How Stringent Fuel-Economy Rules Are Creating Jobs
ZF's new 9-speed transmission factory provides one example of economic impact
President Obama ushered in stringent new fuel economy standards last year. Federal legislation mandates that the corporate average fuel economy standard rise to 54.5 miles per gallon by 2025. Automakers are scrambling to update their vehicles with fuel-saving technology.
The ripple effect was felt in Laurens County, S.C., last week, when automotive supplier ZF announced expansion plans for a transmission factory that opened only last month. The assembly plant produces the world's first 9-speed transmission, which ZF says improves fuel economy by 16 percent over a more conventional 6-speed model.
Orders are stacking up for the 8- and 9-speed transmissions made here. ZF opened this facility in June. It was on pace to hire 1,200 employees here by the end of the year. Now, the German company will invest $215 million more into an expansion, and eventually hire an additional 450 workers, bringing its total workforce here to 1,650.
"Fuel economy is a key megatrend we see in all regions of the world, and with this product, we're well positioned," said ZF CEO Stefan Sommer.
Some critics had considered the MPG rule excessive, and doubted that automakers could reach the standard in the allotted timeframe. During the 2012 presidential campaign, Republican candidate Mitt Romney said the rule would limit consumers' choices in the dealership.
But automakers are reacting quickly to the rule. Currently, this ZF factory has the capacity to annually produce 800,000 transmissions. Once the expansion is complete, that number will increase to 1.2 million. The Range Rover Evoque, which achieves an EPA-rated 20 mpg in city driving and 28 mpg on the highway, will be the first vehicle to receive the 9-speed transmission.
"Fuel economy, with what we're tasked with by 2025, we'll have to develop newer models and higher-tech vehicles," said Clinton Blair, vice president of governmental affairs for Jaguar/Land Rover in North America. "The 9-speed is a big step forward for us."
As the auto industry continues its migration south, this swath of South Carolina stands positioned to benefit from the changing needs of manufacturers, regulators and consumers. Outside Greenville, the South Carolina Technology & Aviation Center, which ZF sometimes uses as a testing facility, hosts 80 companies with global ties, such as IBM, Michelin Tire and Lockheed Martin.
ZP officials said they examined more than 70 potential sites in the United States when they initially picked this plot three years ago. Key factors in the company's decision included interstate highways, intermodal transportation nearby and easy access to the port of Charleston. The company also formed a partnership with nearby Clemson University and developed plans to start a technical college.
More than 250 OEMs have facilities in South Carolina that employ about 85,000 residents, approximately 5 percent of the state's overall work base, according to the state's chamber of commerce.
"We understand what it means to build new products," Gov. Nikki Haley said during an appearance at the ZF announcement. "When a company invests in South Carolina, we wrap our arms around it and do what we can to make sure they're successful."
Pete Bigelow is an associate editor at AOL Autos. He can be reached via email at email@example.com and followed @PeterCBigelow.
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