Week of August 30, 2004
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Jobs to Kentucky
HEBRON, Ky. Zumbiel
Packaging, a 161-year-old company that's historically based all
of its operations in Ohio, is moving 465 jobs some 22 miles (35 kilometers)
southwest to Hebron, Ky.
Company SoldThe consolidation came as no surprise. Only its location remained in question.
One Plant Site in June
The writing on the wall for Zumbiel's consolidation became plain in June, when the company sold the beverage carton plant's nine-acre (3.6-hectare) site. Xavier University was the buyer, paying $8.4 million for the property. The tract is literally where gown meets the town's business community. Zumbiel's plant site abuts the eastern edge of Xavier's campus.
The beverage carton plant, however, may remain open for another three years, said Robert Zumbiel. Xavier has set no time frame for redeveloping the plant site, and it hasn't said yet how it plans to reuse the property.
The university, however, has said that it will utilize the Zumbiel site for a project that "will foster economic development and serve the needs of the surrounding residential community and Xavier," Xavier Administrative Vice President John Kucia wrote in a June letter to Richard Dettmer, director of Norwood's Department of Economic Development.
Kucia's letter also indicated that Zumbiel's plant would be able to stay in place for three years while the company built a new facility "that will allow them to consolidate functions and provide room to grow in the future."
Zumbiel's relocation intentions were further underscored in the company's recent purchase of a Fischer & Krecke eight-color printing press. The press is too big to fit inside the company's existing beverage carton plant in Norwood.
"The decision to relocate was difficult to make, but it represents the best opportunity for continued growth for Zumbiel Packaging," said Robert Zumbiel.
How Big WasZumbiel will be eligible to receive $3.7 million in state and local incentives through the Kentucky Industrial Development Act, which provides tax credits for new and expanding manufacturing plants. To qualify for the full amount, the company would have to relocate its 400 existing Ohio jobs now and create 65
the Airport Factor?
new ones in Hebron.
Ohio officials haven't commented on the incentives that the Buckeye State offered. Zumbiel Vice President Mark Hausfeld, however, said that the two competing states' subsidy packages were very similar.
One major factor that may have clinched the site decision is the proximity of the Cincinnati/Northern Kentucky International Airport. Zumbiel will be consolidating its manufacturing on a tract that's only three miles (4.8 kilometers) from the airport.
The company anticipates completing the new Hebron plant as early as the end of this year. The relocations will be gradually phased in, said Hausfeld.
The company is using Corporex Development and Construction Management as its Hebron project consultant on construction and real estate-related issues.
Ohio may be losing Zumbiel's jobs, but two other major players in the Northern Kentucky project will lend a definite Buckeye State flavor. Oswald Construction will act as the general contractor, while KZF Design will be the architect. Both companies are based in Cincinnati.
GM Adding 280 Workers,
New Saturn Model in
$203-Million Kansas Expansion
by JACK LYNE,Site Selection Executive Editor of Interactive Publishing
KANSAS CITY, Kan. General Motors' 3,000-worker plant in Kansas City, Kan. - already the state's biggest private investment - is getting bigger still.
GM announced on Aug. 26th that it's adding 280 workers in a $203-million expansion of the 3-million-sq.-ft. (270,000-sq.-m.) factory on the Missouri River. Even before the latest expansion announcement, GM reports that it's invested $1 billion in the so-called Fairfax plant, which opened in 1987.
The expansion will add a third production line at the factory. The Fairfax plant currently makes the midsize Malibu and a hatchback offshoot, the Malibu Maxx. With the expansion, the plant will begin making a new Saturn midsize sedan.
The new model will be part of GM's plan to increase production efficiencies through cross-platform manufacturing. The new Saturn made in Kansas City will be built on the so-called Epsilon vehicle architecture. Both the Malibu and the Malibu Maxx are already based on the Epsilon structural design.
GM first used the Epsilon architecture in Europe on the company's Opel Vectra and the Saab 9-3. Currently, GM's only product that's now made in North America with the Epsilon platform is the Saab 9-3. In addition to the new Saturn, the automaker says that it will add another Epsilon-based model in 2008 - a hybrid-powered Chevrolet Malibu.
A week later, GM followed suit by making the expansion official.
"The Unified Government's recent support of our tax abatement application without a doubt was a very, very critical part of our taking this business case forward and getting it approved by our board of directors," GM General Manager of Vehicle Manufacturing Joe Speilman told employees during an Aug. 26th news conference held on the factory floor.
The Unified Government of Wyandotte County/Kansas City will issue $162 million in bonds to help bankroll the expansion. GM will be obligated to pay off the bonds. The automaker's Kansas City plant is the city's biggest taxpayer. Over the past five years, the facility has paid an average of $11.2 million in annual property taxes.
Kansas Lt. Gov. John Moore told plant workers that the state will provide an additional $4 million for new employee training.
"The performance of this plant and its work force is what determined where this expansion occurred, so you have all contributed to our economy," said Moore, who is also secretary of the Kansas Department of Commerce and Housing.
Production Begins in 2006GM's multimillion-dollar Kansas City expansion won't actually add much new space.
In preparation for the new Saturn model, the automaker will build a 55,000-sq.-ft. (4,950-sq.-m.) addition to the plant's body shop. The new space will handle the auto body and its "swing parts" - hinged components such as doors and hoods. The plant addition will cost some $5 million, said Speilman.
Another $96 million of GM's investment will go for special tools and dies to make the new Saturn, with some $61 million going for new equipment.
Kansas City production on the new Saturn will begin in 2006 for the 2007 model year, Speilman explained. GM says that it won't reveal the new model's name until the second half of 2006. The new Saturn will replace the L-series, a model on which GM halted production in July in response to poor sales.
The Kansas City plant currently makes about 200,000 Malibu models each year. GM hasn't
Change aThe Kansas City plant is certainly no stranger to change.
The GM facility initially made the Pontiac Grand Prix. All that changed, though, in 2003, when the automaker invested $722 million to retool the plant to produce the totally redesigned Malibu sedan and Maxx sports model. The Fairfax plant is the only GM production facility that makes the Malibu.
Or at least it's the only one that makes today's Malibu - a model that's practically had change as a permanent passenger riding shotgun.
The original Malibu was introduced in 1964 under the Chevelle brand, aimed at what was then known as the market's "intermediate segment." That model went through a number of redesigns until GM last year announced its back-to-the-drawing-board strategy.
Nonetheless, production didn't actually stop on the last of the "old Malibu" models that were made in Kansas City. They're still made, only they're now known as the Chevy Classic. GM's Lansing, Mich., plant turns out those models, which are now sold only to fleet and commercial customers.
Southern Shift: Steel Dynamics'
Florida Fabrication Plant Will Employ 175
by JACK LYNE,Site Selection Executive Editor of Interactive Publishing
FORT WAYNE, Ind. Steel Dynamics Inc. (SDI) has picked Lake City, Fla., in the company's first site-selection sortie outside its home state of Indiana. Strong steel demand and market proximity were the key drivers in the steel manufacturer's decision to venture outside the Hoosier State's borders.
SDI's 265,000-sq.-ft. (23,850-sq.-m.) Florida operation will house a new steel fabrication plant that will employ as many as 175 workers. The Fort Wayne, Ind.-based company has selected a 70-acre (28-hectare) site northwest of Lake City, some 65 miles (104 kilometers) west of Jacksonville.
"We believe now is a good time to proceed with regional expansion, as the construction market recovers from historically low construction rates," said Bert Hollman, president of New Millennium Building Systems, a wholly owned SDI subsidiary.
New Millennium will operate the Florida plant. Created in 1999, the subsidiary specializes in manufacturing non-residential steel components used in buildings including factories, warehouses, hospitals, schools and shopping centers.
"We are focusing our business expansion on regions of the country having the best prospects for growth in non-residential construction," Hollman explained in Fort Wayne. "In our business, having production facilities within close proximity to customers is important in responding to customer needs for service and quick delivery. This new plant will be in a good position to serve the Southeast, including Florida
and nearby states."
Always important, customer proximity has assumed added significance for SDI. The company's southward shift comes during a period of inordinately strong steel demand. That's increased pricing for fabricators and builders alike. And surging demand has also increased delivery times for steel component manufacturers.
Plant WillNew Millennium expects the Florida plant to be completed and shipping product by sometime early next year, said Hollman.
Resemble Indiana Mill
The new operation will include 250,000 sq. ft. (22,500 sq. m.) of space for the steel fabrication plant. In addition, New Millennium is building a 15,000-sq.-ft. (1,350-sq.-m.) office building, as well as finished-product staging yards.
SDI currently operates three mini-mills in the Indiana cities of Butler, Columbia City and Pittsboro. The Columbia City plant, a $315-million mini-mill for SDI's Structural and Rail Division, is the most recent addition, completed in 2002. (For more on that project, see Site Selection's November 2002 cover story, "mini mill, Major Project.")
The Florida plant's size, layout and output, explained Hollman, will be very similar to the Butler, Ind., facility. The Lake City operation will have the annual capacity to produce 70,000 tons (63,000 metric tons) of girders, joists and trusses, as well as 50,000 tons (45,000 metric tons) of steel roof and floor decking.
SDI hasn't estimated its total capital outlay on the project. In March, when the company's Southeast site search first became public knowledge, industry watchers projected that the total cost for the plant would be about $40 million.
Steel's 'Perfect Storm'Most of the steel that the Florida plant will use will be supplied from SDI's Indiana mini-mills in Butler
The company's first non-Indiana project coincides with what many industry observers are calling "the perfect storm" for steel demand. Steel mills last year raised their base prices six times. Those soaring prices have left much of the building industry scrambling.
One central element in steel's perfect storm is China. While steel demand is surging globally, China's up-tick is making the biggest market dent.
China's explosive growth last year pushed it past the U.S. as the world's largest steel producer. 2003 also saw China claim another relevant distinction, passing the U.S. as the world's largest steel consumer. On top of that, with its own mills unable to churn out enough product to meet ravenous demand, China pulled off a hat trick: Last year, it became the world's largest
The dollar's diminishing value is another key element in steel's demand storm. That plunge is particularly relevant for the shredded scrap steel used to make finished steel products. As mini-mills have vied to buy enough scrap to fuel output, prices have gone through the roof. From June of 2003 to April of 2004, for example, scrap prices doubled to around $300 a ton. And with the weak dollar, China has a strong edge in affordably purchasing American scrap metal.
Builders outside China have struggled with that scenario. For one thing, many have faced raw material surcharges added to their original price quotes from mills. In addition, numerous builders have been contractually obligated to work on projects in which prices were fixed before steel prices began their spike up.
On top of that, prices for cement, wood and wallboard are also going up. Many analysts attribute those increases to an effort to capitalize on the "shadow effect" of steel prices.
Some construction companies are stockpiling steel to avoid future sticker shock. That strategy, though, ties up working capital while it increases storage costs.
SDI's Expansion DesignsSDI's bottom line reflects the demand-side surge. For the first six months of this year, the company's revenues rose from $454.1 million to $909.8 million in 2003.
Could Also Include U.S. West
As a result, the 1,500-employee company may expand further to capitalize on its bullish business.
"We have also begun exploring options for further expansion in the western U.S., which would permit us to serve growing markets on the West Coast and in the Southwest," said Hollman.
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