March, 2000
  Incentives Deal of the Month
   from Site Selection's exclusive New Plant database

$62.5 Million in Incentives Help Steer
1,500-Employee Hummer Plant to Indiana

"It takes a village to raise a Hummer," said Julie Vuckovich.

And that quip by Vuckovich, who was representing Indiana Rep. Tim Roemer, summed up much of what lay behind the decision by AM General ( to pick the South Bend, Ind., metro as the site of a US$239.5 million, 1,500-employee plant that will manufacture Hummer all-terrain vehicles.

Ken Lindensmith, General Motors program manager for the Hummer, also praised the teamwork that led to the South Bend area's landing the plant. "It's a little bit awesome to me," Lindensmith said of the collaboration on the deal between General Motors (, the United Auto Workers (, and local, state and federal officials. (GM in 1999 acquired exclusive ownership of the Hummer brand name.)

That teamwork also added up to a substantial incentive package, one valued at $62.5 million.

Just how broad the involvement in the deal had been became clear at the project's formal announcement at South Bend's Century Center Recital Hall. Patrick McMahon, executive director of local economic development agency Project Future, began naming the business government, trade and union groups that had played major roles in the landing the plant, asking each to stand and remain standing. By the time McMahon named everyone involved, half of the capacity crowd was on its feet.

AM General and GM officials praised that small village of cooperating groups for keeping the project confidential and for moving quickly to meet corporate location requirements.

Ohio Major Contender

As in every auto manufacturing location project, this one was hotly contested.

"There was strong competition," AM General President Jim Armour allowed at the project's unveiling. The strongest competition came from Ohio, said Gov. Frank O'Bannon, who called the race with the Buckeye State "pretty close." South Bend won out, according to Armour, because "you elected officials said no to any thought of finishing second."

AM General didn't divulge what particular incentives the company was offered by Ohio economic development agencies.

Of the $62.5 million incentive package from Indiana, St. Joseph County is providing $20.7 million for infrastructure improvement funding. County Commissioner Cynthia Bodle stressed that the county made its contribution to the incentives "without raising taxes." The county funds, St. Joseph officials explained, will be raised through tax-increment-financing bonds, general obligations through the county bridge fund and anticipated revenue from the St. Joseph County economic development income tax.

The Indiana Dept. of Commerce ( committed $27.2 million of the total incentives to St. Joseph County for the purpose of upgrading transportation links around the plant. One of the major upgrades will be for the main route leading from the facility to the area's principal transportation arteries.

Armour also praised Rep. Roemer for his help from Washington with the Hummer project.

UAW Cooperation Praised

The UAW, which made long-term contract guarantees, also came in for praise from the AM General president.

UAW Region 3 Director Terry Thurman also spoke at the Hummer announcement. Thurman quoted an observation once made by labor leader Walter Reuther that management and labor "have far more in common than in conflict."

The payoff for the area is substantial, according to development officials. AM General's new plant, for example, will add $83 million annually to the area economy in the form of new workers' salaries and fringe benefits, they said. By comparison, wages and benefits totaled $37.3 million in 1999 for the 692 workers currently working at AM General's existing facility in the South Bend area.

Facility Will Go Online in 2003

AM General officials also broke down the total of $239.5 million that the company will spend as part of the new Hummer plant. That total includes $63.5 million for the building and grounds and $164.6 million for equipment, they explained. The $239.5 million total expenditure also includes $5 million for site acquisition and $6.4 million for consulting and engineering work, AM General officials added.

Officials expect the new South Bend area plant to be in full production by 2003.

The new facility will span 630,000 sq. ft. (56,700 sq. m.), AM General officials said. That will more than double the size of AM General's existing plant in South Bend, which totals 570,000 sq. ft. (51,300 sq. m.). AM General officials say they plan to site the plant on land east of the company's existing plant.

Some 60 homes, however, now stand on the land on which AM General plans to build the new facility. The company will have to negotiate, probably with each individual homeowner, to buy the acreage. If the two parties can't come to an agreement, the issue would probably go to court for settlement.

Project Risky, Some Analysts Say

The deal marks a major upswing for Hummer's operations in South Bend, which nearly closed in the winter of 1998, when the operation was solely owned by AM General. But a $26 million U.S. Army contract, which materialized in late 1998, kept the South Bend plant in business, as well as the 300 workers it then employed.

The new Hummer facility, though, is something of a calculated risk.

Some industry analysts are skeptical as to whether GM and AM General can meet their goal of increasing annual Hummer sales from the current few thousand to tens of thousands.

Other analysts, however, are more upbeat about the Hummer's future. They see significant market potential, as well as "image value," in the new H2, a smaller version of the Hummer that was introduced in the market early 2000.

None of that analysis, though, could put a damper on the enthusiasm in South Bend.

Particularly pleased was Lt. Gov. Joe Kernan, the former mayor of South Bend, the city in which he grew up. Kernan recalled when Studebaker's South Bend plant closed 37 years earlier, when the lieutenant governor was a high school senior.

Beamed Kernan, "We're back in the automobile business big time."



©2000 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.