Week of December 30, 2002
  Project Watch
South Carolina's coastal city of Charleston
South Carolina's coastal city of Charleston (pictured) won out among the 50 East Coast locations that MTU Drive Shafts considered for its new U.S. manufacturing operation.
South Carolina Tale: DC's Sprinter Lost, MTU Drive Shafts Gained
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

CHARLESTON, S.C.South Carolina may have narrowly lost out to Georgia to manufacture DaimlerChrysler's (DC) Sprinter vans, but the Palmetto State has landed another of the company's expansions:
        DC arm MTU Drive Shafts, the world's largest manufacturer of passenger-car drive shafts, has announced that it's bringing a 200-employee, US$25-million production operation to North Charleston. The South Carolina coastal city got the nod after 50 U.S. East Coast locations were considered, according to officials with MTU Drive Shafts, part of DC's Off-Highway business unit.
        The Charleston facility - which will also house operations for MTU Drive Shafts LLC, the company's brand-new U.S. subsidiary - will produce drive shafts for luxury and high-performance vehicles. The U.S. plant will have a production capacity of about one million drive shafts a year. That's about three-fourths of current production at MTU Drive Shafts' lone existing drive-shaft plant in Friedrichshafen, Germany.
        The new Charleston operation will strengthen MTU Drive Shafts' position to serve car and truck manufacturers' North American plants, said Rob Tykal, newly tapped as president of MTU Drive Shafts LLC.
        "Our customers expect just-in-time delivery and high flexibility," said Tykal, formerly technical director of the Off-Highway Division of Detroit Diesel Corp., the other entity comprising DaimlerChrysler Off-Highway. "By assembling the drive shafts here in the U.S., we are much better equipped to meet these requirements."

Available Building Big Factor
A suitable building in North Charleston was a major factor driving MTU Drive Shafts' location choice, Tykal said.
        And that building wasn't just any run-of-the-mill structure. Freightliner, another DC company, owned the building, one of two facilities on the North Charleston site that came into Freightliner's portfolio when the company acquired Western Star in 2000.
        After the Western Star plant closed, Freightliner last year decided to locate an 800-employee American LaFrance operation in one of the vacant facilities (For more, see "American LaFrance Relocates to South Carolina, Projects 800 Employees at New Site," Aug. 5's Blockbuster Deal of the Week.) With MTU Drive Shafts' move-in, the two DC companies will become next-door neighbors.
        South Carolina's incentives were another major factor in MTU Drive Shafts' site-selection decision, Tykal explained. Details of those incentives are still being fleshed out with state officials, he added. Among the incentives likely to be part of the final package are job-tax credits, property tax breaks and employee-training aid, Tykal said.
        MTU has garnered some 26 percent of the worldwide market share in manufacturing passenger-vehicle drive shafts. The company also manufactures diesel and gas engines for ships, distributed power plants, heavy vehicles and rail.
        The North Charleston plant will go online in 2004, staffing up to 200 workers on three shifts by 2006, Tykal said.

Leesburg, Ala.
DRIVEN TO GET BIGGER: With its new Honda contract, the 170,000-sq.-ft. (15,973 sq.-m.), 165-employee plant (pictured) that KLP first brought online late last year will add 145,000 sq. ft. (13,470 sq. m.) and 125 employees in a $60-million expansion.

KTH Adding 125 Workers to
Supply Honda from Leesburg, Ala.
– Population: 218

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

LEESBURG, Ala.Leesburg, a tiny northwest Alabama town that bills itself as "the Crappie Capital of the World," has reeled in a big expansion catch - one riding atop Honda's rising tide in the Yellowhammer State.
        KTH Leesburg Products (KLP), a joint venture between St. Paris, Ohio-based KTH Parts Industries and Tokyo-based Hongo Company, has announced that it's adding 125 new employees at its existing plant in Leesburg - population: 218. The Leesburg operation makes steel frame components for the Odyssey mini-vans that are built at Honda's 2,300-employee manufacturing plant in Lincoln, Ala.
        The announcement of the $60-million, 145,000-sq.-ft. (13,470-sq.-m.), expansion comes only 14 months after KLP first went online with its 170,000-sq.-ft. (15,973 sq.-m.), 165-employee plant, which lies 50 miles (80.5 kilometers) northeast of Lincoln.
        "We felt like we were going to expand the plant," KLP Vice President John Boyer, who manages the Leesburg operation, said in announcing the project. "But we just didn't think it would be this quick."
        Honda's rapid Alabama growth, however, rippled out to trigger KLP's quicker-than-expected expansion clip. The carmaker in July of 2002 - only three years after going public with its intent to build an Alabama plant - announced that it would add 2,000 more workers in a $450-million expansion in Lincoln. (For more details, see "Car Wars: Honda's $450M Alabama Expansion Will Create 2,000 New Jobs," our July 15 Blockbuster Deal of the Week.)
        KLP had been negotiating for the Lincoln plant's new business since Honda's July announcement, Boyer explained. With the expansion, KLP will double its output to some 1,300 units a day, he said.

Weiss Lake
GONE FISHIN': Leesburg's claim as "the Crappie Capital of the World" rests on the area's 30,200-acre (12,222-hectare) Weiss Lake (pictured). A hydro-electric impoundment owned by Alabama Power Company, Weiss Lake contains many crappies weighing more than two pounds (0.91 kilograms).

Leesburg Project Mirrors Lincoln Expansion
KLP's expansion will closely follow Honda's Lincoln timeline. The company will break ground on its Leesburg expansion in January, adding 125 new workers by 2004, Boyer said. Honda's expansion, for which ground was broken in late November, will be completed by 2004, officials with the automaker estimate.
        KLP's project will also mirror another aspect of Honda's Lincoln expansion. With the addition of a new production line, the expanded Lincoln plant will be capable of producing multiple vehicles. (The automaker is expected to decide in 2003 whether to build another vehicle at its Alabama operation.)
        Similarly, KLP's expanded plant - which will include 109 new welding robots, as well as a new 1,500-ton transfer press - will be able to manufacture steel frame components for multiple vehicles.
        "With this new equipment, it is possible that we will be able to add sport utility-vehicle and light-pickup-truck frames to our line in seconds," Boyer said. "We will be able to construct different frame parts for different vehicles, depending on consumer demand."
        "This is a fantastic deal for Leesburg," said Mayor Ed Mackey. "This will really help the town and bring more people and businesses to spend more tax dollars." About half of KLP's current employees come from Cherokee County, he explained.
        "Our economy," Mackey added, "has grown over these last few years because of KLP," which broke ground in Leesburg in June of 2000. Since then, the city has added a convenience store, a pharmacy, a Dollar General store, a Subway outlet and a video store, Mackey explained.

Changes Afoot for State Economic Development?
KLP's expansion announcement and Honda's groundbreaking coincided with a possible major revamping of the state's economic development structure.
        Gov. Don Siegelman (D) is leaving office in January, following a narrow loss in November's election to Bob Riley (R).
        "Education and quality job growth go together hand in hand. It's extremely important that the incoming administration recognizes that point," Siegelman said at the Lincoln groundbreaking for Honda, whose $158-million incentive package in 1999 was the first contract that Siegelman signed as governor.
        Gov.-elect Riley has said that he may push for a commission, largely made up of private-sector leaders, to oversee state economic development efforts. That commission would hire the Alabama Development Office head - who would then continue in that post even with gubernatorial changes. Riley is already on record as favoring a similar commission structure to oversee the state's transportation agencies.
        Alabama Power Company, another major force in state economic development, is developing a paper outlining how such a state economic development commission might operate. That paper, the utility says, will be presented to state economic developers to solicit their opinions.

Artesyn Technologies' Tatabanya plant
HUNGARIAN TOWN HOME TO OTHER U.S.-BASED FIRMS: Tatabanya, Hungary, where Lexmark has bought a manufacturing site, is also home to a number of other sizable industrial operations, including the 600-employee plant that Boca Raton, Fla.-based Artesyn Technologies' (pictured), opened, manufacturing power supplies and subsystems for the communications industry.

Lexmark Postpones $50M, 200-Employee Hungarian Plant, but Project Still Looks Probable

by JACK LYNE, Site Selection
Executive Editor of Interactive Publishing

TATABANYA, HungaryLexmark International has, for the moment, hit the "Stop Print" control on its planned $50-million, 200-employee plant in Tatabanya, Hungary.
        Citing the slowdown in demand for electronic goods, the Lexington, Ky.-based printer manufacturer has told its Hungarian partners that it is indefinitely postponing its previously announced plans to build the facility, which would manufacture laser and matrix printers.
        Lexmark officials at the company's Kentucky headquarters, however, haven't publicly commented on the Hungarian delay. News of the postponement broke early this month, when Tatabanya Mayor Janos Bencsik told the Budapest Business Journal about Lexmark officials' late-November visit, where the company announced that it was putting the brakes on the expansion.

Project Still Looks a Likely Go
The world's second-largest laser printer manufacturer, however, doesn't appear to be throwing in the towel on the expansion in Tatabanya, the city some 37 miles (60 kilometers) west of Budapest that Lexmark chose last year after a two-year site search. Lexmark in a letter late last month to local Hungarian partners emphasized that it isn't abandoning the project, only temporarily suspending it.
        Another sign suggesting that the project is still very much alive: the 31-acre (12.4-hectare) tract in a Tatabanya industrial park that Lexmark purchased last year. State and local officials, in fact, joined Lexmark officials in the summer of last year in laying a cornerstone at the site for the proposed 430,556-sq.-ft. (40,000-sq.-m.) plant.
        The land purchase coincided with the company's establishing a subsidiary, Lexmark International Hungária, to manage the expansion project. Lexmark also tapped a project manager for its initial Hungarian manufacturing sortie.
        And that pre-project infrastructure will remain in place. Lexmark is keeping its Tatabanya acreage and will also continue to operate its Hungarian subsidiary, according to Peter Berethalmi, a lawyer with Nagy and Trocsanyi, which is representing the U.S.-based printer manufacturer in Hungary.
        Another factor auguring will for the project's ultimately reaching fruition is Lexmark's comparatively healthy business position within its industry. Last year's sales of $4.14 billion marked an 8 percent annual increase. In addition, the company's earnings per share this year have increased in each quarter.

Project Underscores New Global Markets' Complexities
The delay is not the first for the Hungarian project, which has illustrated the complexities that often earmark a maiden voyage in establishing a major manufacturing operation in a new international market.
        Lexmark in 2001, for example, pushed back the expansion project until June of 2002, citing troubles in obtaining building permits.
        The delay, the company added, was also partially due to the pending merger between Hewlett-Packard and Compaq Computer, Lexmark's two main international customers. Ironically, while Lexmark's plans are on temporary hold, Hewlett-Packard is now reportedly considering building its own plant in Hungary.
        The Hungarian project has also drawn protests from employees at Lexmark's plant in Orleans, France. Some of the production now performed at the French facility would move to the new Hungarian plant. (For more on this trend, see "East Beats West? European Manufacturing Strength May Surprise Some" in the November 2002 issue of Site Selection.)
        Then there's the matter of the $1.27-million non-refundable grant that the Hungarian government awarded to Lexmark's Tatabanya expansion project.
        That issue, at least, appears to have already been resolved. The grant monies were never fully turned over to Lexmark, Hungarian officials said.
        Now, while Lexmark ponders the next turn in its Hungarian expansion plans, the incentive funds it had landed will be distributed to other firms that have applied for assistance, state officials said.


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