Issue: Dec 2013


Kentucky smooths the way for auto investors



by Lenny Case




Kentucky is leveraging its geographic position and skilled workforce to attract and grow its automo-tive sector. Automotive manufacturing in the state dates back to when Ford Motor Company began assembly of 12 Model Ts per day in Louisville in 1913. Bowling Green has been the exclusive home of the iconic Corvette since 1981, and in 1985 Toyota began production at its first North American plant in Georgetown, and later located its North American Engineering and Manufacturing headquarters and parts center in Northern Kentucky.

Automotive Industries (AI) asked Kentucky Governor Steve Beshear how the state established itself as a text-book case on showing leadership and innovation in the development of a powerful engineering and manufacturing base for global automakers.

Beshear: Automotive manufacturing is in the DNA of Kentuckians, and we manufacture them to the best standards in the world. Kentucky is also looking to the future and is on its way to becoming the epicenter of advanced automotive manufacturing. In August of last year, we cut the ribbon on the Kentucky-Argonne Battery Research & Development Center, which is a partnership between the Commonwealth of Kentucky, University of Kentucky, University of Louisville and Argonne National Laboratory, a leader in basic battery research. Over the past year joint research projects have been developed with several major automotive manufacturers, including Ford, Hitachi and Toyota. The presence of three global OEMs, combined with world-class research institutions and capabilities and a highly skilled workforce, has attracted an ecosystem of Tier I and Tier II suppliers in all parts of the state. Today, Kentucky boasts more than 450 motor vehicle-related facilities that employ approximately 80,000 people. We’re the third-largest producer of light trucks and vehicles in the U.S., with more capacity being added in the near future. It’s a great time to be in the automotive industry in Kentucky.

AI: What incentives do you offer automotive companies?

Beshear: Our most popular program is the Kentucky Business Investment program. Approved new and existing companies can receive corporate income tax credits and wage assessments when creating new jobs and making an investment in Kentucky. We also offer approved companies a refund on Kentucky sales and use tax for building and construction materials, R&D and data processing equipment. I recently signed into law legislation expanding one of our incentive programs specifically targeting Kentucky’s OEMs and major auto suppliers, the Kentucky Jobs Retention Act. This led to Toyota announcing it would invest $530 million to expand its Georgetown manufacturing plant and establish its first U.S. production site for the Lexus ES 350.

The move will result in an estimated 750 new jobs in the Commonwealth to produce about 50,000 vehicles a year starting in 2015. The investment is the second-largest ever made by Toyota in its Georgetown plant, and the largest since the $800 million addition of Plant 2 in 1991, more than 20 years ago. It was this same incentive program that was used to encourage Ford Motor Company to invest $1.2 billion between its two Louisville assembly plants. The Louisville Assembly Plant, which now produces the Escape, was transformed into the company’s most flexible high-volume plant in the world, while its Kentucky Truck Plant also got an overhaul. The rest of the auto industry is paying attention. Since January 2010, approximately 225 auto manufacturers and suppliers have announced $3.6 billion in planned capital investment and more than 15,000 new jobs in Kentucky.

AI: Tell us about the kind of infrastructure, talent pool and other benefits companies can hope to get in Kentucky.

Beshear: Located at the center of a 34-state distribution area in the Eastern United States, our location advantage facilitates the expedited distribution of products to industrial and consumer markets. Bolstered by 19 interstates and major highways, major rail networks, barge traffic on the Ohio and Mississippi rivers, five commercial airports and dozens of regional airports, Kentucky’s logistics network makes it easy to reach all points of the globe easily and efficiently. Kentucky businesses are also served by two major shipping hubs (UPS and DHL) located at Kentucky’s two international airports.

UPS and DHL help rank the state third in the nation in total air cargo shipments. I know that workforce considerations are always at the top of any site selector’s check list and we take that seriously. We strive on our ability to provide companies with the skilled and available workforce it needs to compete in the global economy. Our state workforce partners work collaboratively to deliver the customized and flexible solutions clients need. Our approach can be validated by the fact that, in 2012, we facilitated the training of nearly 85,000 Kentuckians, while also assisting clients with pre-employment activities, such as job fair hosting, screening applications and posting over 120,000 hiring vacancies. Kentucky is also one of the first states in the country to implement a Work Ready Communities Program – an agreement whereby communities meet certain educational, workforce development and collaboration goals to earn certification. In fact, we have implemented the most rigorous Work Ready Communities certification program in the nation.

AI: Why are German automotive companies choosing Kentucky?

Beshear: The most important factor is location – many German suppliers already supply VW, BMW and Mercedes in the South. They are winning more contracts from U.S. OEMs, and are choosing to locate somewhere in the middle of the Southern Automotive Corridor. We are also finding out that many German companies like the small town communities they find in Kentucky. Interestingly, our German prospects have expressed a desire to have a strong bond with local officials. This is because they believe they will get help in dealing with problems that inevitably occur and believe such personal relationships are best built in smaller communities.

AI: How do you hope to see the sector grow in the future? What role does the Kentucky Cabinet for Economic Development play in promoting the sector?

Beshear: Kentucky’s automotive industry will continue to evolve through increased investment in research and development and engineering – not just manufacturing. Furthermore, I envision Kentucky to be the location of choice for international investment. Our Cabinet for Economic Development is responsible for leading this effort and has been unwavering in its commitment to support, expand and diversify our state’s automotive industry. Our economic development team, which includes two international representatives in Germany and Japan, continues to aggressively market Kentucky’s many advantages and serve as that single point of contact companies are looking for to make their decision process easier.

Examples of our success include Hitachi Automotive U.S., which has its North American headquarters in central Kentucky, ZF Steering’s $150 million expansion in northern Kentucky and nGimat, which relocated to Kentucky to partner with the Kentucky-Argonne Battery Research & Development Center. The bottom line is – we are open for business and welcome the opportunity to showcase what Kentucky has to offer Kentucky geared for the motor industry

• Central Location: Kentucky is within 300 miles of 11 of the top 20 most populous places in the US and within 600 miles of over 65% of the nation’s population and manufacturing establishments.

• Site & Building Inventory: There is no shortage of available sites or existing buildings to suit any automotive-related operation. Greenfield sites selection includes three certified mega sites, all prime development opportunities for large-scale manufacturing facilities, as well as hundreds of additional shovel-ready sites and available buildings.

• High Quality Workforce: Kentucky’s workers are valued for the craftsmanship and quality they bring to the workplace. Kentuckians take pride in their work and that pride is reflected in the thousands of quality products made there every day.

• Business Costs: Kentucky consistently has one of the lowest overall costs of doing business in the eastern United States. In a CNBC Special Report, America’s Top States for Business – 2012, Kentucky secured the recognition for having the lowest overall costs of doing business in the country. It is also ranked by the Tax Foundation as the 7th most business-friendly state in the country for new firms and 6th lowest cost state in the country for new corporate headquarters. In addition, Kentucky can claim the 6th lowest industrial power costs in the country, and the #1 lowest among the top vehicle-producing states.

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