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Location Notebook: Auto Industry Driving the Kentucky Economy

The auto industry is steering the Bluegrass State toward growth and prosperity, while the state works to meet the challenge of keeping enough workers in the pipeline.

Directory 2016
Talk about running on all cylinders…it’s easy to see why industry and economic development leaders in Kentucky are feeling good about the state of the automotive industry. The headlines have been spectacular in recent months.

• In early December, Ford Motor Co. announced a $1.3 billion investment in its Kentucky Truck Plant in Louisville. It’s part of the launch of the automaker’s all-new 2017 Ford F-Series Super Duty truck, and the investment is expected to create 2,000 new jobs. The plant has produced more than five million F-Series Super Duty trucks of various models since 1999, and also assembles the Ford Expedition and Lincoln Navigator.

• Ford’s giant investment in 2015 adds to the $80 million, 350-job upgrade there in 2014. In addition, a $129 million investment at Ford’s Louisville Assembly Plant to support Lincoln MKC production was a 300-job announcement.

• In the weeks leading up to the big Ford announcement in December 2015, Toyota Motor Manufacturing Kentucky in Georgetown unveiled the first Lexus built in the United States. The ES 350 is the top-selling Lexus sedan worldwide, and a $360 million investment is adding 750 jobs along with the capacity to produce about 50,000 Lexus vehicles in Kentucky annually.

• A few months before that, General Motors announced plans to invest $439 million for facility upgrades at its Bowling Green Corvette Assembly Plant. Among the plans is a new 450,000-square-foot paint shop.

“We’ve had significant investment from all of our three OEMs,” observes Erik Dunnigan, acting secretary for the Kentucky Cabinet for Economic Development. The recent Ford announcement, he says, was among the state’s biggest deals ever. “That’s the equivalent of a new auto plant that’s just been reinvested in a plant. The ripple effect is significant as well.”
General Motors is investing $439 million for facility upgrades at its Bowling Green Corvette Assembly plant, including a new 450,000-square-foot paint shop.
General Motors is investing $439 million for facility upgrades at its Bowling Green Corvette Assembly plant, including a new 450,000-square-foot paint shop.
Auto Suppliers
There are plenty of suppliers in Kentucky lined up to experience a ripple effect, but they’re already generating big news on their own. Just a few examples include Bowling Green Metalforming, with 450 jobs and a $261 million investment; another 190 jobs and $240 million invested in Russellville so Logan Aluminum can produce more metal for vehicle bodies; 112 jobs and $57 million plugged into Kobe Aluminum in Bowling Green; a $13.7 million investment by Grupo Antolin that will create 200 jobs in Louisville; and most recently, an announcement from Fritz Winter North America LP, a German-owned company that plans to build a $193.7 million foundry and production facility in Franklin, creating 343 jobs. All of those announcements, and more, happened toward the end of 2015.

Auto Industry Driving Kentucky Economy

Kentucky has seen recent significant investment from all of the three automotive OEMs with production in the state with a ripple effect extending to hundreds of other auto-related businesses.
  1. Ford Motor Co. announced a $1.3 billion investment in its Kentucky Truck Plant in Louisville.

  2. General Motors announced plans to invest $439 million for facility upgrades at its Bowling Green Corvette Assembly Plant.

  3. Toyota Motor Manufacturing Kentucky in Georgetown unveiled the first Lexus built in the United States and announced a $360 million investment is adding 750 jobs along with the capacity to produce about 50,000 Lexus vehicles in Kentucky annually.

  4. Bowling Green Metalforming, manufacturer of automotive body and chassis assemblies, will in Bowling Green with an announced investment of more than $261 million, with plans to create 450 jobs.

  5. Kobe Aluminum Automotive Products LLC (KAAP), a supplier for the automotive industry, will add 112 jobs with a $57 million investment in its Bowling Green facility.

  6. Grupo Antolin, one of the largest global manufacturers of interior components for the automotive industry, will locate two facilities in Louisville, creating 200 jobs through a more than $13.7 million investment.

  7. Fritz Winter North America LP, a German-owned company plans to build a $193.7 million foundry and production facility in Franklin, creating 343 jobs.

“Kentucky is an attractive state for the auto industry,” says Dave Tatman, executive director of the Kentucky Automotive Industry Association. There’s a real critical mass of automotive production in the Bluegrass State, he says. “Not only is Kentucky the third-largest state for auto production, but it’s also home to hundreds of other auto-related businesses.”

So what’s behind all the good news? “A lot of this can be seen as the transformation in the industry,” Dunnigan says. Automakers are modernizing, consolidating, and gradually shifting the map, and it’s no secret that the compass has been pointing strongly to the South.

“Over 50 percent of production is now coming from south of the Ohio River,” Dunnigan says. “This has been very positive for Kentucky. One in 10 vehicles made in the United States is made in Kentucky. It’s a huge player for us.”

“There’s global growth in the automotive business — this is a really good time to be in the auto business,” Tatman adds. “Couple that with the fact that Kentucky has the lowest cost of energy of the 13 auto states, and terrific infrastructure with interstate highways and our parkway system.”
In December 2015, Toyota Motor Manufacturing in Georgetown unveiled the first Lexus built in the U.S.
In December 2015, Toyota Motor Manufacturing in Georgetown unveiled the first Lexus built in the U.S.
Of course, there’s also the location factor, Tatman says, and that keeps getting better as the industry transforms. “There are 29 regional OEM auto assembly plants in North America, and Kentucky has the closest average location to all of them of any state in the country. The cost of moving materials from a Kentucky base is much lower.”

Dunnigan points out that “the base of our economy is manufacturing.” The auto sector plays a big role in that, and a positive one. Employment related to motor vehicles is up by 72 percent since 1990, he says, and that comes amid a general decline elsewhere. But the manufacturing picture is more than cars and trucks, Dunnigan explains. “The Kentucky manufacturing base is very robust and growing. A lot can be attributed to onshoring.”

Workforce Development
In Dunnigan’s view, companies seeking locations for growth have a checklist with three main boxes. The first is location, and Kentucky nails that with a spot on the map that’s within a day’s drive of two-thirds of the American population.

It’s the second checkbox of workforce development that is a challenge in many states, including Kentucky. With all of those potential jobs in the pipeline, can the state deliver enough qualified candidates? Dunnigan acknowledges the challenge. “Our educational system was producing educated students, but the students did not always have real-world application of their learning.”
Ford is investing $1.3 billion in its Louisville plant as part of the automaker’s launch of the all-new 2017 Ford F-Series Super Duty truck.
Ford is investing $1.3 billion in its Louisville plant as part of the automaker’s launch of the all-new 2017 Ford F-Series Super Duty truck.
Kentucky is not alone in facing that challenge, but the state is working on multiple fronts to address it. One promising concept, says Dunnigan, is “a new training model that identifies students right out of high school. They take college classes two days a week and work in a manufacturing facility three days. They graduate with an associate’s degree and experience in a manufacturing environment.”

It’s known as the Kentucky Federation for Advanced Manufacturing Education, or KY FAME for short, and it spread its way across the Commonwealth in 2015. “It’s a win-win scenario,” Dunnigan says. “Programs like this are the future of workforce development. That’s the trend we’re going to have to shift into for education.”

Other efforts are aimed at expanding the workforce, he says. “Unemployment is at 4.4 percent, so we’re almost at full employment. Having low unemployment is a great success, but it presents new challenges when you have expanding industries,” he notes. “The next opportunity is to identify more people who can enter the workforce. We have to get more people engaged in the workforce and we have to recruit people.”

The third checkbox, Dunnigan says, is the business environment, from incentives to regulation to the tax environment — “What’s it like to operate in Kentucky and in your community?” Kentucky has been busily improving on that front, too, he says, including an effort that began a few years ago called Incentives for a New Kentucky, which retooled Kentucky’s menu of business incentives. As Dunnigan explains, “We try to keep it simple.”
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