Week of August 19, 2002
Blockbuster Deal of the Week
from Site Selection's exclusive New Plant database
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$63M in Incentives
GM Doling Out $500M to Build New Model in North Ohio; Labor Cooperation KeyBy JACK LYNE,
Site Selection Executive Editor of Interactive Publishing LORDSTOWN, Ohio "This is truly the Lord's day,'' said U.S. Sen. George Voinovich (R). "This is truly the Lord's town day."
And it had to be a day for prayerful thanks in Lordstown, Ohio,(www.lordstown.com) as General Motors (www.gm.com) announced last Thursday that it will spend at least US$500 million in refurbishing its huge, 2.65-million-sq.-ft. (238,500-sq.-m.) complex in the North Ohio city. The automaker's half-billion-dollar investment will ready the Lordstown plant to produce a next-generation small car that GM is still developing.
The Ohio plant will begin producing the new vehicle in late 2004. GM has earmarked $25 million of its investment to build a 140,000-sq.-ft. (12,600-sq.-m.) paint shop, which will be an addition to the Lordstown assembly plant. Another $475 million will be spent on new equipment installed in both the assembly plant and the fabrication operation.
"GM's investment in Lordstown signifies that GM will continue to aggressively compete in the very important small car segment," said GM North America President Gary Cowger, who was a plant manager in the Lordstown complex in the mid-1980s.
The news was particularly welcome in the Mahoning Valley surrounding Lordstown, part of the Youngstown-Warren metro area. The area has been stung by several local manufacturing operations' shutdowns. But GM's 7,000-worker Lordstown plant remains the area's economic linchpin.
"Keeping General Motors in Lordstown has been my No. 1 economic development priority," Gov. Bob Taft (R) said while announcing GM's decision at the plant in Trumbull County. "This announcement assures that the Lordstown plant, the cornerstone of the Mahoning Valley economy, will stay in place for many years to come. . . . The Mahoning Valley is turning the corner."
New Technology Means Fewer Assembly JobsBut while landing GM's new model solidifies the future of the Lordstown plant, the new operation will actually employ fewer workers. The cutbacks will affect assembly plant employees, who make up 4,200 of GM's 7,000 Lordstown employees. (The remainder of the work force consists of 2,500 workers in an adjacent fabrication plant, plus another 300 employees in a separate seat-production operation.)
The more modern technology that will be installed, GM officials explained, will require fewer assembly workers at the Lordstown complex, which went online all the way back in 1964.
The automaker hasn't determined the total number of assembly employees it will need in producing the new car. GM, however, in applying for a county real estate and property tax abatement, estimated that the revamped assembly operation would need between 2,500 and 2,700 assembly-line workers. But with the new model still in development, those numbers are only estimates, GM officials cautioned.
Cooperative Labor Stance 'Key' in ProjectEven with the anticipated job losses, however, union leaders welcomed the announcement. United Auto Workers' (UAW) local unions had been trying to land GM's new line for more than three years. With the Lordstown plant's aging work force, retirements will negate many of the lost assembly jobs, Lordstown UAW leaders said.
"This significant investment in GM's Lordstown assembly plant and the metal-stamping facility in the Lordstown complex provide job security for loyal, hard- working UAW members for years to come," UAW International Vice President Richard Shoemaker said.
The union's cooperative stance was a critical element in the new car launch, explained Dan Flores, a spokesman for GM manufacturing.
"A competitive local labor agreement was key with this project, and with the competitive nature of the industry, it always is and will continue to be as we go forward," Flores said.
The union already had a tentative cooperative agreement in place, according to Reid Dulberger, executive vice president of the Youngstown/Warren Regional Chamber (www.regionalchamber.com).
"That new labor agreement only goes into effect if the new model is built in Lordstown, and it didn't supersede the existing agreement," Dulberger said. "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 labor agreement was a critical part of that."
The new pact, Dulberger explained, includes "items like increasing the flexibility of the labor force and removing some of the multiple job descriptions."
A labor agreement had also tentatively commited GM to investing $150 million to refurbish and install new equipment in the fabrication operation. The agreement that GM signed last year with the fabrication workers' union stipulated that the automaker would fund the fabrication improvements if the company later chose to renovate the assembly plant.
Incentives May Total $63M, but
The Buckeye State sweetened the pot for GM's success with a generous package of tax rebates, grants and loans. All told, those incentives could be worth as much as $63 million. Ohio's package includes $37 million in manufacturing machinery equipment tax credits; a $20 million grant; $4.5 million for training; and a $1.5 million low-interest loan to Trumbull County to build a redundant water line to the facility.
In addition, Trumbull County is providing a 10-year, 100-percent real estate and property tax abatement. GM's Lordstown complex was already operating with a 75-percent county tax abatement.
Even with the 100-percent abatement, however, GM's presence will actually provide more funding for local schools. That increase will come as a result of a separate agreement that the automaker entered into with the Lordstown Board of Education. The agreement provides that GM will pay local schools the same total revenue that the district would've received with the 75-percent abatement. On top of that, the automaker agreed to contribute half of the total real estate and property taxes that it would've paid with the 75-percent abatement.
With the new agreement, GM will pay local schools $6.5 million over 10 years, school board officials estimated. That's $1 million more than the automaker would've paid with the previous 75-percent abatement, they said.
New Model Will Use European PlatformThe new small car that GM will manufacture in Lordstown remains an unknown. GM officials offered few specifics, citing competitive reasons for their reticence.
Vehicle prototypes have been developed, but engineering hasn't begun, GM explained. Company officials did say, however, that the new small auto will use the so-called Delta engineering platform that GM uses with Opel, its European subsidiary. Auto analysts consider the Delta platform flexible enough that it potentially could support a wide range of vehicles, including coupes and sedans and, possibly, pickups.
The Lordstown plant currently makes the Chevrolet Cavalier and Pontiac Sunfire. Production of those models will continue until the Ohio complex has been overhauled. Once manufacturing of the new small car begins, the complex will discontinue Cavalier and Sunfire production.
Shorter product life cycles and ever-increasing competition are driving what Flores calls "a significant change in the way we renovate our facilities. We can't afford to have a hiccup on the current production, and we can't afford to have a hiccup as they're preparing for the new product as well. We can't blink. It's a continual race with no finish line."
Keeping the Lordstown operation continually online is particularly important, Flores said. "The Lordstown plant built 324,000 cars last year, making it one of the top three or four volume plants in North America," Flores explained. "Even from the standpoint of keeping product in the pipeline, we could not have Lordstown down for any time at all."
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