Toyota is raising the bar for state’s auto sector

By Abby Laub

Toyota Motor Corp. President Akio Toyoda announces that the Lexus ES 350 sedan will be produced in Georgetown
Toyota Motor Corp. President Akio Toyoda announces that the Lexus ES 350 sedan will be produced in Georgetown

As if Kentucky’s world-renowned automotive industry needed any more notoriety (it didn’t), now the Bluegrass State is about to boast a new popular luxury vehicle that’s homegrown.

“Our team in Georgetown has always been committed to building great cars,” said Rick Hesterberg, external affairs manager at Toyota Motor Manufacturing Kentucky, of the imminent production of the gas-powered Lexus ES 350 sedan, which begins next month at TMMK. “The Camry is a testament to that commitment with 13 years straight as America’s best-selling car. But bringing Lexus to Georgetown raised the bar and has challenged our team to do even better.”

The sixth generation of the Lexus ES 350 was unveiled in April at Auto Shanghai. Since its 1989 introduction, the ES has sold 1.7 million units worldwide. Made until now only in Japan, it goes into production in October at TMMK in Georgetown, which expects to produce 50,000 annually.
The sixth generation of the Lexus ES 350 was unveiled in April at Auto Shanghai. Since its 1989 introduction, the ES has sold 1.7 million units worldwide. Made until now only in Japan, it goes into production in October at TMMK in Georgetown, which expects to produce 50,000 annually.

The sporty luxury sedan’s production in Kentucky marks the first time a Lexus has rolled off a line outside of Japan. TMMK added 750 jobs for ES manufacturing and spent $531 million to grow its plant 307,310 s.f. to accommodate an addition to its already wildly successful family.

“Adding production also attracts more business for our supply base across the commonwealth and adds to the tax revenues for the local economy,” Hesterberg said. “Kentucky is already third in the U.S. in overall vehicle production, and with the addition of Lexus volume should get closer to the No. 2 spot.”

Built on the same platform as the Camry, the ES 350 is a sporty, entry-level luxury vehicle, according to automotive information website Edmunds.com. It offers comfort and lots of optional amenities to go with a V6, 268-hp engine. U.S. sales topped 72,000 in 2013 and 2014 after averaging 51,600 in the 2008-2012 slowdown and post-recession years. The 2016 model will be the sixth generation of ES.

“The ES attracts large numbers of (U.S.) buyers,” according to goodcarbadcar.net, “simply because it’s an ES: refined, quiet, smooth, affordable, sufficiently powerful, in possession of a legendary reputation for reliability, and sold in customer-oriented dealerships.”

Toyota’s announcement a couple of years ago that it would introduce non-Japanese production at TMMK was a “proud moment” accompanied by “much responsibility,” Hesterberg said. Kentuckians are expected to roll 50,000 ES 350s off the line annually.

“From a business standpoint, the decision to build the ES in the U.S. is consistent with our strategy to assemble products in the regions where we sell them,” he said. “The ES was built for this market.”

Kentucky ranks 3rd in U.S. vehicle production

The automotive market for buyers and sellers in Kentucky has a lot going for it. According to the Kentucky Automotive Industry Association, the state is home to more than 460 motor vehicle industry facilities, which include four major auto assembly plants, employing nearly 85,000 people full-time in the state of Kentucky.

In 2014, 1,276,557 vehicles rolled off Kentucky assembly lines, and $5.5 billion in Kentucky-made vehicles and parts were exported. Kentucky ranks third in the United States in light vehicle production – behind Michigan and Ohio – but is first on a per capita basis.

Those are numbers to be reckoned with, and KAIA Executive Director Dave Tatman said the notoriety of adding Lexus to those numbers is significant.

“The prestige of building automobiles in the state of Kentucky was already established by building General Motors’s premiere sports car (the Corvette in Bowling Green), but adding Lexus does give us the full scope of the automotive industry,” he said. “We have covered all the bases, and that’s a really good thing.”

Larry Hayes, secretary for the Kentucky Cabinet for Economic Development, said there is much excitement in the commonwealth about Lexus production and the ripple effects it will have on the state’s economy.

“The real proof of success is when a company that has been in Kentucky (30 years) chooses to expand here,” Hayes said. “Toyota has chosen to expand here time after time. That would not have happened if Toyota were not being successful. That speaks volumes about Kentucky’s economy, its workforce, its economic development programs, its economic environment and a company’s potential for success here. To consider that Toyota would build its top quality model – the Lexus – is the ultimate compliment for what we’ve been trying to accomplish.”

Accompanying the 750 jobs in the Georgetown expansion, he said, are many more jobs outside of TMMK.

“The impact goes way beyond the 750 jobs at the plant, although the direct impact of that is huge,” Hayes said. “There are 750 more families that now have financial stability. Those families now have the resources to buy houses, food, medicines, gas, entertainment, etc., in the communities in which they live.

“Those communities benefit from the extra spending, which, in turn, allows them to hire more people to handle the additional business. The effect grows the economy in other communities. And since Toyota attracts workers from 77 of Kentucky’s 120 counties, the impact throughout Kentucky is huge.”

And, he said, the investment further attracts new businesses to supply the parts the company will need. Toyota already has 100 supplier companies in Kentucky, 15 of which are in Scott County. The numbers of companies should only increase, which grows the Kentucky economy even more.

Tatman said technology advances related to producing new vehicles also are important and will serve Kentucky’s automotive industry well. Kentucky is ahead of the curve, and often setting the bar, for manufacturing technology, which is part of why Lexus came here to begin with.

“Fundamentally, Toyota set the bar in terms of manufacturing processes about 30 to 35 years ago when they started building Toyotas in North America. Everywhere in the commonwealth or the world now is running under ‘lean’ manufacturing principles,” Tatman said. “And as we introduce new models like new Lexus or Corvette, there are variations.”

So not only is there a chance to manufacture and export new luxury vehicles, now the commonwealth can fine-tune its collective manufacturing processes and existing developments even more.

The beauty of adding Lexus to TMMK, he pointed out, is that it’s growing an already successful facility.

“You don’t want to forget your existing businesses,” Tatman said. “I think Kentucky does a terrific job of creating an environment of expansion to our locations. … We constantly work on attracting new business, and we’ve been very successful with that over the past seven or eight years.”

Adding new jobs to existing businesses has an enormous economic impact that will last for years to come.

“With every automotive job that we create in the commonwealth, it creates 3.5 other jobs in other parts of the economy. So it’s a huge economic engine,” Tatman said.

One of every 13 jobs in the state of Kentucky is related to the automotive industry, and the sector has $14.3 economic impact on the state’s GDP.

Additionally, other manufacturing sectors will continue to look to Toyota and the standards it sets. State and local economic development officials hope they will choose to locate their new or expanded facilities here, too.

“Success breeds success,” Hayes said. “When we have companies such as Toyota make such investments in Kentucky over and over, it’s proof we have the environment that businesses look for. We can – and will – recruit new industry and support existing businesses as they expand. Being able to point to Toyota as an example of success is a huge advantage.”

The state continues to partner with Toyota. As well as staying connected with TMMK President Wil James, officials in the Governor’s Office and Cabinet for Economic Development often travel to Japan for face-to-face communication with the company’s leaders.

“The Kentucky Economic Development Authority approved (tax) incentives of $146.5 million for Toyota for both the Lexus investment and an additional $171 million in improvements to the Toyota plant,” Hayes said. “It’s important to note that our incentives are performance based: That means Toyota must make the investment and hire the workers before they can start accessing the incentives.”

Lexus production is about to begin in Georgetown, but there still are improvements that can be made in conjunction with the new high-standard vehicle and in the broader, connected realm of advanced manufacturing growth in the state as a whole. For example, public and private leaders usually say first that the issue of ensuring an ongoing workforce pipeline is real. There is a big need for more workers with the skills to man today’s – and tomorrow’s – increasingly technical production lines.

“Kentucky’s unemployment rate has been below the national average for months,” Hayes said. “That is why we have spent so much time and effort on workforce training. Through the Kentucky Skills Network, and with such programs as KY FAME (Kentucky Federation of Advanced Manufacturing Education), which is an apprentice-type program, we are telling companies, ‘Look, we will work with you to find qualified workers, and we will provide the programs needed to ensure that they are properly trained.’

“Our workforce training programs are attracting national attention for their success, and companies have noticed,” he continued. “Last year alone, we trained 84,000 employees and assisted 4,100 companies.”

Toyota has adopted the Advanced Maintenance Technician training regimen developed at TMMK in conjunction with Bluegrass Community Technical College at all of its North American plants, and the KY FAME model is being used in other auto manufacturing states such as Alabama.

Tatman added that workforce shortages are the single biggest problem faced by the automotive industry in the Kentucky and North America.

“They’re great careers. They’re really not jobs, they’re careers,” he said. “If you choose to get into the automotive industry, you can make a living there for a very long time. Most of our youth and their parents think that manufacturing is dirty, dark and dangerous and it’s not. These are well-lit, well ventilated, ergonomically sensitive jobs with good pay and good benefits.”

He also cited KY FAME and other programs as being “way out in front and doing some things that are really innovative” collaborations between education, innovation and in some cases, government.

Progress is being made in building the workforce pipeline, thanks in large part to what Toyota initiated in partnership with the Kentucky Community and Technical College System. Now the entire manufacturing sector is reaping the benefits, and more jobs are becoming available to more people.

The demand for jobs will no doubt be met by the rising demand for more automotive manufacturing opportunities, like Lexus ES 350.

“All economic forecasts that I’ve been a part of or that I’ve seen would suggest that the North American automotive industry will continue to grow at a slower pace (than in the past few years as it rebounded from the deep sales drop in the 2008-09 recession), but at a pace that maxes out around 18 million vehicles a year, which is way beyond what we were at back in the worst of the recession.”

That growth forecast extends to the global market also, with Kentucky helping supply many of the parts, vehicles and skills for the world’s automotive sector.

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