For Kia Motor Corp., like Hyundai, Toyota, Nissan and Honda, there really was no other option. The South Korea-based automaker, armed with a specific set of site location criteria, was looking to build its first manufacturing plant in the United States.
Like the foreign automakers that came before it, Kia decided to site its plant in the southern United States. Specifically, the company selected West Point, Ga., near the Alabama state line, for a $1.2 billion automotive assembly plant.
Kia is an affiliate of Hyundai, which opened its first U.S. manufacturing facility in Montgomery, Ala., last year. West Point and Montgomery are less than 100 miles apart.
“Our first priority in selecting a site was to maximize the synergy with Hyundai’s Alabama plant,” said Seung-Tack Kim, senior vice president of the Global Strategy Group for Kia Motors Corp., based in Seoul, South Korea. “Other considerations included the availability of a qualified work force, logistics and transportation infrastructure, surrounding infrastructure, and the incentive package.”
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“The state authorities were able to prove to our satisfaction that they could meet all of our requirements, as well as provide a very attractive package of benefits.”
— Seung-Tack Kim, senior vice president, Global Strategy Group, Kia Motors Corp.
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The state of Georgia is offering an incentive package valued at $410 million, involving site and infrastructure consultancy, financial aid for job creation and project promotion, and tax reductions.
“The state authorities were able to prove to our satisfaction that they could meet all of our requirements, as well as provide a very attractive package of benefits,” Kim said. “We spent some months evaluating options and, after deliberation, we agreed that the Georgia site was likely to offer the best long term return on investment, in terms of the quality of the projected output [and] economies of scale.”
The reason for Kia’s interest in the United States is simple. Nearly 17 million passenger vehicles were sold in the United States last year, according to the National Automobile Dealers Association. Asia-based automakers accounted for 36.5 percent of those sales. Conversely, sales of U.S.-based automakers fell to 56.9 percent, compared with 61.7 percent in 2003.
Kia expects sales in the United States and Canada to increase 15 percent to 350,000 vehicles this year and to 800,000 vehicles by 2010. By building many of those vehicles in the United States, Kia can substantially reduce its costs related to material, transportation and other line items.
The company expects to create 2,800 jobs at the facility and produce 300,000 vehicles annually. Since the plant will be located in proximity to the Georgia-Alabama state line, Kia will be able to attract a work force from both states.
A benefit to this arrangement is that Kia will be able to take advantage of two of the best work force training programs in the country — Georgia’s Quick Start and Alabama Industrial Development Training. (The work force training programs of Alabama and Georgia were ranked No. 1 and No. 2, respectively, by an Expansion Management poll of site location consultants earlier this year.)
“We believe that within a 50-mile radius of the plant site, an area containing nine counties in Georgia and four in Alabama, there is a population of about 900,000,” Kim pointed out. “As such, the surrounding area certainly has enough labor supply to meet the level of required manpower for our plant, and we expect individuals with the necessary skills to be among this potential labor market.”
Suppliers Add to Project Expansions
A skilled work force is a major reason why foreign automakers choose the South for its expansions. However, another attribute of the region is its abundance of greenfield space, allowing automakers to build their massive, state-of-the-art plants and also allowing for supplier-related expansion projects.
One of the most important characteristics of an automobile manufacturing plant expansion is that it inevitably brings supplier expansions. Suppliers need to be close to the original equipment manufacturer (OEM) in order to reduce supply chain and other costs. Supplier expansions can easily double the potential work force — and sometimes more — that is involved with an OEM expansion project.
By the time Nissan opened its manufacturing plant in Canton, Miss., in June 2003, 26 suppliers had sited facilities in the region. Thirty-five suppliers have added more than 4,500 jobs to Hyundai’s work force of 2,800.
Kia expects at least five or six suppliers to initially establish operations near the West Point plant, creating an additional 2,000 jobs in the region.
Already, South Korea-based GMB Automotive USA announced plans to open its first U.S. manufacturing operation in Auburn, Ala., to supply both the Kia and Hyundai plants. The plant will produce powertrain components, said Joon Park, president and CEO of GMB Korea.
“The city of Auburn is a fine location for our plant,” Park said. “Its strategic location between the Hyundai plant and the site of the future Kia plant makes it the perfect location as a supplier to both companies.”
This mirrors the situation in San Antonio, Texas, where Toyota will have the annual capacity to build nearly 2 million cars and trucks, 1.44 million engines, and 600,000 automatic transmissions by 2008 at its $850 million complex.
Toyota will employ about 2,000 workers at full capacity, and 21 on-site suppliers will add an additional 2,100 workers.
The city of San Antonio and Bexar County have teamed up to provide incentives for the suppliers to locate near the facility.
So, while the trials and tribulations continue for Detroit-based automakers, foreign automakers continue to grow their U.S. market share safely from their expanding plants throughout the South.
States have contributed billions of dollars in incentives to attract these companies, and a highly skilled work force has developed in the region during the past two decades.
Based on its site location criteria, Kia, like those before, never doubted where its plant would be located.
“We were always targeting a site located in the southern U.S. states,” Kim said.
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