August, 2002
  Incentives Deal of the Month
   from Site Selection's exclusive New Plant database
$140M Project at Risk?
Ford Escape
The Avon Lake plant will build a Mercury-brand version of Ford's hot selling mini SUV, the Escape (pictured).
Ford, Ohio at Odds over $83M Incentive Package

By JACK LYNESite Selection Executive Editor of Interactive Publishing
"Under the agreement announced today, about 800 replacement jobs will be created in summer 2003."

– Ford Motor Co.'s May 1, 2002, press release on
the company's US$140-million expansion in Avon Lake, Ohio

"The $140 million project will lead to the retention of 1,200 jobs
and allow 800 workers to be recalled from layoff status.
Ford has committed to maintain 2,000 jobs over the next 20 years."

– Ohio Dept. of Development's May 10, 2002, press release on
Ford's US$140-million expansion in Avon Lake, Ohio

COLUMBUS, Ohio and DEARBORN, Mich. – So, was it 800 jobs, or was it 2,000 jobs?
        That's the key question in an incentives brouhaha that's brewing between Ford Motor Co. ( and Ohio. Hanging in the balance are more than $80 million in state incentives - and, perhaps, Ford's $140-million expansion in Avon Lake, Ohio.
        The 800-or-2,000-job question began to take form in May. That was when Ford announced its multimillion expansion plans for the plant in Avon Lake, some 18 miles (28.8 kilometers) west of Cleveland.
        Ford's announcement piped life-affirming air into the Ohio plant, which now employs 2,200. Ford in June laid off some 800 workers, a result of the plant's discontinuing production of the Mercury Villager and the Nissan Quest, both sluggish sellers. And the Ohio plant might eventually be altogether shut down, the automaker said, if the company couldn't identify a new product to build there.
        But Ford identified a new product: a new SUV for its Mercury division. The vehicle to be built in Avon Lake would be based on Ford's hot-selling Escape compact SUV, company officials said.
        Ohio, in turn, identified $83 million in incentives for Ford's expansion.
        All seemed well. For a while.
Avon Lake, Ohio
Some 2,200 employees currently work at Ford's plant in Avon Lake (pictured), located on the shores of Lake Erie 18 miles
(28.8 kilometers) west of Cleveland.

Incentives Cut Will Be
'50 percent, Probably More,' State Official Says

Things, though, have gotten a bit squirrelly since then. The whole deal, in fact, is now shadowed by divergent understandings of Ford's commitment.
        Ford, as indicated in its press release quoted above, only mentioned 800 jobs. The state, however, released the 2,000-job figure.
        The 1,200-job difference came to a head in late July, when Ford sent the Ohio Dept. of Development (DED at a letter that committed the automaker to retaining 800 jobs at the Avon Lake plant.
        Ford, in that same letter, told the DED that it wouldn't be able to take advantage of the 10-year, $24.3-million job-retention tax credit that was part of the Buckeye State's incentive offer. Taking that job-retention tax credit would've committed Ford to upping its total investments in fixed assets in Avon Lake to $200 million by Dec. 31, 2006.
        But Ford's incentives for the Avon Lake will be reduced by more $24.3 million, DED Director Bruce Johnson told The Cleveland Plain-Dealer in response to Ford's letter. Subsidies for the automaker would be reduced by "approximately 50 percent, probably more," Johnson said.

Spokesperson: Ford's 'Focus Consistent on 800 Jobs'

"I wouldn't want to speculate on the company's response," Ford spokeswoman Della DiPietro replied in Dearborn. "The only thing I would say is that we were consistent from the beginning - that our focus was on the 800 jobs."
        Just how much the state may slash its incentives remains to be seen. Johnson said only that he was "continuing [the] dialogue with Ford."
        Johnson added, though, that he hadn't really expected Ford to go along with guaranteeing 2,000 jobs for 20 years.
        "What I thought was they would come back to me and say, 'We can't commit to this for 20 years,' " Johnson said. "I did expect them to say that.
        "I'm talking about what my expectation was," he continued. "I thought they would indicate to me what the natural lifetime of a new [vehicle] model is, and we'd start talking about reducing the 20-year commitment."

Ford's Fortunes Improve; Profitable Quarterly
Report Follows 35,000 Job Cuts Announced in January

Given Ford's sagging fortunes, the automaker wouldn't seem a likely candidate to buy into a 20-year commitment - tantamount to several lifetimes in today's unpredictable environment, many business analysts contend.
Ford Chart
Ford's financial woes prompted the company to announce in January that it was cutting 35,000 jobs and closing five plants. The Avon Lake plant, Ford said, would stay open only if the company identified another product that would be made there.

        The Dearborn, Mich.-based automaker has, however, substantially improved its balance sheet. After four consecutive quarterly losses, Ford on July 17 announced a $570-million profit in the quarter spanning April through June.
        The better bottom-line report card comes after Ford announced a massive restructuring in January. That plan called for eliminating 35,000 jobs and shuttering five plants. (The Avon Lake plant was not among those announced closings. But Ford said that the Ohio facility, along with Ford's Cuautitlan, Mexico, plant would stay open only if each operation were making a new product line.)
        The auto giant's chief financial officer, however, cautioned against over-optimism. Further cost cuts, including job and pay cuts exceeding those outlined in the restructuring program, might still be in the offing, said CFO Allan Gilmour.
        "Progress has not come evenly across all elements of the revitalization plan," Gilmour said in discussing the quarterly report. "If incremental actions are needed to meet the targets, we intend to take them."
        Any Ford plant closings, however, would only come after the fall of 2003. That's when Ford's current contract with the United Autoworkers (UAW at expires. The UAW's existing contract doesn't allow Ford to shut down existing plants.
        Meanwhile, Ford plans to have its Mercury mini SUV on the market by 2005 at the latest. If the Ohio incentives issue is speedily resolved, Ford may still meet its summer-2003 schedule for beginning Mercury SUV production in Avon Lake.
        "Our plan has been to find another product to utilize the plant and to meet our commitment to the UAW," Ford group vice president for North America Jim Padilla, said when the project was first announced in May. "Our partnership with the state and local governments is crucial to making this project viable."

Editor's note: For more on business location in the Buckeye State, see the Ohio Spotlight Roundtable feature in the September Site Selection. And look for the extended version of the discussion as a Web exclusive.


ti0208bti0208b ©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.