Kentucky’s automobile manufacturing industry has been making a steady climb back to pre-recession performance levels.
Last year, for the first time since 2007 – before the economic downturn – the state’s four auto manufacturing plants produced more than 1 million vehicles, making Kentucky the No. 4 state for vehicle output. One in 10 vehicles produced in the United States last year were built in the commonwealth.
Automakers are not only hoping for continued growth, they’re banking on it. In April, Toyota announced plans to move production of the Lexus ES 350 from Japan to Toyota Motor Manufacturing Kentucky in Georgetown, a $531 million investment that comes with 750 new jobs. General Motors, which already spent $131 million to rehabilitate its Bowling Green Assembly Plant to produce the next-generation Corvette, decided also to move its Performance Build Center, a production facility for hand-built high-performance engines, from Wixom, Mich., to Bowling Green.
And this summer, Ford will begin a $621 million rehabilitation of its Kentucky Truck Plant in Louisville, where the company already spent more than $600 million transforming the Louisville Assembly Plant into its most flexible high-volume plant in the world.
Auto parts manufacturers are paying attention. Since June 2012, parts suppliers have announced more than $529 million in investments in Kentucky, adding 2,290 jobs.
Saying the state’s auto manufacturing industry is “moving in the right direction,” Gov. Steve Beshear calls it a “promising time” for Kentucky.
• Kentucky’s automotive production was up 48.65 percent in the first quarter of 2013 compared to a year ago, according to Automotive News. Kentucky’s first-quarter increase ranks No. 1 among the top vehicle-producing states.
• Combined production of the 10 models made in Kentucky totaled 326,796 in the first quarter of 2013, compared to 219,843 in 2012, Automotive News reported.
• For the first quarter of 2013, Kentucky is ranked third among top vehicle-producing states.
• Kentucky-made auto sales were up 12.87 percent in the first quarter of 2013 compared to the first quarter of 2012.
The auto industry plays a significant role in Kentucky’s economy, according to Larry Hayes, secretary of the Cabinet for Economic Development. Nearly 80,000 people are employed at more than 450 automotive-related industries in Kentucky. The commonwealth ranks third in the U.S. in auto industry-related employment as a percent of total state employment.
“When Kentucky’s automotive industry succeeds, the commonwealth as a whole wins,” Hayes said.
Building cars where they sell them
On April 19, Toyota Motor Corp. made official what President Akio Toyoda called its “worst-kept secret”: In 2015, TMMK in Georgetown would begin manufacturing the Lexus ES on a new, dedicated assembly line. The move represents a half billion bet on Kentucky’s advanced manufacturing capabilities.
The company had been discussing moving the luxury line to North America for more than a year, but made its final decision in less than a month.
“For some time, we’ve all been talking about localizing vehicles from Japan over to North American, and the ES has always been one of those candidates for the discussion because of the volume,” said Wil James, president of TMMK. “Our corporate policy is, we like to build cars where we sell them as a general rule. So if you’ve got enough (sales) volume, it makes sense to move it to a closer location.”
Since 1990, nearly 1.2 million Lexus ES sedans have been sold in the United States.
Toyota chose Kentucky because of its “successful 25-year partnership with the state,” Toyoda said. TMMK was Toyota’s first stand-alone U.S. plant and remains its largest. “In a way, for manufacturing, Kentucky is Toyota’s home,” he said.
The Georgetown plant currently builds the Camry, Camry Hybrid, Avalon and Venza. The platform for building Camry and Avalon is similar to Lexus, James said, “so (adding Lexus) is not something that required a whole major upheaval of the plant.”
The announcement has been made and celebrated, the state’s financial incentives have been approved, and now the work begins.
A new building for what is being called Line 3 will be constructed on the west side of 1,300-acre plant, James said.
“The stamping, the body welding and the paint will be in an exclusive area of our existing operations,” he said. “The assembly and final quality analysis area, that’s going to be a completely separate facility.”
Toyota engineers and a design architectural team have been working out the details of adding the luxury line, James said, “sketching out what the processes are going to look like, what equipment will be needed. … We’re laying out a list of all of those other things we need to do and some kind of rough idea of timing – when those things need to happen. For example, right now we don’t have to exactly decide how we are going to select the people (employees) to go (to the Lexus line), but we know that within the course of a year, we need to select those people.”
This early in the process, the critical task at hand is data gathering, organizing and benchmarking, he said.
TMMK officials will look to other Lexus plants for guidance. They will spend time at Toyota’s Canadian operations to find out what plant officials there learned when the Lexus was introduced, James said. TMMK employees also will go to Japan “where the Lexus ES is built to get much more familiar with the vehicle, working through the things they do in their practice that we don’t do in ours so we make sure we can fill those gaps.”
TMMK’s biggest challenge is time, James said. The plant has just two years to build a new facility, move and train workers, purchase and install equipment, and conduct trial runs.
“Fortunately, we’ve been in this position before. We’ve been asked to do projects on a short time frame, and we’ve pulled it off,” he said. “Our folks don’t get too out of shape when we throw these challenges out there. This is Toyota. This is what we do.”
James recalled his first week on the job at TMMK in October of 1987. A group leader, he and his colleagues were responsible for overseeing the building of the facility.
“The first week on the job, I asked my boss, ‘When are we supposed to have this plant built and start building cars?’ And he says, ‘May.’ I said, ‘May of what year?’ He said, ‘May of next year.’ I said, ‘We don’t even have buildings yet.’ And he said, ‘Yeah, that’s Toyota.’ And that’s the way it’s been for the entire 25 years,” James said.
“We set every aggressive targets, very aggressive time frames and then we go for it. The beauty of Toyota is we take all of our time talking about it and making sure everybody is lined up as we’re making the decision. And once the decision is made, everybody’s already ready.”
‘We don’t build cars, we build dreams’
This past Feb. 28 at about 8 a.m., workers at the Bowling Green Assembly Plant built the last sixth-generation Corvette, a 60th anniversary 427 convertible now on display at the GM Heritage Center.
As the 2013 Corvette “passed through every station throughout the plant, we began to tear that station down and make the conversion for the C7 (seventh-generation Corvette),” said Dave Tatman, Bowling Green plant manager. “By the time that car was finished, our body shop had been completely demolished.”
GM announced in May 2011 it would spend $131 million retooling the Bowling Green Assembly Plant to build the next-generation Corvette, which has little in common with its predecessors. Only two parts from the 2013 model were carried over: the interior cabin air filter and the rear latch for the removable roof panel. Completely redesigned, the 2014 Stingray is described as the most powerful standard Corvette ever.
With a new lightweight aluminum frame, the sports car is able to accelerate from 0 to 60 mph in less than four seconds. It also is expected to be the most fuel-efficient Corvette ever, exceeding the EPA-estimated 26 mpg of the current model.
For the C7, Bowling Green workers essentially demolished the assembly line and started from scratch, Tatman said. The upgrade included the complete interior and exterior revitalization of the facility, the addition of 250 new full-time employees, and installation of a new body shop to manufacture the car’s aluminum frame in-house for the first time.
“We spent most of the month of March working very aggressively on converting the factory for C7,” Tatman said.
On March 25, the plant began a launch process phase Tatman calls “slow build,” which continues today. Workers are building C7 models at a very slow rate “so all of our employees can learn their jobs and can identify and resolve issues as they occur on the line,” he said. The vehicles manufactured during the training process will not be sold.
“It’s all designed to get us ready so that once we decide officially to launch the retail cars at line rate, we will be ready to go to build a world-class sports car at world-class quality levels,” Tatman said.
The 2014 Corvette is expected to go on sale in the third quarter of 2013. Slightly more expensive than its predecessors, the coupe will start at $51,995, and the Stingray Convertible will start at $56,995. That’s about $1,400 more than 2013 Corvette models.
Early next year, as part of a consolidation of GM Powertrain engineering sites, GM’s Performance Build Center will reopen in Bowling Green, a $3.5 million investment that brings with it 20 new jobs. Relocation of the center from Wixom, Mich., goes hand-in-hand with production of the next-generation Corvette, and it might lead to additional tourism opportunities in South Central Kentucky, Tatman said.
The center currently builds the 6.2L LS3 V8 engine, which powers the Corvette Grand Sport Coupe manual version; the 7.0L LS7 V8 engine for the Corvette Z06; and the 6.2L Supercharged LS9 engine for the Corvette ZR1. Eventually, Corvette customers will be able to combine watching their Corvette being built and participating in assembling their vehicle’s high-performance engine.
“We’ll offer the Corvette customer the chance for them to come in and build their own engine. They’ll work side-by-side with a technician. He or she will teach them everything they need to know about building an engine, and they’ll build their engine inside the course of a day,” Tatman said.
“Ultimately, my vision is that we could have a Corvette customer come to Bowling Green, build their engine on a Monday and within a day or two after that we’ll be putting it in a Corvette for them. No one else can offer that kind of experience, and we’re pretty excited about the prospect.”
Tatman’s oft-cited motto works well with the customer-experience concept: “We don’t build cars, we build dreams,” he says.
Louisville a Ford powerhouse
Ford has not yet released many details about its plan announced last year to overhaul the Kentucky Truck Plant, but Kristina Adamski, manufacturing and purchasing communications manager at Ford Motor Co., confirmed last month that the project will entail “overall facility upgrades to support future product growth.” Construction will begin in early summer and continue throughout 2014, she said.
The 6 million-s.f. truck plant produces the workhorse Ford F-250 through F-550, Super Duty pickups, Ford Expedition and Lincoln Navigator. The F-Series boasted sales of more than 645,000 in 2012, continuing a run as the best-selling vehicle in America for 31 straight years.
Approximately 3,847 workers are employed there.
While the truck plant undergoes transformation to produce the next generation F-Series (and other vehicles), workers will continue to build its current lineup of vehicles, Adamski said.
“We don’t have anything further to announce at this time regarding Kentucky Truck plant,” she said in late May.
Ford unveiled its transformation of the Louisville Assembly Plant last summer. LAP was converted from producing body-on-frame SUVs into a state-of-the-art facility with 4,400 employees, more than 20 miles of conveyors and nearly 1,000 programmable machines and robots.
“Since August 2012, LAP has been equipped to produce more than 1,300 products daily, running on three crews seven days a week,” Adamski said.
The plant has the flexibility and capability to produce six different types of vehicles at the same time, but currently manufactures only the Ford Escape small SUV, whose 2013 model was a new generation. The Escape’s April sales were the model’s strongest since its launch 13 years ago; Ford reported a 52 percent year-over-year increase.
“In the future, though, we plan to expand the vehicle line-up at the plant, which is part of Ford’s overall strategy to optimize our manufacturing facilities around the world,” according to Adamski.
In February, Ford marked its 100th anniversary of auto manufacturing in Louisville. The company’s tradition in the River City dates to 1913 when Henry Ford began manufacturing the Model T at a small shop on South Third Street with 17 employees. They produced an average of 12 cars a day.
Today, Ford is Kentucky’s largest automaker, employing more than 8,500 workers in two Louisville plants that roll out more than 650,000 vehicles a year. Louisville-made Ford vehicles are exported and sold in more than 140 countries around the globe.
Ford’s impact on Louisville’s economy is significant. The auto industry estimates that for every direct manufacturing job, nine indirect jobs are created. Using that formula, the Louisville Assembly Plant alone has helped produce close to 40,000 jobs in the local community, Adamski said. Add in the truck plant and that’s nearly 75,000 indirect jobs.
In 2009, however, with the U.S. economy and vehicle sales in free fall, Ford’s aging Louisville plants faced an unknown fate – they were candidates for the chopping block like every other Ford facility.
“The dramatic resurgence of the two Louisville Ford plants has been incredibly important to our local economy and to the thousands of Louisville-area citizens who have been hired to work at the auto and truck facilities, which are now in high gear, producing some of the most popular vehicles in the world,” said Louisville Mayor Greg Fischer.
The corporation’s continued investment is supported by strong partnerships at the state and local levels, as well as by Ford’s green partnership with the U.S. Department of Energy, Adamski said. LAP is one of 11 Ford facilities participating in the Advanced Technology Vehicles Manufacturing Loan Program initiated by Congress and implemented by the Obama administration.
“Additionally, Ford and the UAW have a great Local UAW 862 workforce, and we’re committed to the Louisville area for future growth,” she said.
Lorie Hailey is associate editor of The Lane Report. Follow her on Twitter, @loriehailey.