Engines revving, Kentucky’s automotive manufacturing industry has shifted into overdrive. The state now ranks third in the nation for light vehicle production, and with two new models set to go into production, commonwealth automakers are seeing nothing but green lights ahead.
U.S. auto sales were reported at 15.6 million in 2013 with the latest forecasts for 2014 at around 16.5 million. Global sales were nearly 83 million in 2013 and are on track to hit 100 million in 2018, according to reports citing consultant IHS Automotive.
Advanced manufacturer training programs are being fine-tuned and implemented across the state to ensure there are enough skilled workers to keep driving the vehicle production status. One of those programs at Lexington-based Bluegrass Community and Technical College is getting a new facility across the street from Toyota Motor Manufacturing Kentucky (TMMK) in nearby Georgetown and is being modeled in other areas of the state.
In the past five years, Toyota, General Motors and Ford have made major, multi-million investments in their Kentucky facilities, modernizing and expanding to accommodate the production of new vehicles. (To put this in context, five years ago the auto industry was almost in collapse, with annual sales having plunged from more than 16 million to 10.4 million, production plants closing in historic numbers and bankruptcy a real possibility for GM and Chrysler.)
Since 2010, nearly 300 motor vehicle-related projects have been announced in Kentucky, representing more than 17,600 new jobs and $4 billion in new investment. In 2013, nearly 35 percent of new investment and almost 30 percent of new job announcements came from motor vehicle-related projects.
Statewide nearly 460 motor vehicle-related establishments employ nearly 82,000 people. Kentucky motor vehicle exports reached a record $5.5 billion last year. With their vehicle production plants as the cornerstones, Louisville and Lexington in 2011 initiated the long-term Bluegrass Economic Advancement Movement project to jointly become a world center of advanced manufacturing known for the superior quality of products crafted there.
It’s been an amazing few years.
Last summer, Ford announced plans to retool its Kentucky Truck Plant. This comes on the heels of Ford’s $600 million investment in the Louisville Assembly Plant, which transformed it into the company’s most flexible high-volume plant in the world and allowed it to produce the all new Ford Escape.
GM recently rehabilitated its Bowling Green Assembly Plant to manufacture the next-generation Corvette, and Toyota announced it would begin building the Lexus ES 350 at TMMK in 2015.
Overall, manufacturers in Kentucky produced 1.2 million light vehicles in 2013, only 200,000 vehicles behind No. 2 Ohio, according to the Kentucky Cabinet for Economic Development. That production volume easily makes Kentucky the No. 1 state in auto production per capita.
There has been much focus on sustaining and accelerating that growth. Earlier this year, the state created the Kentucky Automotive Industry Association, which will raise awareness of and advocate for the light-vehicle manufacturing sector, create workforce development opportunities, and aggressively recruit workers and operations to the commonwealth. It brings together public officials and representatives of private manufacturers and suppliers to exchange ideas and identify challenges to growth.
Developing an ear for opportunity
“In a relatively small state, the auto industry is a huge economic force for us, so we’re trying to create more recognition of the industry and collaboration among all the parties,” said Larry Hayes, secretary of the Cabinet for Economic Development. “From the economic development standpoint, the more awareness we can get of Kentucky being a major player, particularly by foreign direct investment opportunities, the better.”
Hayes recounted a crunch-time conversation between Gov. Steve Beshear and the president of an auto component supplier whose Kentucky plant was 25 years old and needed an upgrade. The executive told the governor he could relocate to another state and receive incentives as a new industry, but because the company had been in Kentucky so long, it wasn’t eligible at the time for incentives for new equipment and training.
“That’s the kind of forum we want to create (with KAIA), so we can listen to our existing companies and give them an opportunity to talk to us at the state level about the opportunities they see and the future of the industry,” Hayes said.
Kentucky’s centralized location makes it an attractive spot for automotive suppliers to locate to reach customers in surrounding states. Recent news about recalls and production interruptions from natural disasters such as the tsunami in Japan have shone the spotlight on manufacturers’ supply chains.
“Everyone has become very sensitive to the centrality of their supplier base and who their suppliers are buying from,” Hayes said.
Business investment incentives enacted in June 2009 continue to attract automotive investment. In May, the Warren County Fiscal Court donated land valued at $2.7 million and authorized $160 million in revenue bonds to support construction of a plant for aluminum companies Constellium N.V. of Europe and UACJ Corp. of Japan. Vehicle makers increasingly are opting for aluminum’s lighter weight over steel’s strength to improve performance and fuel efficiency.
The companies expect to invest more than $155 million in the Warren County aluminum plant, which will employ 80 people with average salaries of $65,000. That’s an even larger investment than the 2013 announcement by shock-absorber maker Bilstein of a $120 million plant in Bowling Green, which was the state’s third largest capital investment that year.
On July 22, the Kentucky Chamber of Commerce’s annual meeting will feature keynote address, “The Future of the Auto Industry and Kentucky’s Economy,” by Wil James Jr., president of TMMK.
Manufacturers investing in the future
General Motors: In Bowling Green, new Corvette plant manager Jeff Lamarche said the facility is producing 170 new Corvette Stingrays daily, five days a week. GM spent $131 million preparing the 1 million-s.f. plant to produce the new model, including a new $52 million body shop that enables workers to fabricate the aluminum frame in-house for the first time.
GM invested $3.5 million to relocate a high-end engine facility from Wixom, Mich., to Bowling Green. The Performance Build Center is turning out souped-up engines for the Camaro Z/28 now and will add the Corvette Z06 engine early next year. It will include a line where car buyers can help build their own engines.
Although the Bowling Green Assembly Plant is running at capacity right now, soon it will start producing the Z06 Corvette, a high-performance model that has auto enthusiasts salivating.
“We’re curious ourselves where the Z06 production will fit, since we’re building all the Corvettes we can right now,” Lamarche said.
To gear up for the Corvette, GM added about 400 jobs, mostly with transfers from other plants, which grew its Kentucky workforce to nearly 1,000 people, Lamarche said.
Ford Motor Co.: Ford’s history in Louisville dates to 1913, when 11 employees started assembling pre-manufactured vehicles. Today, Ford employs nearly 9,000 union and management workers there in two plants.
About 4,200 work at the Kentucky Truck Plant, which was built in 1969. In January, Ford announced it would invest $80 million and create another 350 jobs to meet demand for F-250, F-350, F-450 and F-550 Super Duty pickups. The upgrades and retooling were designed to deliver a 15 percent increase in production capacity, or an additional 55,000 units per year.
The plant also makes the Ford Expedition and Lincoln Navigator sports utility vehicles. With production increasing, Ford officials expect the plant to build its 5-millionth Ford F-Series Super Duty sometime in 2014.
“Ford has been the No. 1 seller of trucks for the past 37 years, and that’s a good testament to job security for those folks in the plant,” said Kristina Adamski, Ford’s manufacturing communications manager.
The 3.1 million-s.f. Louisville Assembly Plant dates to 1955 and in 2012 underwent a $600 million revamp to a flexible design so it could produce up to six different models at once. Ford can retool a line within weeks rather than months to respond to changing consumer preferences.
Right now it’s concentrating on the popular Ford Escape crossover SUV, but soon will initiate production also of the Lincoln MKC, a brand new compact SUV for the venerable luxury nameplate, according to Adamski.
In 2012, the company increased its LAP workforce by 1,800 jobs and added a third shift to bring employment to about 4,400. Since the plant revamp announcement, several major Ford suppliers have invested more than $56 million in Kentucky and created 900 jobs to support the Escape and other production requirements.
LAP’s flexibility allows it to add the Lincoln MKC to its line and meet that luxury nameplate’s quality standards.
“They hold their quality to the highest standard, and those employees have been through a lot of training and have had a lot of visits from Lincoln’s leadership to make sure they’re ready to build the right vehicle in the right way for the right luxury customer,” Adamski said.
Toyota: The Toyota Camry rolling off the line at TMMK in Georgetown has been the most popular vehicle in the United States for many years and drives stability among another 110 suppliers in the state. TMMK also builds the Camry Hybrid, Avalon, Avalon Hybrid and Venza and manufactures four-cylinder and V6 engines.
“That drives a lot of job growth,” said spokesman Rick Hesterburg, “and that doesn’t count service providers and vendors we use for other things – and that’s just from the parts supply perspective.”
The commonwealth’s auto sector experienced one significant reversal when Toyota announced its was relocating the its North American administrative headquarters employing 1,600 in Erlanger to Plano, Texas – where the leading Japanese vehicle maker also is consolidating sales offices from California and engineering research from Michigan.
The net Toyota job loss to the Kentucky will be mitigated by gains in other areas. The Georgetown plant next year will produce the first Lexus models built in the United States, and that is creating about 750 jobs. Also, Hesterburg said, about 300 Toyota engineers relocating from Northern Kentucky and Michigan will come to Georgetown rather than Texas.
Adding the Lexus ES 350 model was real coup for the Scott County plant as it will be the first time any of the premium nameplate’s vehicles will be built outside Japan. The company is investing $360 million to turn out an expected 50,000 additional vehicles per year. Production is expected to start in the fall of 2015.
“Winning the Lexus project was a boost for us and a realization of a workforce that’s matured and proven itself to be able to take on a prestigious product like the Lexus,” Hesterburg said.
Later this year, said TMMK’s James, the plant will launch an updated “mega-changed 2015 Camry.” This will increase production at the plant also, he said.
“With any new or redesigned model, we are accustomed to increases in production, but the buzz surrounding the next generation Camry is better than ever … and for good reason: We stripped the Camry down to its chassis and rebuilt it from the ground up, raising the bar yet again in the highly competitive mid-size sedan segment,” James said.
Building a better auto worker, too
To ensure a well-trained workforce, Bluegrass Community and Technical College several years ago teamed up with auto companies for classes that give workers both technical and cultural skills to go to work.
About 14 companies participate in the Advanced Manufacturing Technician program in the Advanced Manufacturing Center on Toyota’s property in Georgetown. The program lets students take classes two days a week and work three days a week in the plant.
“The students make money in order to keep down their expenses and get out of school debt-free, and they gain a lot of experience and the schools get to see them work,” said Mark Manuel, vice president for workforce and institutional development at BCTC.
The school is also launching a program with the University of Kentucky’s College of Engineering in which BCTC students who earn associate’s degrees can transfer as sophomores into a four-year engineering degree program at UK.
As part of Kentucky’s economic development incentive package to land the Lexus production at Toyota, BCTC is investing $24 million in a new AMT training facility attached to TMMK.
“Workforce development is an extremely critical issue for all of us in this industry, and BCTC has been one of those conduits for us to channel potential candidates to the program to provide some of the skills needed by candidates to perform the jobs in facilities such as ours,” Hesterburg said.
The AMT worker training program the Kentucky Community and Technical College System developed at BCTC for Toyota has been such a success that at least 10 other states have copied it, with help from KCTCS.
One of the biggest problems facing the industry is a lack of people with the math skills and desire to work in a manufacturing facility. Toyota is facing a wave of retirements from the first hires at the Georgetown plant who have surpassed the 20-year mark, as well as retiring Baby Boomers at other companies.
“We talk with the manufacturers about the pipelines not being full enough,” Manuel said. “We don’t have enough people who want to go into manufacturing, and that’s partly due to their (outdated) perceptions of what manufacturing is like. Today it’s nothing like the plants your fathers or grandfathers worked in.”
Uniting automakers for Kentucky
Meanwhile, the new Kentucky Automotive Industry Association brings together auto manufacturers, suppliers and supporting entities to make the commonwealth an even more prominent automotive powerhouse.
The united front will be crucial in marketing Kentucky’s automotive prowess and moving the industry forward, said Mandy Lambert, commissioner of business development in the Kentucky Cabinet for Economic Development.
“For the first time, these automotive professionals – many of whom are competitors – have volunteered to work together, share best practices and encourage meaningful partnerships that will advance the auto industry now and in the future,” Lambert said. “The KAIA will play a key role in modernizing our workforce, addressing industry challenges and finding long-term solutions. It also will allow us to highlight successes and elevate the state’s contributions to the global auto market.”
Kentucky is, quite simply, the place to build vehicles, she said.
Gary Wollenhaupt is a correspondent for The Lane Report. He can be reached at [email protected]