Manufacturing in Georgia: Upbeat or Up the Creek?

Take German firms around the United States, which in the Southeast are heavy on manufacturing: Nearly all of them expected their business to grow in 2012 and three-fourths said that they planned to hire in 2013, according to a December survey. 

The Georgia Department of Economic Development is upbeat coming off its best fiscal year ever, said Gretchen Corbin, the department's deputy commissioner for global commerce.

"We see manufacturers who need to be closer to their customers, and our infrastructure and logistics network, anchored by the ports and Hartsfield airport, make it very easy for companies both international and domestic to speedily move products and services to market," Ms. Corbin said, adding that the state's universities and workforce training programs are also a plus. 

The global commerce division, in charge of both foreign and domestic expansions and relocations, worked on 403 projects, announcing new investments totaling nearly $6 billion for the fiscal year ended June 30, 2012. About 44 percent of those, 178 in all, involved manufacturing. Foreign companies accounted for 29 percent of the total, though it wasn't clear how many of those were manufacturers. 

The Metro Atlanta Chamber also worked on Baxter and some other manufacturing wins like voestalpine, an Austrian supplier of metal and structural parts to the VW plant in Chattanooga, Tenn. The company's $62 million investment in Bartow County could create 220 jobs. 

But just looking at new factory announcements isn't the whole picture, said Jorge Fernandez, vice president for global commerce at the chamber. 

Many companies, including a Brazilian auto supplier he's currently assisting, first look at Atlanta for a sales office with an eye toward building factories later, he said. 

"Sales office, distribution, manufacturing. When we talk about foreign companies, that's their normal route," Mr.Fernandez told Global Atlanta. 

That said, landing the "sexier" announcements like Baxter can "build an ecosystem" that bolsters his sales pitch to smaller companies, he said. 

"Last time I was in India, the fact that I talked about that Baxter had landed here, that opened a lot of eyes," he said. 

Perhaps no part of the American economy is as politicized as manufacturing. Maybe for that reason, the real-time statistics sometimes don't match the rhetoric floating around in speeches and in the media.  

In recent months, some have argued that a "manufacturing renaissance" has come to United States. After a decade seeing outsourcing as essential strategy, multinationals have begun to bring factories back home. As higher wages in faraway China make it less attractive to set up and ship from there, cheaper land and energy plus greater automation have made it cheaper to make things here. 

A survey of 528 Georgia manufacturers by accounting firm Habif, Arogeti & Wynne LLP and Kennesaw State University found that more of them had moved production from other states and countries into Georgia than vice versa in 2011. Asia was at the forefront of this insourcing trend, with 4 percent of respondents saying they brought work back from that region, compared to 2.6 percent the previous year. 

Caterpillar Inc., one of Georgia's big investment coups of 2012, is a prime example. The company's decision to scale down excavator manufacturing in Japan was part of its decision to put a $200 million plant outside of Athens that could hire up to 1,400 people. 

But it's not just American companies returning home. Foreign auto suppliers are also flocking to Georgia, following the giant car makers that have put factories around the region, including Korea's Kia Motors and Germany's Volkswagen AG. 

Kia said recently that it would issue $1.6 billion in bonds over 16 years to finance production enhancements at its West Point, Ga., factory as the vehicles produced there continue to shatter sales records. Suppliers are growing too, with investments ranging from $3 million (Sewon America) to $80 million (steering gear maker Mando Corp.) in 2012. 

Throughout the year, German, Austrian, Danish, Canadian, Japanese and Korean auto suppliers announced plans for new or expanded Georgia factories. Panasonic Automotive Systems Co. of America said it would open a research center at the Georgia Institute of Technology, even though it makes car audio equipment in Mexico. 

Big wins also came in biotechnology, with Baxter International breaking ground on a more than $1 billion biopharmaceutical plant in Covington that could employ 1,800 people. In December, Purac, a Dutch company that makes biomedical polymers announced a $20 million investment. 

So why are some turning gloomy on manufacturing? 

While the year started off bright, the presidential elections and the ensuing fiscal-cliff talks helped dampen activity in the latter half of the year, said Don Sabbarese, director of Kennesaw State University's Econometric Center. 

"Manufacturing was showing some really positive signs of growth, but by the time we hit around June or July, with a lot of the election stuff going on, it really started slipping and really hasn't rebounded," Dr. Sabbarese said. 

Slowdowns in China and India, along with Europe's woes, have also hit exports, sapping factory activity, he said. 

Georgia felt the pain in December, as manufacturing contracted for the second straight month, according to the center's Georgia Purchasing Managers Index. 

The index read 45.2, down 1.2 points from November as production and new orders slumped. Anything less than 50 means that manufacturing activity is shrinking in the state.

Still, there have been signs of optimism for 2013.