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Kia Building a $1.2 Billion Assembly Plant in Georgia

Recent scandal in its South Korean homeland will not stand in the way of Kia building a new facility in West Point, GA, creating more than 2,800 jobs.

By Mary Ellen McCandless

Despite a last-minute cancellation of a groundbreaking ceremony originally scheduled for April 26, Kia Motors Corp. (KMC) is moving ahead with plans to build its first U.S. manufacturing operation. The automotive assembly plant, which will be built in the city of West Point (Troup County), GA, will create more than 2,800 jobs and result in a $1.2 billion economic investment in the state.

Kia asked to postpone the groundbreaking ceremony because prosecutors in South Korea banned Kia President and CEO Chung Eui-sun, son of Hyundai Motor Chairman Chung Mong-koo, from leaving the country amid a bribery scandal. A new date has not been set, but Georgia state officials are not worried that the scandal will have any impact on the project.

“We talk to Kia about the project every day, if not four times a day,” explains Chris Clark, deputy commissioner, Global Commerce Division, Georgia Department of Economic Development (DEcD). “We’re buying property, we’re engineering the building, they are meeting and interviewing architects. This has nothing at all to do with the project. We have a contract and we’re moving full force ahead. The politics in Korea are something we are not involved with and the company has reassured us every day.”

On March 13 in Seoul, South Korea, after months of anticipation, Georgia’s Governor Sonny Perdue and Kia’s president and CEO Chung signed the business deal.

The new two-million-square-foot assembly plant, scheduled to begin testing operations by May 2008 and reach full production by 2009, will build two vehicle lines and include an engine assembly line, paint shop, training center, welcome center, and two adjacent supplier facilities. It will be built on a portion of a 3,300-acre site at the intersection of I-85 and Webb Road. About 2,200 acres will be dedicated to the plant and future expansions. The remaining property will be used for roadwork and other infrastructure improvements. The company, owned by Korea-based Hyundai Motor Company, anticipates the plant will produce 300,000 vehicles per year.

“Kia Motors has entered an aggressive growth phase in the U.S., and the decision by KMC to build a manufacturing facility in West Point, Troup County, GA is the latest example of the company’s commitment to the marketplace,” says Chung Eui-sun. “Kia has made tremendous investments in design, engineering, and production resources to better meet the needs and desires of American consumers, and this new plant will produce high quality, well-styled vehicles with the safety features and affordability that customers expect from Kia.”

Troup County will see a significant economic boost from the opening of the Kia facility. In addition to the assembly plant, five supplier companies have committed to locate near the Kia site in Georgia to fit into Kia’s “just-in-time” inventory strategy. These five suppliers will employ an estimated 2,600 workers.

A Group Effort

The state’s effort to attract Kia was led by Gov. Perdue and the staff of DEcD, including Clark as the state’s lead negotiator. One of the most challenging aspects, especially considering its size, was the project’s timeline.

kia georgia sonny perdue Georgia Governor Sonny Perdue, right, and Kia President and CEO Chung Eui-sun toured potential sites by helicopter. Images provided by KIA Motors Corporation; Georgia Dept. of Economic Development

“This is the biggest project any of us have ever worked on,” says Clark. “Usually for very large projects you might have six to eight months, up to a year. But for this project we had a very short timeline. As soon as the right information was shared at the end of November, Kia was on the ground in Georgia within three or four days. Then they were here every week for the next six to eight weeks. That forced us to put everything else on hold in order to focus, and that’s very difficult for us. The company was very up front with us, they were very open, and it was a great relationship from the beginning. It was just that they had a timeline that they wanted to keep and that put pressure on the state of Georgia.”

Georgia will purchase the site for the plant for approximately $35.7 million and will conduct site preparation work, including grading, at a cost of $24.8 million. The Department of Transportation will provide road improvements at a cost of $30 million. Much of the roadwork is anticipated to come from federal interstate highway funds. A rail spur will be connected to the site at a cost of $6.05 million.

The state will build and staff a 70,000-square-foot training center on the Kia site that will provide custom training for the company and serve as a community training center, at a cost of $20.2 million. Maintenance and operations expenses of the center over a five-year period are expected to cost the state $5.5 million. The Quick Start program of the Department of Adult and Technical Education (DTAE) will develop a training curriculum and provide training courses for plant employees at an estimated cost of $5.7 million. The cost to the state for the training program has a market value to Kia of approximately $14.5 million.

At 2,893 jobs created, the company will receive $75.9 million in job tax credits against its tax liability created over five years. At the contractual minimum of 2,500 jobs, the company will receive $65.6 million in job tax credits against its tax liability over five years. Company estimates indicate approximately $13.9 million in sales tax exemptions will be available on its capital expenditures. With the estimated 2,893 jobs created, the total state incentive package is worth $258.25 million (or $89,550 per job). The total package lowers to $248.05 million if 2,500 jobs—the contractual minimum—are created.

Diethard “D” Lindner, Chairman of the Development Authority of LaGrange, served as the community coordinator for the Kia project, primarily responsible for coordinating the local incentive package that involved Troup County, the city of LaGrange, the city of West Point, the Troup County Board of Education, and the development authorities of LaGrange and West Point.

“This is the first project where the county, two city governments, and two development authorities worked together to offer a combined incentive package to fold into the state’s incentive package,” says Lindner. “It had to be done this way, there was just too much at stake—we could not let Kia go somewhere else.”

kia georgia sonny perdue Kia executives welcome the delegation from Georgia to their headquarters in Seoul, South Korea. Images provided by KIA Motors Corporation; Georgia Dept. of Economic Development

The local incentive package adds up to about $147 million. Almost $130 million of that total is for real and personal property tax abate-ment over a 16-year period, which includes ramping the school tax from 50% to 100% over the abatement year period. Other local incentives were for water, sewer, and natural gas infrastructure; an increased level of fire fighting and hazardous material training and equipment; temporary office and training facilities; a Foreign Trade Zone designation; and to hire a local project coordinator and a family relocation assistance manager.

“We did not give away a single dollar,” says Lindner. “We invested future taxes and income, in our community. The leadership of West Point, LaGrange, and Troup County clearly understand that our investment would come back to the community, multiplied many, many times. Our community will get an amazing return on its investment.”

The Kia plant and its suppliers will provide much-needed job opportunities for the region, which is historically a textile driven economy. With the decline of textiles in the U.S. and locally, unemployment has become a serious problem in the area. The entire community appears grateful that a Kia plant will be locating in the county, according to Lindner. He relates the story of a West Point resident who summed it up when she said, “Now our children won’t have to leave [West Point] to find a job.”

Lindner first became aware of the Kia project, then referred to as “Project G,” a week before Thanksgiving in 2005. Things started moving quickly after that: On November 30, DEcD’s Jim Ewing came to LaGrange to view available sites; on December 1 Clark provided an overview of the project, leaving the identity of the company secret; and on December 6 the company visited LaGrange to view two identified sites. Lindner provided an overview of Troup County and the type of inducements available; an exchange of business cards identified “Project G” as Kia Motors of America.

“We have worked numerous projects, usually $10 to $30 million, involving 50 to 200 workers…but I had never worked a project that would invest $1.2 billion in a single site and provide 3,000 jobs,” explains Lindner. “With the inclusion of the major Tier 1 and Tier 2 suppliers, the investment will top $2 billion and generate 5,500 jobs. It is estimated that the ripple effect, including the suppliers to the suppliers and resulting service industry, would ultimately increase the regional jobs up to 9,000 workers.”

The most challenging aspect of the project was the size of the project, and Kia’s demand for absolute secrecy, says Lindner. It was clearly stated on numerous occasions that Kia would author all press releases, and that no official comments were to be provided to the local press.

And late February 2006 brought an unexpected surprise: “Mississippi announced that it was offering a $1 billion incentive package to have Kia locate in Mississippi,” says Lindner. “That incentive package included $240 million of Katrina relief funds. There was a brief period of silent shock, followed by continued communications with Kia. We all felt better when there was an agreement to set a signing date in early March.”

The only exceptions to the happy announcement were from a few residents who live near the site but were not included in the site purchase. These residents felt left out of the process and had questions concerning the plant and the environment. “We have met with some of these residents and have assured them that the plant has no smokestacks, will not emit toxic water or pollute the air, and it will not be a noisy operation,” says Lindner. “The added traffic load during construction must still be addressed.

“As the former president of Hughes Aircraft Georgia, I was very aware that no business deal, however certain, is ever a reality until you have a signed contract,” concludes Lindner. “Throughout the negotiations with Kia, we were always reminded that although we are on the ‘five yard line and are ready to score a touchdown,’ we still had some issues to resolve. When the day came in Seoul, Korea to sign the contract, I started to believe that this would really happen. I was fortunate to be at the signing…After [Gov. Perdue] signed the second book, which was already signed by President Chung, a great relief set in and a big smile showed on my face. I finally let myself say, ‘We landed the Kia deal!’”

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