Ohio

The biggest news to come out of Ohio this year came in late summer, as three automotive industry expansions were finalized. First, General Motors announced it would invest $500 million in a total renovation and expansion of its Lordstown small car plant in Warren (6,890 jobs). Next came the resolution of a public squabble over incentives and job targets that ended with Ford Motor Co. promising to invest $75 million in its Avon Lake manufacturing facility (2,000 jobs). And finally, across the state near Cincinnati, Ford's Sharonville transmission plant will be investing $81 million to install a new manufacturing line, equipment and tooling for the company's TorqShift transmission (2,500 jobs).
        State incentives for the Avon Lake project include $16 million in Business Development Account grants, $3.5 million in Ohio Investment in Training Program funds, $5.6 million in Manufacturing Machinery and Equipment Investment Tax Credits, $6.4 million in Job Creation Tax Credits over a five-year term and $4.5 million in local tax abatements through the Enterprise Zone program.
        "As our dialogue continued, the state did a great job of building flexibility into the incentive package and showing their desire to support us in this highly competitive industry," said Jim Padilla, group vice president, Ford Motor Company.
        That degree of competition lay at the heart of the Lordstown negotiations as well, as GM looked for a way to make small car manufacturing viable. Reid Dulberger, executive vice president of the Youngstown/Warren Regional Chamber, describes the linchpins involved in cinching the deal.
        "I don't know that there were any discrete milestones, with one exception," he says, "the approval by United Auto Workers Local 1112 of the shelf agreement, a labor agreement that only goes into effect if the new plant is actually built. GM has struggled because they lose money on small car production, and they were committed to putting in place a system where that wouldn't happen in the future. The shelf agreement was a critical part of that."
        Equally critical, says Dulberger, has been the leadership of plant manager Herman Moss, a GM veteran who has brought a new tenor to the management of the facility since arriving five years ago from a stint with Saturn.
        "He and the president of UAW 1112, Jim Graham, got to the point where they understood that the future of that plant and all those jobs was dependent on them being able to work together," says Dulberger. "They were able to forge a relationship that allowed them to increase the productivity and increase the quality of the cars every year."
        Among the incentives from the state is $20 million in cash grants, up to $4.5 million in training funds, and a $1.5 million low-interest loan to Trumbull County for a redundant water line to the facility. In addition, the project qualifies for the state's 7-percent manufacturing machinery and equipment tax credit, which has an estimated value of $37 million for this project. The assembly plant has also negotiated a property tax abatement agreement with local officials valued at $60 million.
        "The state came to the table relatively early, was generous, quite frankly, and the package was much higher than what Toledo scored for its Jeep manufacturing plant several years ago," adds Dulberger. His colleague, Business Attraction Manager Walter Good, points out that the project was Gov. Bob Taft's No. 1 economic development priority when he came into office three years ago.
        But first GM had to find a way to make small cars a worthwhile priority.
        "The bottom line is GM told us they couldn't keep losing money on small car production," says Dulberger. "They didn't feel like they could make an entirely new investment in a greenfield site and meet that objective. They are going to in essence retrofit the existing facility while they maintain production of the Cavalier and Sunfire. The building they're in right now is about 2.65 million square feet [246,185 sq. m.] and because of technology improvements since it was put in place in 1956 and because of different production methodologies, they don't utilize all that space today. They are going to shrink the existing manufacturing operation to the minimum amount of space possible, and then they'll start dealing with the vacant part of the building, some of which will be demolished because it's no longer needed. There will be additions to some parts, particularly loading docks to accommodate just-in-time delivery at various places in the building. And this 140,000 sq. ft. [13,006-sq.-m.] state of the art paint line, which they have tagged in the $200-million to $250-million price range, will become an addition to the building. They're utilizing as much of what's there as possible, and they're going to do it and not lose any production."
        "The directive is to not impact the current production," confirms Dan Flores, GM manufacturing spokesman. "Cavalier and Sunfire are two important products for us -- 324,000 cars built last year, at one of the top volume plants in North America. Even from a keeping-product-in-the-pipeline standpoint, we could not have Lordstown down for any time at all."
        At the same time, he admits that it took some time to make the case -- affording an example of how product design and real estate implementation worked hand in hand.
        "The challenge we had, with the expectation of our shareholders, was that whatever we end up doing has to at least have a chance to be profitable," says Flores. "So the entire team went back several times and reworked things, re-scoped the project several times, and finally we got to the point where we did have a business case, where we think there is a chance for profitability."
        The complexity of the process, he says, was compounded by both flexibility goals and the narrow profit margin in the market segment. In addition to the partnership with the community, Flores points to the labor agreement, transportation infrastructure and a local supplier base as keys to the company's decision-making process.
        Supplier Delphi Packard Electric has been established in the area for many years. What has local officials even more enthralled is the nearly 600 acres (243 hectares) near the facility -- flat, cleared and already with full utilities -- that awaits other suppliers looking to be near the refurbished facility. Some two dozen already have paid visits based on the possibility of winning contracts from GM.