Anatomy Of A Manufacturing Site Decision

How Schneider Electric decided to invest $140 million more into two plants making industrial electrical equipment in Tennessee provides the anatomy of a site decision made against a current backdrop of urgent but mixed messages from the marketplace and the U.S. government.

The France-based manufacturing giant said recently that it plans to transform and equip an existing 500,000-square-foot building in Mt. Juliet, Tennessee, and to upgrade its existing Smyrna, Tennessee manufacturing plant, creating a total of 455 jobs for manufacturing technicians, engineers and other factory positions.

The decision was based on continuing demand for Schneider’s equipment to build out new EV, battery and chip-making plants even amid slowdowns in those two areas of construction, and to equip new data centers to support the growth of AI; marketplace interest in energy-saving manufacturing systems; pressures to invest in the company’s U.S. manufacturing base; and new federal-government incentives for Schneider to count on that combination of factors.

“The tailwinds continue to create a favorable environment for these investments,” Aamir Paul, executive vice president of Schneider Electric North America, based in Boston, tells Chief Executive. “There are big projects such as battery plants. There will be slippage. There will also be pull-in. But if you take the long view, we feel confident those investments will continue and be critical to building the foundation of infrastructure in the U.S.”

Tennessee has become a popular destination for CEOs making plant-investment decisions. Schneider decided to make its own new investments in Tennessee—an addition to the $440 million it already has put into facilities across its U.S. manufacturing network since 2020—instead of somewhere else based on four main factors, Paul says.

First was the availability of digital talent in Tennessee, both technical and production labor, that could handle Schneider’s increasingly automated approach to production.

Second, Schneider favored places friendly to “intra-country logistics in terms of trucking and rail,” Paul says, as well as locations close to the company’s other existing factories in places like Texas, and to suppliers. Third, Schneider has a technical center in Franklin, Tennessee, “and it would be easy for people to get together and collaborate.”

And, he concludes, Schneider wanted “resilience from extreme weather events,” learning from the traumatic freeze in Texas in 2021. “We realized then that a lot of our operations were impacted because of our concentration risk and [reliance] on the ERCOT [electricity] grid in Texas,” he says. “That risk could have been elsewhere from hurricanes or tornadoes or flooding. No part of the country is immune. So we wanted to minimize the risk that a single event would impact multiple facilities at the same time.”