North American Reports: Alabama, Kentucky, Kansas, Site Selection Magazine, March 2003

From Site Selection magazine, March 2003

NORTH AMERICAN REPORTS

Edited by ADAM BRUNS

HIGH-STAKES HOPSCOTCH: The parcel outlines for major Hyundai suppliers, like the one above for Mobis in Montgomery, are being chalked out across Alabama.

Cars Fall on Alabama: 430-Worker Mobis Plant Starts Hyundai Supplier Surge

by JACK LYNE

he enduring ditty etched on Alabama's license plates has it wrong: It's not that song's stars that are falling on Alabama right now. It's cars.
Current case in point: the 430-employee, 400,000-sq.-ft. (36,000-sq.-m.) plant that Hyundai Mobis has decided to build in Montgomery. Mobis's first U.S. production operation, the facility will make instrument panels and front and rear chassis assemblies for Hyundai's US$1-billion, 2,000-worker plant, now rapidly taking shape on a nearby 1,744-acre (698-hectare) site.
Moreover, Mobis marks the start of a major surge. The project represents only the initial Tier-1 trickle in the supplier tsunami on tap from the big stone that Hyundai's plopped into Alabama's pond. As many as 14 more Tier-1 Hyundai supplier plants are coming to Alabama, state officials estimate – and soon. Hyundai, which chose its own Montgomery site in April of 2002, has set a hard June 2004 deadline for initial production tests at the automaker's first U.S. manufacturing operation.
Accordingly, Mobis is moving rapidly. It will break ground in March at the 82.2-acre (33-hectare) site it selected in Airport Industrial Park, says Hee Man Rhyoo, director of Hyundai Mobis Detroit, the Korean parts supplier's U.S. arm. The $30-million plant will be operational by May 2004.

A Careful Site Search

Early on, Mobis's close ties with Hyundai made it the odds-on favorite to be the first Tier-1 supplier to announce its location serving the Alabama auto plant. Hyundai Mobis, Hyundai Motor Co. and Kia Motors make up the Hyundai Automotive Group.
Seoul-based Mobis, in fact, began its site search in the spring of 2002, soon after Hyundai announced that it would build its plant in Montgomery, Rhyoo says. The parts supplier, though, put considerable care into determining exactly where it would locate. Mobis's project team visited the Montgomery area 10 times, according to Mayor Bobby Bright.
In the end, the search narrowed down to two sites: the Airport Industrial Park tract, located only a few miles from the Hyundai plant, and an 80-acre (32-hectare) site in South Industrial Park in Prattville, some 13 miles (21 km.) northwest of Montgomery.
The Montgomery site offered Mobis lower-cost, higher-speed delivery of its sections for Hyundai's Santa Fe SUVs and Sonata sedans, Rhyoo explains. The company also liked the site's transportation links, with an I-80 exchange and the Montgomery Regional Airport positioned nearby, he says.
Mobis in Montgomery is also getting some $1.1 million in local-area incentives, including discounted land, water and sewer extensions to the site, and site preparation, according to Montgomery Area Chamber of Commerce officials. In addition, Mobis's workers will be trained gratis through the Alabama Industrial Development Training Institute.

State No. 3 by 2005

Mobis is only the latest manifestation of the state's ascending supernova in the auto-making galaxy.
Not until 1997 did the state even manufacture a single vehicle. Very rapidly, though, Alabama became a major force in the U.S. Car Wars, after landing DaimlerChrysler in Vance in 1993 and Honda in Lincoln in 1999. The state now ranks No. 6 in total auto production, according to newly released Alabama Automotive Manufacturers' Association (AAMA) research. Moreover, by 2005 the state will rank No. 3, the AAMA is projecting. By then, Alabama will have muscled up to the capacity to churn out 760,000 vehicles – only 10,000 less than No. 2 Tennessee's projected tally.
As Mobis readies its Montgomery plant, Alabama's auto-manufacturing beat goes on. Mercedes is spending $600 million to double capacity in Vance, while Honda is doling out $425 million to double the Lincoln operation's output. And a host of other recently announced supplier expansions are under way in Alabama. Just after opening, U.S.-Japanese joint venture KTH Leesburg Products in December announced that it's adding 125 new employees in a $60-million, 145,000-sq.-ft. (13,470-sq.-m.) expansion of its Leesburg plant, which makes steel frame components for Honda's Alabama plant. German-based Benteler Automotive in late December announced that it's building a new 150-employee, 144,000-sq.-ft. (12,960-sq.-m.) plant in Opelika.
Borgers, another German firm, announced a new 70-employee plant in December, this one supplying the nearby Mercedes plant from a Tuscaloosa location.
In other words, the cars keep falling on Alabama.

If You Want the Best Jam, You've Got to Make Your Own

Orrville, Ohio-based J.M. Smucker Co. had already made its entry into Kentucky with the June 2002 purchase of the Jif and Crisco brands from fellow Ohio company Procter & Gamble, thus acquiring the operation of the Jif peanut butter manufacturing facility in Lexington. In December, the company decided to go for another spoonful, announcing the building of a $51-million factory in Scottsville for the making of the company's popular Uncrustables line of sandwiches, first unveiled in 2000. The small town of 4,700 in the south-central part of the state will see groundbreaking this spring, with production scheduled to begin in spring 2004 with an initial payroll of 150.

Two Pick Kansas for Growth

The hospital products division of Abbott Laboratories has chosen to expand at this facility in McPherson, Kan., as well as a similar facility in Rocky Mount, N.C., driven by both an abundance of good labor and shortages of high-demand injectable products.

Mailbox maker Auth-Florence Manufacturing has a new address: Corporate Drive, Corporate Technology Park, Manhattan, Kan. That's where the Chicago area-based firm, which specializes in high-security commercial and residential cluster mailbox units, will locate a $10-million, 250-employee plant, scheduled to begin production by the end of 2003.
Executives with the 68-year-old family-owned business considered dozens of locations in five Midwestern states. They found that the state of Kansas was perfectly situated – and its work force ideally suited – for the facility. The 190-acre (77-hectare) Corporate Technology Park is next door to the Manhattan Regional Airport, and the Sunflower State's central location fits with the company's distribution plans.
In addition to a state incentive package, The City of Manhattan offered its own. Foremost was industrial revenue bond financing, which includes tax abatement on real and personal property, equal to the company's initial project investment of $10 million. Then comes a forgivable loan for 25 acres (10 hectares) of land and special assessments at the site location, as well as certain relocation expenses. The proposal is contingent upon the company attaining agreed upon contractual performance provisions and approval by the Manhattan City Commission.
Besides such clients as the Empire State Building and the John Hancock Building, Auth-Florence counts Manhattan's Kansas State University as a customer – perhaps the key connection to bringing the company out to the prairie.

No Shortage of Good Work

Another Illinois company is also making itself more at home in Kansas. Abbott Laboratories, best-known lately in corporate real estate circles for its donation of its shuttered facility in Laurinburg, N.C., to the local development agency, will be investing more than $50 million in an expansion of its biologics and injectables facility in McPherson, Kan. Up to 150 new jobs will be created by the growth, which was helped along by the recent vote by city commissioners to authorize up to $100 million in industrial revenue bonds to support a plant expansion.
The existing 300,000-sq.-ft. (27,870-sq.-m.) plant will see an additional 80,000 sq. ft. (7,432 sq. m.) of manufacturing, lab and office space come on board by 2005. Abbott's Hospital Products division bought the 25-year-old facility in 1997, and has added more than 100 positions in the past year. The increase in capacity will also help the company's One2One pharmaceutical outsourcing business.
Plant Manager William Gately credited the strong sense of commitment evident in the Abbott employee base, as well as quality of life and business climate, for strongly influencing the decision. Company spokesperson Tareta Adams cited recent shortages of certain hospital injectables as another motivating force. But there is an abundance of praise for the McPherson work force.
"They have come through very consistently for the company," Adams says, praising the team's ability to see projects to completion.
Driven by the same business factors, the same Abbott division just completed a $20-million expansion of its Rocky Mount, N.C., injectables facility, adding 26,000 sq. ft. (2,415 sq. m.) and 50 new jobs.

Keeping Track?

Eighty percent of companies want to cut costs in 2003, yet 37 percent received no management information on their real estate portfolio and 55 percent had no defined real estate strategy in place in 2002, says a recent survey of global CFOs by Ernst & Young.
"That's a curious position to take toward an item that is typically the second largest cost (after labor) on almost any company's balance sheet," says the firm's annual report on the state of the real estate industry.

It also notes that in the year ahead, roughly 70 percent of projects are "likely to either suffer huge cost overruns or fail to meet construction deadlines because of inadequate project management oversight."
One experienced observer says that manufacturing companies tend to know less than service companies about their real estate because it tends to be controlled internally within each business unit.