Producer of America's Top Vehicles, Kentucky Uses Location and More to Outpace Auto-Industry Competitors

Kentucky's automotive plants produce the nation's top-selling vehicles in three important segments - passenger car (the Toyota Camry, built in Georgetown), pickup truck (Ford's heavy-duty F-series, Louisville), and premium sportscar (the Chevrolet Corvette, Bowling Green). Ford's popular Explorer SUV is also made in Louisville.

Kentucky ranks third in the total production of cars and light trucks, placing it at "the hub of Auto Alley," that strip of Middle America that stretches from Michigan into the Deep South. More than 89,000 people work in Kentucky's nearly 500 motor vehicle-related facilities. Almost 2 percent of the state's employment is in the auto industry, which puts Kentucky third among all states, according to a study by the University of Michigan.

The Kentucky legislature enacted Governor Ernie Fletcher's across-the-board tax modernization plan in 2005, eliminating some corporate taxes and reducing others to make the state even more business-friendly than before. One aspect of the legislation provides tax credits to environmentally friendly companies, which Toyota cited as a major factor in choosing its Georgetown plant to begin producing the hybrid Camry.

"Our hope is that the Kentucky Environmental Stewardship Act will help attract new industries and technologies to Kentucky that will not only create new jobs and investments, but will be good for the environment as well," says Governor Fletcher. "I think this is one of the most innovative incentive programs around and has already benefited the commonwealth by bringing the Camry hybrid production to Kentucky."

The new law is only the latest reflection of the automobile's importance to Kentucky, dating to 1913, when Henry Ford started a small factory in Louisville. In 1955, Ford began operations at the modern Louisville Assembly Plant, and in 1969, production began at a separate facility, the Kentucky Truck Plant, on the east side of town. About 8,200 people work for the two Ford plants. The expanded Truck Plant, now 4.6 million square feet, is the second-largest Ford assembly plant in North America.

In 1981, General Motors moved production of the Chevrolet Corvette from St. Louis to Bowling Green, which remains today as the exclusive home of the legendary sportscar. In 2004, the plant's 1,200 employees built over 35,000 vehicles, including the new Cadillac XLR.

Toyota started production in Kentucky in 1988, and its $5 billion Georgetown plant is the company's largest production facility outside Japan. With two vehicle production lines and a powertrain engine and axle facility, approximately 7,200 team members build about 500,000 vehicles and nearly 400,000 engines each year. The company was so delighted with its success here that Kentucky rose to the top twice more when Toyota built its North American manufacturing headquarters and its North American Parts Center. The headquarters is in Erlanger, and the parts center is in nearby Hebron. Together they employ close to another 1,200 people.

Kentucky's Advantages
Jim Wiseman, vice president of corporate affairs for Toyota Motor Engineering and Manufacturing North America, Inc., says Kentucky offers important advantages over most other states:

• Central location. Besides greatly reducing the shipping costs of its products, Kentucky's location also puts it close to the auto supply industry. "We've got suppliers in 30-plus states, and Kentucky's right in the middle, which makes it one of the best places to be in terms of getting parts from all those suppliers," says Wiseman. This allows Toyota to rely on just-in-time delivery of parts and saves money.

• Low energy costs. The latest data from the U.S. Energy Information Administration shows that Kentucky lays claim to having the lowest industrial power costs for the sixth consecutive year among all 50 states. "We save several million dollars a year in electricity compared to what we'd spend in other states," says Wiseman. "In some states, we might spend twice as much as we do here."

• An administration that goes out of its way to accommodate manufacturers. "Kentucky has always been very good - and you can credit the state's Economic Development Cabinet for this - at putting together sites for manufacturers that are very appealing," says Wiseman. "When we look for a new plant, we're looking for 1,000 acres-plus, we're looking for service from two railroads, we're looking for the state to bring us the infrastructure we need in terms of electricity and gas and water and highways. Kentucky's in the top tier when it comes to looking for ways to suit the customer."

• A high-caliber work force. "There's an excellent work ethic in Kentucky. The Georgetown plant has been recognized for more quality awards than any other automotive plant in North America. These are the JD Power & Associates plant quality awards. That's a testament to the work ethic that exists," says Wiseman.

Training assistance is another big draw. Kentucky's work force training programs have consistently ranked among the top 10 in the nation. One key Toyota supplier, Toyotetsu America, has saved more than $112,000 by using the Economic Development Cabinet's Bluegrass State Skills Corporation (BSSC) Grant-in-Aid program to help train nearly half its 1,300 employees.

Toyotetsu has been producing automotive frame structures and other parts in Kentucky for about a decade, starting with Somerset in April 1997. Since that time, the company has undergone multiple expansions at the Somerset plant and added a second plant across the state in Owensboro.

Herb Krase, Vice President of Administration for Toyotetsu America, says BSSC's assistance was critical - especially during startup: "This is a time when companies are always in a very vulnerable spot as far as potentially losing money."

But Krase says it's more than just the money. "BSSC is so versatile and flexible," he says. Production workers and team leaders alike underwent training, he says, and the curriculum ranged from equipment-maintenance training at a local technical college to in-house training at Toyotetsu's facilities.

The Cabinet's help is one reason his company has been able to expand a half-dozen times in its first decade. "So it benefits us, and the state benefits from it also," he says.

In March 2007, as a result of the passage of HB536, the BSSC received additional funding from the state legislature. As a result of the increase in funding, maximum grant size was increased from a flat $25,000 per company per fiscal year to a range of $50,000 to $200,000 (based on company size), and maximum grant amount for training consortia was increased from $75,000 to $200,000 per fiscal year. Allowable per-trainee costs for higher-waged jobs were also increased, and scoring criteria for determining eligibility was simplified.

Jim Medbery, senior vice president for the Binswanger Corporation in Atlanta and a man who has been involved in 40 major plant locations in Kentucky, says the Bluegrass state "always rates as one of the most pro-business states out there. From my personal experience, there has been very good, strong continuity among Kentucky's economic-development group. And the quality of service they provide is excellent. They're really intelligent, bright, pro-business people. They're just great to work with."

Toyota's Wiseman says Kentucky boasts something that's hard to put on a list. "It's a can-do spirit that you don't find everywhere," he says.

One major site selection magazine has consistently ranked Kentucky among the top states for overall competitiveness, most recently placing sixth for 2006, while Development Counsellors International ranked the Bluegrass State among the Top 10 business climates.

Sunroof maker Webasto Roof Systems says Kentucky's staff has continued to prove it can accomplish what the business executive wants. "Kentucky didn't roll out the red tape, they rolled out the red carpet," says Fred Olson, Webasto's president and CEO. "Their people are extremely cooperative, they provided a lot of assistance, and they helped us get a lot of things get done quickly."

That is why Webasto started with a plant in Lexington in 1998 and has since added an additional Lexington facility and one in Murray. "We've had nothing but good experience after good experience after good experience," says Olson. "The people there take economic development in the state of Kentucky extremely seriously. They don't pay it lip service; they work hard to make it a fact."

J.R. Wilhite, Commissioner, New Business Development
Kentucky Cabinet for Economic Development
Old Capitol Annex
300 West Broadway
Frankfort, KY 40601
Tel: 800-626-2930
Fax: 502-564-3256
www.thinkkentucky.com