Kias Got Georgia on Its Mind

Georgias automotive sector has been hit with some bad news in recent months. Only in November General Motors announced that it would cut thousands of jobs with the closure of the Doraville manufacturing plant, no later than 2008, followed up more recently with similar news from Ford Motor Company regarding its Hapeville facility which could shut down as early as August after the once-popular Taurus finishes production.

In real terms, shutting down the Doraville plant, which incidentally was retrofitted for van production to the tune of $150 million only three years ago, means the loss of about 3,000 jobs and a 10 percent reduction in local city taxes - approximately $800,000 to $1 million in property taxes and fees. And what about Hapeville? Despite Georgia offering Ford $88 million in incentives to expand its Hapeville plant, 2,100 workers are now facing unemployment. And thats only the auto sector.

Adding insult to injury is what the Atlanta Journal-Constitution called "a crippling combination of bad economic news for Atlanta and Georgia", which included the sale of Georgia-Pacific and Scientific-Atlanta, cuts at Bellsouth and the bankruptcy announcement by longtime Atlanta employer Delta Air Lines.

While there have been attempts by local politician Vernon Jones to save the plants, Georgia is being forced to focus on the future, made a great deal brighter by Kia Motors and its announcement that its first plant outside of South Korea would be built in West Point, Troup County.

The worlds fastest growing nameplate is enjoying great success throughout the United States and Canada, thanks to the value proposition its vehicles offer cash-strapped, quality conscious North American consumers.

"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, Georgia is the latest example of the companys commitment to the marketplace," said Euisun Chung, President and CEO, Kia Motors Corporation.  "Kia has made tremendous investments in design and engineering 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."

The West Point manufacturing facility, to be built on 2,200 acres, will have the capability of building up to 300,000 vehicles per annum once production begins in 2009, and create about 2,500 local jobs. Additionally, between five and six suppliers are expected to set up operations around the plant in Troup County, resulting in another 2,000 jobs.

Truly, the reality Georgia is facing, losing up to 5,100 jobs from two members of the Big 3, only to gain what looks to eventually become a similar number back from an imported brand and its associated suppliers, reflects on the entire industry. Yes, despite the doom and gloom in Detroit, the new vehicle market is stronger than ever, and is expected to grow further in upcoming years. The growth, however, is driven by brands such as Kia and its sibling-nameplate Hyundai, as well as rival imports Toyota, Honda, Nissan, Mazda, and the list goes on. Only Mitsubishi has seen its sales slide in recent years, although it looks to be making a slow and steady comeback. On the other hand, only Chrysler Group, now owned by German automaker DaimlerChrysler, previously Daimler-Benz, parent company to Mercedes-Benz, is profitable amongst domestic automakers.

Kia, specifically, has enjoyed amazing success since coming to the American market 12 years ago, when it sold only a single model, the compact Sephia sedan, later joined by the first-generation Sportage compact SUV. Now, after 12 years of consecutive sales records, capped off with 275,871 vehicles sold in 2005, it has expanded to a full product line of vehicles. February 2006 sales were record-level again, up some 3.2 percent compared to February of last year. Kia expects its North American sales, in both the U.S. and Canada, to increase by 15 percent to 350,000 units in 2006, plus grow beyond this mark to 800,000 units by 2010. Ambitious? For sure. Probability? Likely.

Georgia, despite Kias announcement which buoyed spirits across the state, isnt planning to achieve the same level of growth that its newest corporate partner should enjoy in coming years, but it would be nice for its employment rate to stay even with todays numbers, which is currently benefiting, over the short term at least, from GM and Fords presence. This in mind, will Kias decision to invest $1.2 billion in West Point cause rival import brands to overlook other states and choose Georgia when setting up new manufacturing plants, thereby potentially offsetting every job lost from the closure of the two GM and Ford plants? For Georgia to think this, as its leading newspaper has suggested, seems a bit naïve, or at the very least, a little too "blue sky". There were no doubt many reasons why Kia chose West Point, Georgia over other reported front-runners, such as Lauderdale County, Mississippi; Chattanooga, Tennessee; Aiken, South Carolina; Hopkinsville, Kentucky and Decatur, Alabama.

Those jurisdictions, however, are now lamenting what would never become reality, at least with Kia, and therefore werent celebrating the news being announced from Seoul, delivered by KMC President and CEO Euisun Chung and Georgia Governor Sonny Perdue. No doubt the fight between states, and Ontario, to maintain current levels of auto sector employment and possibly even grow the segment, will continue. A civil war in the making? At least the South, on the whole, can take some confidence in knowing that the Rebs won one over on the Northern Yanks.