It would have been a grand celebration for the small city of West Point, GA, on the Alabama border 65 miles (105 km) southwest of Atlanta, but unfortunately the guest of honor failed to show up and the hoopla has been postponed.
April 26 was to be the formal groundbreaking for a new $1.2 billion, 2-million-sq.-ft. (185,800-sq.-m) Kia Motors Corp. assembly plant scheduled to begin operations in West Point two years from now.
The first cars are to be built in 2009, reviving a region hit hard in recent years as its once vibrant textile manufacturing economy fell victim to global outsourcing.
West Point's unemployment is 6.7% compared with Georgia's overall 5% rate, but the jobless rate is estimated to be 8% to 9% in the surrounding area.
In an ironic twist, West Point and nearby towns in Georgia and Alabama stand to gain new jobs from globalization: 2,500 at Kia and 2,600 more at supplier facilities as the fast-rising auto maker plants a toehold in the U.S. All of Kia's current models are imported from South Korea. And yet another twist: Kia's first U.S. plant comes as Ford Motor Co. and General Motors Corp. are closing plants in Georgia.
Ford's Atlanta assembly plant, which produces the Taurus and Sable and employs 2,100, will close late this year. GM's Doraville minivan plant, employing 3,100, is set to close in 2008. Both moves reflect the Big Two's shrinking market shares, thanks to foreign competition.
Somewhat embarrassing, Kia canceled the April 26 groundbreaking ceremony because Kia President Chung Eui-sun was barred from leaving South Korea pending a Hyundai Motor Group bribery investigation. Kia is a subsidiary of Hyundai.
Chung's father, Hyundai Chairman Chung Mong-koo, since has been incarcerated and indicted for breach of trust and for allegedly embezzling $106 million from the company to create a slush fund for bribing government officials. His son is being investigated in the same case.
Hyundai Motor Group also faces a stockholder's suit alleging it diverted more than $1 million from group firms to Glovis Co., Hyundai's logistics firm, in which the two Chungs hold controlling interests. The two since have offered their shares to charity as an act of contrition.
So it is not exactly an auspicious start for a state and local effort calling for $410 million in incentives for Kia's West Point plant.
In mid-May, Reuters reported Kia was indefinitely delaying start of construction in West Point because of the investigation. But state officials discount the report and say the project is moving forward.
"We've been reassured again and again that (the Chung affair) will have no impact on us, and we believe them," says Bert Brantley, spokesman for the Georgia Dept. of Economic Development.
A spokesman for Kia Motors America Inc., the auto maker's U.S. subsidiary, tells Ward's the U.S. operation has not received word of a postponement of construction.
A Kia spokesman in Seoul says initial site development, which involves leveling the ground for the plant, will be carried out by state authorities in coming months, as scheduled. But the spokesman also says construction may be on hold until the senior Chung is released from prison.
Brantley says the state has been closing deals with land owners to purchase the 2,245-acre (908-ha) plant site for a total of $37.5 million and already has acquired 1,300 acres (526 ha). It has options on the remaining acreage and is closing deals each week, he says.
In addition, the Georgia Department of Transportation is acquiring another contiguous 1,055 acres (427 ha) for road improvements, a new interchange on adjacent Interstate 85 and an access road.
A source close to the negotiations says sellers have been offered $15,000 per acre "above market value" for their land.
Although dating to 1944, Kia is a recent automotive upstart. Ford and Mazda Motor Corp. each owned 10% of Kia, but when it came close to bankruptcy in the late 1990s, they passed on helping with a bailout. Hyundai took control in 1999.
Kia since has flourished and now has 12 manufacturing and assembly operations in seven countries that produce 1.1 million vehicles annually. Kia, which translates roughly into "Rising Out of Asia," entered the U.S. market in 1994 and currently markets seven nameplates.
Kia sales totaled 275,851 in 2005, and through April this year sales rose 2.4% to 92,640, according to Ward's data. Its 2006 goal is 300,000-plus units, which may be a stretch, and 800,000 by 2010 in the U.S. and Canada, perhaps an even bigger stretch. Kia officials repeatedly have said when U.S. sales reach 300,000 units it would consider a U.S. plant.
The West Point facility is designed to produce 300,000 vehicles annually - Kia hasn't said which ones - and could push that up to 400,000. That suggests half its vehicles still would be imported four years hence if the 800,000 target is achieved.
