Category Archives: Economy

Foreign Direct Investment in the Bluegrass Region

Following our recent ranking as #7 Top Small American City of the Future 2017/18 for FDI Strategy by fDi Intelligence (read more here) let’s look at the presence of foreign direct investment in the Bluegrass Region.

According to the Cabinet for Economic Development, there are over 480 foreign-owned facilities in Kentucky employing nearly 106,000 Kentuckians. The eight counties of the Bluegrass Region are home to 21% of the FDI facilities in Kentucky and 23% of the employees – that’s 99 facilities with ownership from 18 different countries providing full time employment to over 23,900 people (as of April 4, 2017).

In Lexington, there are 34 facilities with ownership from 14 countries, employing nearly 6,600 people full time. China is the largest FDI employer with 2,128 jobs (or 33% of Lexington’s FDI employment), followed by Japan with 1,210 jobs (or 18%).

In the Bluegrass Region, Japan is the largest FDI employer, with nearly 16,000 employees, or 67% of the FDI workforce and 60% of the foreign-owned facilities. Not surprisingly, 60% of the Japanese FDI workforce is in Scott County, followed by 14% in Madison County.

Germany is the second largest employer, with nearly 2,500 employees (10% of the FDI workforce), 95% of which work in Fayette, Franklin, and Woodford County.

Half of the foreign-owned facilities are located in Fayette (34%) and Scott County (18%). Around 41% of the FDI workforce is in Scott County alone, with 27% in Fayette County, 11% in Madison County, 8% in Franklin County, and the rest spread throughout Bourbon, Clark, Jessamine, and Woodford County.

The majority of foreign-owned facilities employ less than 100 people (54%) and a just over one third employ less than 50 people (38%) and around one third employ between 100 and 500 people (37%). However, several Japanese-owned facilities are major employers in our region, including around 8,200 employees at three Toyota facilities in Scott County and 1,449 employees at two Hitachi facilities in Madison County.

Check back next week for highlights from the Center for Automotive Research’s report on the economic impact of Toyota in Kentucky. 

Want to learn more about foreign direct investment in the Bluegrass Region? Check out the Bluegrass Economic Advancement Movement (BEAM) Global Trade and Investment Plan.

Advanced Manufacturing in the Bluegrass

Advanced manufacturing is a key component of the Bluegrass Region’s economy and is a targeted industry for Lexington’s economic development.

Advanced manufacturing uses innovation and technology to improve manufacturing process, typically through the incorporation of computer technology, advanced robots, clean technology, information technologies, automation, innovation, precision control of the manufacturing process, customization, sustainability and eco-friendly technologies and practices, and waste reduction.

AdvancedManufacturingEmployers2015

One of the Bluegrass Region’s most prominent advanced manufacturers is Toyota Motor Manufacturing Kentucky, Inc. (TMMK) in Georgetown, an automotive assembly facility established in 1986 by Toyota Motor Corporation. The facility produces four cylinder and V-6 engines, Camry, Camry Hybrid, Avalon, Avalon Hybrid, and Venza, and will begin producing the first U.S. assembled Lexus later this year, an addition that will increase its production by 50,000 vehicles. Currently, around 7,900 Kentuckians are employed. The philosophy of the Toyota Production System is “the complete elimination of all waste.” Toyota’s Just in Time system quickly and efficiently produces and delivers only vehicles ordered by customers, without excess. Toyota’s machines monitor production quality and automatically shut off when the process completes or when a quality or equipment problem arises. This ensures high quality of production, increases processing capacity, and allows operators to monitor several machines at once.

Webasto Roof Systems, one of the world’s largest automotive suppliers, has a sunroofs and components production facility in Lexington. Webasto researchers and developers work with automotive manufacturers to design highly specific custom prototypes and produce sunroofs for individual make and model specifications, a process which takes around two years from design to production. Webasto recently invested $10 million in expansions and modernization, and created 65 new jobs.

The iconic household brand Jif Peanut Butter is made here in Lexington by J.M. Smucker, a leading food products manufacturer. The Jif plant in Lexington is the largest peanut butter production facility in the world, requiring 188 billion peanuts annually and employing around 280 people. In 2013, Smucker announced it would invest over $43 million in upgrades to increase efficiency and productivity, improve machinery and equipment, and increase product line capacity. In a press release for the announcement, Gov. Beshear said, “This investment of $43 million in Lexington really shows the commitment to Smucker’s growth and success here, and a testament to the positive relationship the company has with the Commonwealth.”

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Each of these companies’ recommitment to the region is proof that Lexington is a great place for advanced manufacturing. The region’s strong transportation network helps serve manufacturing efforts, allowing for the easy import of component supplies and the distribution of finished products, and Lexington’s workforce provides the innovative and skilled talent these companies need.

Check back next week to learn about MakeTime, the Machine Capacity Marketplace. 

 

Lexington Ranks 4th Best City for Attracting Foreign Investment!

Here at Commerce Lexington, we’re always working to attract companies to the region and to help existing companies grow, and international companies are a large part of that effort. We’re proud to say that Lexington has ranked #4 Top 10 Small American Cities of the Future 2015/16 for FDI Strategy by fDi Intelligence!

The fDi Intelligence team gathered data on 421 locations in five categories — Economic Potential, Business Friendliness, Human Capital and Lifestyle, Cost Effectiveness, and Connectivity — and a sixth qualitative category, FDI Strategy, was gathered for 105 locations.

Many international companies have chosen to locate in Lexington and the Bluegrass Area. According to the Kentucky Cabinet for Economic Development, there are 28 facilities with foreign ownership in Fayette County, providing over 4,000 full-time jobs. In the Bluegrass Region, there are 88 facilities with ownership from 17 different countries employing almost 21,000 Kentuckians full time. A previous blog post offers more details on countries that have invested in our community.

FDI

The Global Cities Initiative, a joint project of the Brookings Institute and JPMorgan Chase, studied foreign direct investment (FDI) in 100 of the country’s largest metro areas over a 10 year period and found that mergers and acquisitions create more jobs than greenfield investments. That is, more FDI jobs are created by buying and revamping existing companies (M&A) than are created by starting new ones. Lexington has benefited from both methods.

Founded in Lexington in 1984, Blue Star Plastics is a plastics fabrication company that employs around 90 people and provides custom thermoplastic injection molding and contract manufacture of plastic assembled parts. The company’s consistent growth required additional investment and was purchased by the family-owned international company Seventh District Holdings, LLC, a subsidiary owned and led by Ahmed Hamza and his son Mohammad Hamza. In 2013, The Lane Report quoted Ahmed Hamza about the decision to acquire Blue Star Plastics: “They have a strong business concept, a long established successful track record, an excellent customer and supplier base, quality products, and a highly professional management team. Lexington, Ky., is an ideal location for our first venture in the United States and one from which we can grow.”

Earlier this year, Piramal Enterprises Limited of India purchased Coldstream Laboratories Inc. in a $30.65 million cash transaction, including $5 million to purchase the building while the remaining funds purchased the company’s shares. Founded in 2007 by the Lexington-based University of Kentucky Research Foundation, Coldstream is a specialty pharmaceutical contract manufacturer of sterile liquid and lyophilized parenterals and injectables that employs around 120 people. Coldstream’s revenues had been increasing from $9 million in 2012 to $14 million in 2014. This success attracted Piramal, said Mr. Vivek Sharma, CEO of PEL’s Pharma Solutions: “Coldstream is a very high quality operation and has been able to build significant customer relationships and track record for sterile products. We see this as a great platform for growth in our Pharma Solutions business.” Piramal hopes to enhance its products by acquiring Coldstream’s expertise in developing and manufacturing sterile injectables.

Some foreign-owned companies began in Lexington. Funai Electric Company, Ltd., of Japan acquired Lexmark’s inkjet technology assets, over 1,000 patents, and a manufacturing facility in 2013 and announced plans to open Funai Lexington Technology Corporation in 2014 to support its research and development. Kiyoski Chinzei, Office & General Manager of the Office Solution Business Unit of Funai Electric Co. said, “This new company will continue research and development in the inkjet and microfluidic technologies… we are pleased with the technology resources available in Lexington and the support of the Commonwealth of Kentucky.” As discussed, Funai will create 50 new jobs and invest over $4.2 million.

Other notable Lexington companies that have been partially or fully acquired by foreign owned investors include:

  • Florida Tile was founded in Florida in 1954, but was purchased by the Italian company Panariagroup in 2006 and moved its headquarters to Lexington in 2010.
  • Aventics GmbH is an industrial pneumatic systems manufacturer (i.e., a gas or pressurized air alternative to electric motors, such as in air brakes on vehicles) that was recently purchased by the German company Triton Partners. Aventics was originally Bosch’s pneumatics division formerly named Rexroth Pneumatics.
  • Young An Hat Company of Korea acquired CLARK Material Handling Company in 2003 and opened its new North American headquarters in Lexington in 2005. CLARK manufactures forklift trucks.
  • Link-Belt Construction Equipment Company was established in Lexington in 1986 as a joint venture between the American company FMC Corporation and the Japanese company Sumitomo, and is now wholly owned by Sumitomo Heavy Industries and remains headquartered in Lexington.

Not only is Lexington attracting foreign investors, but the jobs created by their investments are quality, high-paying positions that will provide Kentuckians with economic security and stability for their families. Funai’s 50 new jobs, for example, will pay an average wage of $100,000 per year.

Of course, jobs are also created when established companies expand. Some recent expansions by major international companies in the Bluegrass include:

  • In 2013, Japanese-owned Toyota  Motor Manufacturing Kentucky (TMMK) announced a $530 million expansion creating 750 new jobs to support production of the Lexus ES 350 at Toyota’s Georgetown plant beginning in 2015.
  • Last year, Surelock McGill opened its first American sales and distribution office in Lexington.
  • Funai Electric Company opened a new research and development center in Lexington last year, with an investment of over $4.2 million that created 50 new jobs.
  • Earlier this year, Sumitomo Electric Wiring System broke ground on a new 440,000 square foot facility in Lexington, representing an investment of almost $8.5 million that will create up to 10 new jobs and retain more than two dozen current employees.

Lexington’s skilled and innovative workforce provides the human capital these companies need to thrive and continue to grow in the Bluegrass. 40.1% of Lexingtonians have at least a bachelor’s degree, and 17.3% have an advanced degree.  Lexington consistently earns praise for its educated citizens. Last year, Lexington was ranked the 23rd Most Educated City by Wallet Hub and the World’s 23rd Smartest City by National Geographic.

Lexington is also an attractive place for businesses, both foreign and domestic, because of our high quality of life. This year alone, Lexington was ranked the 8th Best Large City to Live In by Wallet Hub, 6th Most Inspiring City for Young Artists by World Wide Learn, and 27th Most Literate City by Central Connecticut State University. These qualitative aspects of everyday life matter to a community’s ability to attract and retain businesses, along with Lexington’s other attributes, and Sumitomo’s and Toyota’s continued commitment to the region is proof that Lexington is a great place to do business.

Startups in Lexington

Lexington and the Bluegrass Region are a great place for business to locate. Our strategic central location, highly educated workforce, diverse economy, network of colleges and universities, high quality of life, low business costs, and transportation access by road, rail, and sky have attracted major companies to the area, including Toyota, Xerox, Amazon, Valvoline, and many others. However, Lexington is also good at growing companies.

Entrepreneurs can find guidance from many sources in Lexington. To name just a few, the Kentucky Innovation Network, the Bluegrass Business Development Partnership, the Bluegrass Small Business Development Center, Awesome Inc., Lexington Venture Club, 5Across, and Lexington SCORE have helped many entrepreneurs build their startup business.

With the school year just beginning, it seems appropriate to highlight a new initiative to support innovation and encourage entrepreneurship: the University of Kentucky Von Allmen Center for Entrepreneurship’s Venture Studio.

Venture Studio will provide real-world startup experience for members of the UK community, including undergraduates, graduate students, post docs, faculty, and staff. During Venture Studio Bootcamp, participants will explore a problem and develop a solution — their startup. Throughout the semester, teams will work with mentors, identify customers and procure feedback, perfect an elevator speech about their project/business, create a prototype, understand intellectual property rights, and develop financial, marketing, and sales pitches and projections. At the end of the semester, teams present final pitches to a panel of community investors, who select teams to move onto local, regional, and national business plan competitions in the spring semester, including the UK Venture Challenge, the University of Louisville’s Cardinal Challenge, the Georgia Bowl, the Alltech Innovation Challenge, Idea State U, and Global Venture Investment Labs.

Venture Studio offers three unique benefits.

First, the program gives more advanced students a headstart into the economy and their chosen industry. Participants gain access to angel investors, mentors, client focus groups, financial and marketing experts, resources, and constructive feedback at every stage of their business development. These are scarce and valuable resources that other fledgling entrepreneurs may not have easy access to.

Second, Venture Studio  is cross-disciplinary. A team of industry experts may have a brilliant idea but most will need people with other skills, such as finance, software, and legal expertise, to help ensure their startup succeeds. Venture Studio will bring together people of various expertise who may not have otherwise found each other, increasing their startup’s chance of success.

Third, Venture Studio has two subtle built-in advantages: deadlines and expectations. As well intending as every entrepreneur may be, life tends to get in the way. Venture Studio requires weekly attendance, sets goals, and defines tasks, leading teams down the path of creating a startup while holding each responsible for completing each step. This commitment obligates participants to prioritize their startup and sets the framework for achieving the goal of actually creating a business.

University of Kentucky student entrepreneurs have a history of success. Last year, five UK student startups placed in various business plan competitions, including Idea State U, the Alltech Innovation Challenge, Lexington Venture Club, the Cardinal Challenge, and 5Across. These entrepreneurs were MBA Candidates, Pharmacy PhD Candidates, and students from the College of Design, with assistance from professors in the College of Agriculture and the College of Engineering. Their project topics included bio-fuel, food/beverage coloring, mining dust and emission solutions, and enzyme production (Commerce Lexington’s strategic target areas are advanced manufacturing, animal and equine sciences, business and professional services, clean technology, life sciences, software and information technology, and visitor industries).

The University of Kentucky has been a valuable partner in growing Lexington’s workforce and has now created a venue for growing Lexington’s businesses. Check back in a few months for updates!

 

Education for Kentucky’s Aerospace Workforce

Kentucky’s aerospace industry is taking flight! At $7.7 billion, aerospace parts and products were Kentucky’s largest export category in 2014 and Kentucky exported more aerospace and aviation products that every other state, except California and Washington.

Lexington and the Bluegrass Region are particularly appealing to the aerospace industry because of the area’s extensive network of colleges, universities, and other educational institutions with aerospace and aviation programs working to develop the region’s workforce.

NASA Kentucky is located in downtown Lexington on the University of Kentucky campus and operates the Space Grant Consortium and EPSCoR program. The Space Grant is a higher education program funding students and supporting research and workforce development in STEM areas, as well as expanding access to other educational resources through networking. The NASA Exprimental Program to Stimulate Competitive Research (EPSCoR) award programs support research and partnership with NASA and offer improved access to workshops, conferences, and seminars through grants.

The Aviation Museum of Kentucky (AMK)located in Lexington’s Bluegrass Airport, houses 20,000 square feet of restored historic airplanes and modern aircraft. Visitors learn about how aviation came to Kentucky and about the science of flight. The Museum strives to introduce young people to aviation and encourage aviation as a career. With the Learning through Aviation program, the AMK helps teachers bring aviation into the classroom and shows how STEM subjects build a foundation for successful aerospace and aviation careers. During the summer, the AMK’s Summer Camp introduces 10 to 15 year olds to aviation, teaching them the history of aviation, the principles of flight, aircraft and engine design, about aviation careers, and gives them hands on experience with a flight simulator and actual flights with instructors. Besides the primary Lexington location, camps are also held in Hazard, Bowling Green, Louisville, and Pikeville, and nearly one third of the campers attend for free through the Museum’s scholarship program.

Nearby, Eastern Kentucky University’s Aviation program offers the nation’s first FAA-approved 1,000-hour power aviation degree program. Students graduate with a concentration in Professional Flight, Aerospace Management, or Aerospace Technology, with supporting courses in mathematics, physics, and business management. Graduates are prepared for an array of aerospace and aviation careers, including piloting, aviation/aerospace management, military, and aerospace technology.

The National Air & Space Institute/Air & Space Academy is a four-year program operating in high schools throughout Kentucky, including several in the Bluegrass Region, that teach high school students aerospace concepts and skills through a STEM curriculum designed to prepare them for college and the aerospace industry. Students engage in online  course study, flight training, and competitions that apply knowledge and skill to create functioning aviation products, such as high performance wings or nanosatellites. Students can receive college credit for participation in the program, giving them a boost into their future careers.

How important is Kentucky’s specialized training and growing aerospace workforce? The Kentucky Legislature has directed the Cabinet for Economic Development, the Transportation Cabinet, and the Commission on Military Affairs to conduct a study on the aerospace and aviation industry in Kentucky. The report will look at where aviation/aerospace parts manufacturing facilities are located, their workforce needs, tactics to grow the industry and create more jobs, an understanding of the industry’s economic impact, and will provide an overall better understanding of how the aerospace/aviation industry affects Kentucky’s economy. Stay tuned!