Home » Ford Expanding Region’s Economic Horsepower

Ford Expanding Region’s Economic Horsepower

By Cary B. Willis

Joe Hinrichs, right, president of The Americas, Ford Motor Co., tours the assembly line in December 2015 and speaks with team member LaDrell Whitehead before announcing that a $1.3 billion investment is bringing 2,000 new jobs to Kentucky Truck Plant in Louisville.
Joe Hinrichs, right, president of The Americas, Ford Motor Co., tours the assembly line in December 2015 and speaks with team member LaDrell Whitehead before announcing that a $1.3 billion investment is bringing 2,000 new jobs to Kentucky Truck Plant in Louisville.

Ford Motor Co. is nearing completion of a huge expansion in Louisville, and that is good news for the city and for Kentucky.

In a city that lost thousands of manufacturing jobs in the 1970s and ’80s, where manufacturing was thought to be in permanent decline, Ford’s growth represents an astonishing return to form.

“The type of investment Ford has made is in a category of its own,” Louisville Mayor Greg Fischer said in a recent interview. “And of course, those are good, strong, middle-class jobs. We’re the fourth-fastest city to recover from the Great Recession, and that’s in large part because of Ford and GE.” (Louisville-based GE Appliances – now in the process of being acquired by China’s Haier Group – also has invested significantly in recent years and has hired new workers.)

Todd Dunn, president of Louisville’s United Auto Workers Local 862, said vehicle output could exceed 850,000 vehicles annually at the two plants by next year, and he couldn’t be more thrilled. “We’re the largest union local in all of Ford,” he said – and that includes Detroit. “We build more than just cars and trucks,” he said. “We build the community.”

State officials are equally delighted.

“I can’t think of anything more rewarding than watching a longtime economic partner of Ford’s caliber reaffirm its commitment to Kentucky in such a big way,” said Mandy Lambert, Commissioner of Business Development for the state Cabinet for Economic Development. “And the impact goes far beyond the new jobs. The ripple effect is enormous, as suppliers provide parts and services to Ford, and new employees require housing, groceries, healthcare, schools for their kids and everything else people need every day. All the merchants and other providers these new employees do business with will then spend those dollars to buy their own goods and services, and so on down the line.”

Transportation has been at the core of Louisville’s business identity since its founding during the height of America’s war for independence. From pioneer days through steamboats, from auto manufacturing to the explosion of logistics-based companies such as UPS, Amazon and CafePress, the business of moving people and freight has always been in Louisville’s blood. Maybe that’s why, when it came time to build a new bridge over the Ohio River recently, Louisville paused for a moment and said, actually, let’s make it two.

Louisville’s start, officially marked as 1778 and credited to surveyor and Revolutionary War commander George Rogers Clark, was born of necessity. European explorers and traders plying the Ohio were forced to stop on its shore to avoid smashing their boats and risking death in the only falls – or more accurately, rapids – interrupting the Ohio’s otherwise placid, 981-mile course westward to the Mississippi. For decades, travelers had to unload their river boats and reload them downriver to avoid the falls. That often meant overnight stays, which led to business opportunity, which led to permanent residence.

A canal was built in 1830 to bypass the falls and ease navigation on the Ohio, and by that time the arrival of steamboats had accelerated the city’s stature as a major trade center and greatly boosted its population.

River traffic was slow, however, and railroads and automobiles were fast on its heels. In 1913 Henry Ford opened the city’s first automobile assembly operation at 931 South Third Street, employing 17 people who built a maximum of 12 Model T’s per day.

Fast forward another century, and Ford Motor Co. is investing $1.3 billion and adding 2,000 employees to its 47-year-old Kentucky Truck Plant (KTP)on a 413-acre site in the city’s eastern suburbs. Ford’s investment includes an all-new body shop, facility upgrades and retooling to build the new, aluminum-body, F-series Super Duty pickup truck.

This is in addition to an $80 million investment in 2014 to meet growing demand for the F-250, F-350, F-450 and F-550, resulting in 350 new jobs, plus another $129 million investment (and 300 more jobs) to support Lincoln MKC production at the older Louisville Assembly Plant near the airport on the south side of town. The latter plant dates to 1955, and in 2012 it underwent a $600 million revamp to a flexible design so it could produce up to six different models at once – including the redesigned Ford Escape.

The upgrades – now nearly complete – bring total employment at Louisville’s Ford plants to just under 13,000, including nearly 8,000 at KTP. The two plants combined produce more than 2,000 vehicles per day, according to Ford spokeswoman Kelli Felker.

Indeed, a report last June from the University of Louisville’s Urban Studies Institute on the economic impact of the automotive industry in Kentucky said that for every automotive manufacturing job created, another three-plus jobs are created in the broader economy. “These are among the largest employment multipliers of any industry in the state,” according to the report. “Combining assembly and parts manufacturing,” the report says, “the economic contribution of automotive manufacturing is 136,500 jobs, $14.3 billion in gross state product and over $6 billion in payroll.”

The report estimates that Ford and its suppliers in the Louisville area contribute $3,900 per job in income taxes and sales taxes to the state’s economy. All told, the report says, automotive manufacturing in Kentucky provides the state $488 million in such taxes. The industry provides another $116 million in local occupational taxes, with more than $50 million of that created in Louisville alone. According to the report, the average automotive manufacturing worker in Kentucky earns about $58,280 per year.

The real deal on real estate

Some of that money, of course, goes to housing. With inventory unusually low, the real estate market in Louisville these days is already “very hot,” especially for houses priced below $250,000, said Judie Parks, broker/owner of Berkshire Hathaway HomeServices Parks & Weisberg and an official with the Greater Louisville Association of Realtors. The heat will only rise with the Ford expansion, she said – although exactly how much is anyone’s guess.

“I do know that people already have purchased houses because of this expansion,” Parks said. Still, she said, the full impact on home purchases might not be felt for two or three years, after new workers have had time to save up for a down payment. Since many of the new Ford employees are just starting their careers, some will be moving out of Mom and Dad’s house into an apartment of their own – or will move from their first apartment into a nicer apartment.

Parks said there is already an uptick in rental demand, and two large new developments totaling almost 600 apartments now under construction on Westport Road a few miles west of the plant might be just the ticket for some Ford workers.

But Parks said the benefits of Ford’s growth will spill across the entire community, not just near the plant.

“Whenever a company does expand, it always helps the entire local economy and real estate market. It gives consumers confidence, even if they don’t work at Ford,” she said. “They might see their neighbor doing better and go out and buy new appliances.”

Dave Tatman, executive director of the Kentucky Automotive Industry Association, said the optimism that comes with new hires is contagious.

“It’s what I call the ‘halo effect,’ affecting more than just those who get the new jobs,” he said. “I might feel better about the economy and decide to buy a new house, a new boat, a new car. A rising tide floats all boats.”

Kentucky’s powerful appeal

It’s not just Ford either. The auto industry throughout the rest of Kentucky is in serious growth mode as well. General Motors has added 316 new jobs and invested a total of $617.5 million since 2011 in its Corvette assembly plant in Bowling Green. Toyota Motor Corp. last fall rolled its first-ever U.S.-made Lexus, the popular ES 350, off its assembly line in Georgetown, creating 750 new jobs on a $360 million investment. The plant, which opened in 1988, continues to produce Toyota’s perennially best-selling Camry and its flagship sedan, the Avalon.

So why Kentucky?

The Urban Studies Institute report says Kentucky has plenty to offer Ford and other automotive manufacturers, including:

• Location – “Auto Alley” has been shifting south from Detroit for decades, and Kentucky has consistently promoted the fact that it’s within a day’s drive of most of the population centers of the eastern U.S.

• Highways – A 2006 industry study noted that the presence of interstates and other limited-access highways significantly increases the likelihood of a manufacturing plant locating there. A strong rail network and access to river transportation are also important. Kentucky has all of the above.

• Utility costs – As of 2014, Kentucky’s cost of industrial electricity was the fourth-lowest in the nation.

• State incentives – Kentucky benefits by offering packages to employers that subsidize training for potential workers through the community and technical college system.

• Momentum – Now that the automotive industry is well established, the decision to move or stay here is made easier.

Just as important as the four major assembly plants turning out finished vehicles are its suppliers, which now total close to 490 across the commonwealth. While most of the manufacturing is clustered around Louisville, Georgetown-Lexington and Bowling Green, 80 of Kentucky’s 120 counties can claim at least one automotive facility.

In 2015, the Kentucky Automotive Industry Association says, suppliers of parts, services and technologies announced 75 investments in the state, creating more than 2,500 new jobs. “It’s testimony to the health of the automotive industry in the state,” Tatman said.

Aluminum: Let there be light

One reason for the growth of suppliers is the emergence of aluminum in vehicle bodies. With its F-series pickups, Ford was among the first mass-consumption automakers to begin transitioning from steel to more lightweight aluminum in order to meet new government fuel-efficiency standards. The shift means a boon to Kentucky’s already vital aluminum industry.

A story in the Wall Street Journal last year said the growing use of aluminum in American vehicles – led by Ford’s F-series trucks – was a “transformational” event that led Netherlands-based Constellium NV, one of the world’s biggest aluminum companies, to shift its focus to the United States from Europe and build a $150 million plant in Bowling Green.

In October of 2014, Aleris, a worldwide company that had been producing automotive body sheet in Belgium for high-end European vehicles for over a decade, broke ground on a $350 million expansion of its Lewisport rolling mill in Hancock County to equip the site with the additional heat treatment and finishing capabilities necessary.

And a major Japanese metal producer, Kobe Steel, announced just last month that it would build an aluminum-fabrication facility next to a sister aluminum-forging plant in Bowling Green. The $46.7 million project is expected to create 105 jobs.

Tatman, who worked for GM for many years before moving to the industry association, said aluminum is not new to automobiles, but new technologies make the use of aluminum more feasible for lower-priced vehicles now.

By 2025 more than 75 percent of pickup trucks and 20 percent of SUVs and large sedans produced in North America will be aluminum-bodied, according to the Urban Studies Institute’s report. This represents an aluminum body sheet content 10 times greater than 2012 levels, “with even more room to grow beyond 2025,” the institute said.

Louisville’s economy is far more diverse than it was 50 years ago, with healthcare, logistics, food service, bourbon production and more all sharing the limelight today. But manufacturing is stronger – and more sophisticated – than ever.

“We’ve got about 75,000 jobs in manufacturing now,” Fischer said. While some manufacturing jobs require a college diploma, others do not. “People in high school say, ‘Well, I want to work with my hands.’ Ford is a place you can go and have a stable, middle-class job for the rest of your life.” ■

Cary B. Willis is a correspondent for The Lane Report. He can be reached at [email protected].