MACON, Ga. — Kumho Tire Co. Inc. has chosen a site near Macon, Ga., to build a $225 million passenger and light truck tire plant, the South Korean company´s first in the U.S.
The factory will be built in two phases on a 127-acre site in Sofkee Industrial Park. Kumho will break ground on phase one of the project in May with an investment of $165 million. The plant should come on stream at year-end 2009 and employ 400.
Kumho said its annual global capacity at the end of 2009 should reach 77 million tires. Last year the company´s global capacity was 60 million tires. Its global sales in 2007 grew 10 percent to $2.4 billion, and its U.S. sales increased $100 million to $565 million.
The second phase of construction-slated to be completed in 2011-will cost the company $60 million and raise annual production capacity to 3.15 million tires. The facility will be 5.5 million square feet in size and employ an additional 50 people at the end of phase two.
Kumho President Sae Chul Oh joined with Georgia Gov. Sonny Perdue and local government officials at Central Georgia Technical College in Bibb County, Macon´s home county, on Jan. 29 for an official announcement and deal-signing ceremony.
"Setting a base of production here will help Kumho gain more market share," Oh said in a statement. "This new plant will help Kumho reduce freight costs and will also set up a stronger base for the firm to achieve its goal of becoming the fifth largest tire company in the world by 2015."
Rick Brennan, vice president of marketing for Kumho Tire U.S.A. Inc., also attended the deal signing and said most of the tires that will be produced in Georgia will be high-performance and ultra-high-performance tires for the U.S. replacement market.
The new Ecsta LX Platinum luxury touring tire, which Kumho is launching to dealers in March, is a candidate for manufacture in Georgia, as is the Ecsta ASX UHP radial, he said.
A portion of total capacity will be dedicated to the original equipment market, but Brennan said it was too soon to speculate on the new plant´s OE/replacement tire supply mix. He said the plant will be the most automated and advanced that the company has ever built.
"It´s proprietary enough that I do know that there´s going to be sensitivity into what areas are going to be allowed for public viewing," he said.
Kumho chose Bibb County as its U.S. manufacturing base for several reasons, particularly because of an "excellent incentives package" Georgia officials put together, the company said. One of the officials present at the signing ceremony, Pat Topping, senior vice president of the Macon Economic Development Commission, said that Kumho´s incentives included $17 million in local tax abatements approved by the county and its board of education.
That means that over a 20-year period, Kumho will save $17 million in local taxes, but it still will pay an estimated $7 million in taxes over that time, Topping said. He said Bibb County in the past has offered tax abatements to companies that invest $20 million to $30 million in the community, and "the size of (Kumho´s) investment is so large that the tax abatement is much larger than what most companies would receive."
In addition to the abatement is $9 million from Bibb County, the Macon Water Authority, Macon-Bibb County Industrial Authority, the Joint Development Authority and a company recruiting organization called Macon Now.
That money will help Kumho develop the land and pay for some infrastructure and water tank costs, Topping said. He said the county also is obtaining a separate $4 million loan to purchase the land-a deal that should close on Feb. 28.
Bibb County will repay that loan from taxes it receives from Kumho, Topping said. As far as who will own the new building, Topping said the county industrial authority must own the property in order for the company to receive tax abatements, so Kumho must lease for a time but will still have autonomy over the facility.
"Kumho is going to build the facility and buy all the equipment for the facility, and then there will be a paper transaction to transfer title once all that is completed to the industrial authority," he said. "That´s just the mechanism we have to use here in Georgia to offer tax abatements."
The state also is providing a $3.8 million grant to help site development and will train workers for Kumho under its Quick Start program at a cost of up to $4 million, according to a spokeswoman for the Atlanta-based Georgia Department of Economic Development.
She said Kumho also has applied for a job-tax credit estimated at $6.75 million, a statutory incentive that companies locating in Georgia are entitled to request.
Besides the incentives, Kumho said other advantages to choosing Bibb County are proximity to transportation and customers, and labor costs. Kumho said it doesn´t expect the future plant to be a good candidate for a union organizing campaign because the company considers its employees as partners, "and as such we pay them competitive wages and other excellent benefits."