What are the major reasons for Kia’s selection of West Point, Georgia as the location of its US plant?
Kia’s first priority in selecting a site was to maximize the synergy effect with Hyundai Motor’s Alabama plant. Other considerations included availability of qualified workforce, logistics and transportation infrastructure, risk of natural disasters, surrounding infrastructure and incentive package.
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From a global perspective, what is the importance of establishing a manufacturing plant in the US?
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The establishment of a factory in the US, in conjunction with the current construction of Kia’s second manufacturing plant in China overseas and its first European facility in Slovakia, will serve as an essential springboard for Kia to achieve its goal of becoming one of the world’s leading global automakers. Combined with Kia’s expanding local R&D network, the US plant will help Kia to rapidly respond to the needs and tastes of US customers.
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Furthermore, Kia will be able to maintain its global competitiveness even in the event of sudden currency fluctuation since all components will be sourced locally. In addition, the success of Kia in North America has a significant effect on the global status of the Kia brand. Given this, the success of the new plant will serve as a pivotal stepping stone to boosting Kia’s global competitiveness.
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Kia formerly announced that the establishment of a production facility in the US would be difficult until sales reached 300,000 units annually. But since Kia sales in the US have yet to reach this figure, is the construction of the West Point plant justifiable in business terms?
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Kia expects its North American sales to climb by 15% to 350,000 units in 2006, and further grow to 800,000 units by 2010.
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Recent rapid gains in Kia’s IQS (initial quality study) scores as well as rising scores in major customer satisfaction surveys for models such as the Amanti, Sportage and Spectra have resulted in a rapidly improving brand image and will support Kia’s sales expansion in North America. Furthermore, Kia is currently developing competitive SUVs and CUVs specifically targeting North American customers. Kia is confident that the synergy effect created by such quality improvements, strengthening brand power and new model introductions will allow us to become the fastest growing major automobile brand in the North American market.
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What are Kia’s sales and market share forecasts for the North American market?
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Kia expects to sell 350,000 units in the US and Canada in 2006 for a 1.9% share of the North American market. By 2010, we expect our market share to reach 4.6%.
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Which models will be produced at the West Point plant?
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We plan to produce passenger cars and RVs that will be competitive in the North American market, but the exact models to be manufactured are still under review.
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Will the vehicles to be produced at the new plant be sold exclusively in the US?
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The cars to be manufactured at the new plant will be sold in the US and Canada.
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What is the total investment amount in the new plant and what will be the plant’s annual production capacity?
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A total of $1.2 billion will be invested in the plant and the eventual annual production capacity will reach 300,000 units.
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What is the total amount of incentives offered by the State of Georgia?
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Including site, infrastructure, financial aid for job creation and project promotion, and tax reductions, the total amount will be $410 million US dollars.
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Can you give us more details about the exact location of the new plant?
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The new Kia’s plant site in the City of West Point in Troup County is located 73 miles to the southwest of Atlanta very near the CSX railroad and 84 miles from Hyundai’s Montgomery plant.
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When faced with selecting as new plant site, an ample labor pool is one of the most important factors to be considered. Please explain the current population data in the surrounding area.
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We expect that within a 50 mile radius of the new plant site, the population of 9 counties in Georgia and 4 in Alabama counties is approximately 900,000 people. Therefore, the surrounding area certainly has enough labor supply to meet the level of required manpower for Kia’s new plant.
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How many workers do you plan to employ at the West Point plant?
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We plan to employ 2,500 local staff at the West Point plant. Including new jobs at 5-6 suppliers as well as Hyundai Mobis that are expected to establish operations in and around West Point, a total of 4,500 new jobs will be created.
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How does Kia plan to manage Georgia’s high labor costs and maintain profitability?
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Since the new Kia plant will be located very close to Hyundai’s Alabama factory, the average household income of the general area is very similar. Hence, we don’t expect the labor costs to be any higher than that of Hyundai’s Alabama plant.
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Georgia has a relatively strong labor union. In this light, what are your thoughts on managing labor relations at the new Kia plant?
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In 2005, the State of Georgia had a much lower union participation rate of 5% than even Alabama (10%).
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Will the new US plant employ workers from the nearby closing GM and Ford factories?
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We feel that it is too early to raise this issue at this time.
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I am aware that Kia is going to share suppliers with Hyundai’s existing Alabama plant. How will this scenario benefit Kia Motors?
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Hyundai’s current suppliers to its Alabama plant are already producing high quality components, and sharing these suppliers will not only result in synergy effects such as quality assurance for the cars produced Kia plant, logistics savings and price competitiveness of our end products.
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Why did Kia decide not to go ahead with the Mississippi site despite early reports that the State of Mississippi was favored?
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We do not feel that it is appropriate to raise this issue at this time.
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Did Kia approach the State of Georgia first or vice versa?
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The State of Georgia approached us regarding Kia’s US plant site search. Subsequently, Kia evaluated the proposed sites and proceeded with negotiations.
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Recently, the State of Mississippi proposed an incentive package worth nearly $1 billion. Does the incentive package offered by the State of Georgia meet your expectation?
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Our decision on the West Point site was not made only on the issue of incentives, but rather many other factors were taken into careful consideration such as synergy effects with Hyundai Motor’s Alabama plant.
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What level of automation will be realized by Kia’s US plant?
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The new plant will boast state-of-the-art facilities that will ensure world-class productivity. Our plan is to produce world-best quality cars by both continuously increasing the ratio of manufacturing-process automation and systematically managing product quality with our TQM standards. In addition, it will produce top quality vehicles through GQMS and automated stock management system.
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The plant’s automation ratio will be similar to that our Hyundai’s Alabama plant.
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When will construction of the US plant commence?
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Following land preparation, which will start in April, we plan to commence construction of the plant in the second half of this year.
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When did talks commence with the State of Georgia?
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Talks between Kia Motors and candidate sites were initiated 1 year ago, and formal negotiations were entered into with the State of Georgia last November.
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Is there any risk of hurricanes in the area where Kia’s US plant will be located?
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According to the National Weather Service, there is very little risk of hurricane or other natural disasters in the immediate area surrounding the site.
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Are there any problems expected related to securing the land for the site in question?
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Since the landowners on the site in question have already agreed to sell their land, we do not anticipate any problems in this regard.
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How will Kia fund this project?
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The required investment amount will be funded by the combination of cash and loan financing.
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Will Kia also be erecting an engine production facility in the US?
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Yes, we plan to construct an engine plant at the West Point facility.
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Which competitors does Kia intend to challenge with the models to be produced at its US plant?
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Although we do not view our sales growth as a result of taking market share from specific makers, our brand positioning strategy definitely has us moving upscale while pursuing sporty and youthful brand attributes. Since our direct competitors differ greatly depending on the vehicle segment in question, it is difficult to single out which makers we have our sights set on.
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When do you plan to hold the groundbreaking ceremony?
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We are targeting sometime in April for the groundbreaking of the US plant.
