State pursues auto industry

• By GARY PERILLOUX
• Advocate business writer
• Published: Dec 13, 2008 - Page: 1D - UPDATED: 12:05 a.m.

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Louisiana’s Department of Economic Development is investing $635,000 in a consultant’s study aimed at helping the state draw more automotive manufacturing.

Chicago-based A.T. Kearney Inc. beat proposals from Deloitte Consulting LLP, which bid $780,000, and The Boston Consulting Group Inc.’s $700,000 bid at a time when automakers are shutting down factories, trimming inventories, laying off workers and delaying capital expenditures in a lingering recession.

Yet, state leaders say the study will position Louisiana as a leading contender for automotive business when recovery does bring vehicle manufacturing out of the doldrums.

LED Secretary Stephen Moret said his department initiated the study earlier this year before the financial crisis deepened and before economists confirmed the recession.

A request for proposals went out in September, and LED hired A.T. Kearney this month to begin recommendations for shoring up General Motors’ presence in Shreveport and for landing a prospect at Franklin Farms, the 1,400-acre economic “megasite” east of Monroe on Interstate 20.

The state bought that site for $4.6 million in 2006 at the urging of former Gov. Kathleen Blanco. Moret said the state is courting two prospects for Franklin Farms now, while south Louisiana sites likely are several years away from being in contention for auto plants.

“The project was timely even before the liquidity crisis the industry currently is facing,” Moret said. “It’s even more important to the state now that the landscape is changing.”

Recent years have seen other states such as Alabama, Mississippi, Tennessee, Georgia and Texas grab major assembly plants and suppliers, while Louisiana stood pat. Its major success — the GM truck plant in Shreveport — entered a period of rejuvenation this decade as GM’s investment there reached $1.5 billion, and the company brought the assembly of some Hummers there.

The slumping auto industry, however, has seen annual vehicle sales slide from a peak of 17 million in 2005 to a projection of as little as 11.5 million for 2009, according to the Federal Reserve. At the same time, the Shreveport plant’s payroll has waned from nearly 3,000 workers to fewer than 800.

Moret recently said he was cautiously optimistic that GM would reopen assembly lines in Shreveport, bringing new vehicles to the site. And Moret and Gov. Bobby Jindal have visited GM officials in Michigan to lobby for such a move.

Still, there aren’t any guarantees that GM, now mired in a tug-of-war to gain federal financing, will move forward with a Shreveport expansion. If the company does, the A.T. Kearney study and its recommendations could be a major reason why, Moret said.

The economic slump isn’t the only major headwind automakers will hit in the next few years.

According to A.T. Kearney and its automotive practice leader, Dan Cheng, car makers from emerging economies — China, Russia, India, Iran and Malaysia — control less than 10 percent of the global market now.