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Meridian tops short list for next plant

Hitting the highway in a Mississippi-made Kia?

Last month, after meeting with Gov. Haley Barbour and representatives of the Mississippi Development Authority (MDA), top leaders of Kia Motors and its parent company, Korean automaker Hyundai Motors, announced that Meridian is the top site being considered for the construction of a new automotive assembly plant in the U.S.

“Kia proposed Meridian to us,” emphasized Barbour. “My administration’s policy is to show every potential site in the state that might qualify to any prospect that is considering Mississippi. In this case, however, Kia told us that it is specifically interested in the Meridian area because of Meridian’s proximity to the Hyundai plant that is already operating in Montgomery, Ala.”

Since before Barbour took office, Alabama and Mississippi have been working together to develop an industrial site that the two states can jointly promote. “After the meeting with Kia, I spoke with Gov. Riley of Alabama, and the MDA is working with its Alabama counterpart,” said Barbour. “It is our goal for the two states to work together and jointly promote the development of a Kia plant in the Meridian-East Mississippi-West Alabama area.”

Mike Randle, editor and publisher of Southern Business and Development magazine, and SouthernAutoCorridor.com, a product of SB&D magazine, predicted a year ago that the Korean automaker would select Meridian.

“There’s not doubt about it,” he said. “If you look at a map, considering all the issues involved with that deal, there’s no other place to put it.”

Even though Columbus, Tupelo and LaGrange, Ga., have been mentioned on the short list, David Rumbarger, president of Community Development Foundation in Tupelo, said he knew the Northeast Mississippi site wasn’t “in the hunt because of the supplier base in Montgomery.”

“We’re delighted with Meridian’s opportunity and wish them the best in recruiting Kia to the area,” he said.

Mark Sweeney, an internationally known site selection consultant and partner of McCallum Sweeney Consulting in Greenville, S.C., said Kia’s announcement was an unexpected development.

“But automotive projects are so high profile and require such an incredible amount of work, it’s not unusual for projects to go public or have some sort of public involvement before the site selection process is finished,” he said. “A lot depends on the culture of the company and I guess they felt comfortable saying that.”

Choosing a site that has not been certified has not caused concern among economic developers, said Sweeney, who certified four megasites for the Tennessee Valley Authority (TVA), two in Mississippi, one in Tennessee and one in Kentucky.

“It’s my understanding that they did consider the megasites,” he said. “But there are particular needs and preferences for each project. The whole idea of a certified site program is to be in a very competitive position for readiness, which will get you looked at more often, with a better chance to win.”

MDA deputy director and COO Gray Swoope said the announcement took the state agency by surprise. “In general, any project is much easier to move quietly before being open to the public,” he said. “Our feeling is that, until the deal is done, the less said, the better.”

The proposed Kia site is comprised of 1,465 acres under option in Mississippi and about 200 acres under option in Alabama. Located south of I-20 on the frontage road behind the weigh stations on the Mississippi-Alabama border, it is north of Norfolk Southern Railroad.

“The logistics, a major concern to automotive manufacturers, would be favorable,” said Wade Jones, president of the East Mississippi Business and Development Corporation in Meridian. “It has high visibility, and with materials onsite conducive to the construction of the plant.”
In other words, the site contains very little, if any, pesky Yazoo clay.

“It’s ironic that we’re working on several projects that will all complement each other, all within target industries we’re pursuing,” said Jones, who mentioned processing, automotive and timber. “We have a very accomplished team in place to work with other parties that would be involved in a development of this size. We also realize it’s still early in the preliminary site search process.”

Timing issue

Speculation has swirled that Kia, whose fitting tagline is “the power to surprise,” plans to make an official announcement this month or next about the Meridian site. With that time frame, the plant could open as early as 2007. Before the announcement is made, Kia plans to review the sales history of the Sonata and the Santa Fe models, the latter of which won’t be in test production until September.

Kia has set sales records for the first and second quarters of 2005, resulting in 143,086 vehicles sold, a 5.3% increase over the first six months of 2004. A 14% increase in sales of the Sorento mid-size SUV highlighted June sales, and the redesigned four-door Spectra sedan eclipsed 5,000 units for the fourth consecutive month.

“The first half of 2005 featured a number of milestones for Kia, including sales records in both the first and second quarters and the successful return of the Sportage compact SUV to our lineup,” said Kia Motors America president and CEO Peter Butterfield. “The Spectra’s performance in the recent J.D. Power Initial Quality Study (second-highest score in the compact segment) is the latest example of how our next-generation vehicles are changing our showrooms and our brand.”

“If Kia announces this fall or winter, as opposed to spring 2006, it’s because suppliers are hurting,” said Randle, who predicted the announcement would be made in the spring of 2006. “The Hyundai plant, which is around 33% production, has probably 50 suppliers who are also probably at 33% production. Of those 50 suppliers, probably 35 or 40 are Korean, and they’ve never had a plant here before. They’re a year old and barely keeping their head above water, and the chairmen of Hyundai and Kia are father and son (respectively). And they may feel they need to move ahead to help out those suppliers sooner rather than later.”

Barbour cautioned that Kia has also publicly said it is considering sites in other states, “so people should not let their expectations get out of hand,” he said. “These are still very preliminary discussions, and it will be quite a while before we know where they will lead.”

Shifting automotive corridor

Industry insiders initially believed the perfect site for the new Kia plant would be Opelika, Ala., home of several Korean suppliers and less than an hour’s drive from Hyundai’s facility in Montgomery. But the site didn’t make the original short list, with speculation that Alabama was reluctant to pony up a comparable incentive package.

“Honda, Toyota and Mercedes have had the pick of the litter of labor in Alabama,” Randle pointed out. “Hyundai, because of what they’re paying, and being the fourth OEM to land in Alabama, are not getting the top-of-the-line labor.”

If Meridian is the site of the new Kia plant, Mississippi may be short-changed with Tier Two and Three suppliers, who are already in place in Alabama and Tennessee. But the sacrifice represents a much smaller part of a bigger picture.

“Even though they won’t get the supplying effect from Kia that a typical plant gets, Mississippi is building a critical mass and it’s a good strategy,” said Randle. “By positioning itself as the center of the Southern automotive corridor, the location alone will get suppliers.”

Midwest suppliers have inquired almost daily about sites available for construction through SouthernAutoCorridor.com.

“Almost none of these suppliers have contracts down here,” said Randle. “Some are talking about building a plant with no contracts. They say they’ll get contracts. They’re going to have to head down here just to maintain productivity, much less grow. Now with Toyota’s San Antonio plant being built, the corridor is jogging west. The center of the spine has always been I-65, but as time goes on, it may be I-55. Mississippi is a day’s drive to the South’s nine or 10 plants. You can’t even say that in Alabama.”

Attention has also turned to Project Pine Tree, which some industry analysts had speculated was the Kia project. Now the buzz is Audi or Daimler Chrysler. If so, will they choose an East Coast port or a TVA-certified megasite, perhaps in Chattanooga or Tupelo, giving Mississippi possibly a third automaker?

“There may not be another plant announced anywhere but the Southern automotive corridor in my lifetime, and those folks in Michigan know it,” said Randle. “They can cry sour grapes all day long, but it’s not going to change anything. I’m not saying we’re better. I’m just reporting the news. Their industry is dying. Ours is expanding. That’s just the truth.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

About Lynne W. Jeter

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