-to-1) and South Carolina (8-to-1).

But to hear Volvo officials tell it, the European automaker is nowhere near making a decision to go forward.

''The possibility of having a factory in the U.S. - or Canada for that matter - is not for the moment for us a hot issue,'' Ingmar Hesslefors, a spokesman for Volvo Car Corp. in Gothenburg, Sweden, said in a telephone interview Tuesday. ''It's not on the agenda for the management board of this corporation.''

However, the company has looked at U.S. sites, including property in North Carolina ''on a preliminary basis,'' Hesslefors said. He declined to talk about specifics.

It's clear that Volvo wants to keep its options open.

''We have said we are looking into the question to see if it's a good idea to have a manufacturing plant in the United States,'' said Mats Edenborg, a spokesman for parent company AB Volvo. ''So far, we have not come to the conclusion that it's the right thing to do.''

Even the mere rumor of a major European automaker looking at sites for U.S. expansion has a familiar ring for North Carolina.

In 1993, the object of the state's recruiting affections was Mercedes-Benz, which eventually passed up 1,100 acres of land in Mebane to build a $ 511 million plant in Alabama.

Because it was high on Mercedes' list, many economic developers have speculated the land is a logical candidate for Volvo. Volvo GM Heavy Truck, in which AB Volvo owns a majority interest, has its headquarters in nearby Greensboro, a fact developers say could strengthen Mebane's chances.

But Clifford Ray Jr., whose 600-acre farm is part of the Mebane tract, said neither Volvo nor state economic developers have contacted him about the property. ''I'd love to see it come, but at this point it's not there,'' he said in an interview this week.

With Volvo planning to introduce a line of sport utility vehicles, industry analysts say it makes sense for the company to build its first U.S. auto-assembly plant. The United States is one of Volvo's largest markets and one of the most popular for sport utility vehicles.

''The logic behind a U.S. manufacturing plant for them is the same it was for the Japanese and the Germans,'' said Frank Prezelski, director of research for Ladenburg Thalmann in New York. ''That is why BMW and Mercedes came here. It costs less to build.''

By opening a U.S. plant for the North American market, Volvo would be able to cut wages and transportation costs, he said.

c ''To me it's just a matter of time before they build in the United States,'' Prezelski said. ''Economics will force them to do it.''

If Volvo decides to build in the United States, chances are industry recruiters will shower the company with offers of incentives to sweeten the deal.

And on that point, North Carolina may be at a disadvantage.

Not only does the state constitution prohibit tax abatements, but the N.C. Supreme Court also is considering a challenge to a state law allowing local governments to offer incentives.

''I imagine until that's resolved we can't put together much of a competitive package, because I'm sure the other states are going to offer lots of incentives, '' said Don Jud, a finance professor at UNCG who tracks the Triad economy.

''If history is any guide, it seems every automobile plant that has come into the Southeast has gotten more incentives than the previous one,'' Jud said. ''What people are going to offer for this Volvo plant, I don't know, but if we can't offer incentives, we're out of the game.''

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Copyright ©1996, Greensboro News & Record.

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