Category Archives: Manufacturing

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.

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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. 

 

Kentucky’s Aerospace Industry is Taking Flight!

Kentucky’s aerospace industry is taking flight! According to the U.S. Census Bureau, Kentucky exported $27.6 billion in 2014, an increase of 9% from 2013. Although Kentucky is traditionally known for horses and bourbon, aerospace parts and products were the largest export category in 2014 at $7.7 billion, while other transportation (i.e., motor vehicles, parts, bodies, and trailers) totaled almost $6 billion. Furthermore, Kentucky exported more aerospace and aviation products than every other state in the country, except California and Washington. Clearly, aerospace is Kentucky’s up-and-coming industry.

Three notable aerospace companies in Lexington are Belcan Corporation, Space Tango, and Lockheed Martin. Each has made significant or unique contributions to aerospace and aviation.

Belcan Corporation is a leading engineering services, design center, and technical staffing company for the aerospace industry that opened its Lexington office in 2005. Today, Belcan serves over 600 clients in the automotive, aviation, energy, marine, and medical industries. Belcan’s engineering services include automation design and build, engineering analysis, project management, and software and systems engineering. Last month, the company announced it will be expanding in downtown Lexington with an investment of $1.2 million, creating 100 new engineering jobs and growing by an additional 15,000 square feet in the Vine Center, a necessary increase for Belcan’s expanding customer base.

Lexington is also home to Space Tango, the first business accelerator for space startups. Through a 12-week program, Space Tango gives entrepreneurs the opportunity to access advisors, sales and marketing professionals, investors, experienced mentor expertise, clean room facilities, and test equipment to help innovative businesses create novel applications and successfully access diverse markets.

Lockheed Martin is an international leader in the aerospace and defense industries. As a global security and aerospace company, Lockheed Martin specializes in aeronautics, information systems and global solutions (IS&GS), mission systems and training, and space systems, among others, with facilities and employees worldwide. Lexington’s Lockheed Martin office is a contractor and logistics support services facility, offering repair, maintenance, and modification of equipment, such as helicopters damaged in service. Lockheed Martin is also one of the Bluegrass Region’s major employers with over 1,000 employees.

As with other industries, Lexington is able to provide the aerospace industry with a skilled and well-educated workforce and a central location. However, Lexington and the Bluegrass Region are particularly appealing to the aerospace industry because of the extensive network of colleges, universities, and other educational institutions with aerospace and aviation programs working to develop the region’s workforce. More about educational opportunities for the Bluegrass Region’s developing aerospace workforce next week!

Jobs in Lexington — Mapped!

Job creation, expansion, and retention are at the core of economic development. Numbers and an accompanying narrative are usually used to explain the economic state of Lexington and the Bluegrass Region, but an exciting new format has just been released.

Robert Manduca, a PhD student at Harvard University, used data from the U.S. Census Bureau Longitudinal Employer-Household Dynamics database to create an interactive map of jobs, modeled after Dustin Cable’s Racial Dot Map.

Every job in the United States is plotted on this map–or at least all of the jobs enrolled in state unemployment insurance programs and some federal jobs. In total, 96% of civilian wage and salary jobs are included.

Each dot represents one job and is color-coded by industry.

  • Red — Manufacturing and Trade
  • Blue — Professional Services
  • Green — Healthcare, Education, and Government
  • Yellow — Retail, Hospitality, and Other Services

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The job clusters of the Golden Triangle between Lexington, Louisville, and Northern Kentucky/Cincinnati are fairly sizable and easy to see, even zoomed out far enough to view the entire continental country. This high concentration of jobs is good news for our region and demonstrates our competitiveness.

Take a look at the Bluegrass Region and the surrounding area:

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A few details that reflect the region’s major employers pop out:

  • Frankfort is mostly green, which is expected from the state capitol.
  • The red area north of Lexington (around Georgetown) is Toyota Motor Manufacturing in Scott County, the second largest employer in the region with 7,900 employees.
  • The red grouping to the east of the city is Lockheed Martin, another major employer with around 1,100 employees.
  • The red grouping near Berea is Tokico (USA) Inc. (Hitachi) in Madison County with 1,350 employees.
  • The red area near Versailles consists of Osram Sylvania Glass Plant, Quad/Graphics, Pilkington North America, Inc., and Yokohama Industries America Inc. in Woodford County. Together these companies employ almost 2,400 people.
  • The red south of Lexington is the Enterprise Industrial Park in Jessamine County.

Lexington has a mix of all four colors and industries, illustrating the city’s healthy economic diversity.

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Healthcare, education, and government jobs (green dots) and manufacturing and trade jobs (red dots) are clearly prominent in Lexington.

Education is one of Lexington’s strengths. Just over 40% of Lexingtonians have a bachelor’s degree or higher and 17.2% have a graduate or professional degree, far above the national and state averages. Not surprisingly, the University of Kentucky is the region’s largest employer with 12,430 employees and is primarily represented by a solid block of green in the near-center of the city. Fayette County Public Schools is also a major employer with 5,427 employees spread throughout the city boosting the number of green dots.

Healthcare facilities also sustain a sizeable portion of the workforce in Lexington. Theses jobs appear throughout the city, with large concentrations in the south-center, center, and south-east. In addition to providing an abundance of quality patient care, these centers conduct cutting-edge research and help attract biotech and high-tech companies. Below are a few of the highest healthcare employers:

  • KentuckyOne Health: 3,000 employees
  • Baptist Health: 1,924 employees
  • Veterans Medical Center: 1,565 employees
  • Cardinal Hill Rehabilitation Hospital: 1,000 employees

Manufacturing is another major part of Lexington’s economy. The majority of manufacturing and trade jobs are concentrated in the north area of Lexington and include some of the city’s major employers: Lexmark (2,145 employees), Amazon.com (1,200 employees), Trane (1,000 employees), Link-Belt Construction Equipment Co. (750 employees), Webasto Roof Systems (720 employees), Big Ass Solutions (550 employees), and Schneider Electric (500 employees), among others.

The Fayette Mall and Hamburg Pavilion shopping centers are also easily distinguishable.

Maps like this are an excellent tool when planning transportation, housing, emergency routes, city services provision, zoning, and events. By showing the spatial patterns, clusters, and concentrations of industries and jobs, maps offer another way to understand the community’s economy and compare to other cities.

For data nerds, the NAICS codes used are:

  • Red, Manufacturing and Trade – 11 (Agriculture and Forestry), 21 (Mining), 22 (Utilities), 23 (Construction), 31-33 (Manufacturing), 42 (Wholesale Trade), 48-49 (Transportation and Warehousing)
  • Blue, Professional Services – 51 (Information), 52 (Finance and Insurance), 53 (Real Estate), 54 (Professional, Scientific, and Technical Services), 55 (Management of Companies and Enterprises)
  • Green, Healthcare, Education, and Government – 61 (Educational Services), 62 (Health Care), 81 (Other Services – largely Religious, Grantmaking, Civic, Professional, and Similar Organizations)
  • Yellow, Retail, Hospitality, and Other Services – 44-45 (Retail Trade), 56 (Administrative and Support Services), 71 (Arts, Entertainment, and Recreation – largely Amusement, Gambling, and Recreation), 72 (Accommodation and Food Services)

Note: Data represents 2010. 

Kentucky’s Automotive Industry, Part 2: Economic Contribution

The Kentucky Automotive Industry Association‘s report discussed last week also examined the contribution of Kentucky’s automotive industry to the state and regional economies through direct, indirect, and induced effects.

Direct effects created by automotive industry companies themselves, such as automotive jobs, production, exports, and payrolls. Indirect effects are caused by inter-industry activities, or business-to-business spending on goods or services used to create automobiles such as trim and engine parts. induced effects are caused by auto industry employees’ household spending. In other words, auto businesses spend money at other businesses (indirect effects) and auto employees spend money (wages) in the regional economy (induced effects). Both create jobs and tax revenue.

To estimate direct, indirect, and induced effects, the researchers used a model of Kentucky’s economy containing data on 536 industries, imports, output, employment, payroll, and other variables specific to Kentucky.

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Kentucky’s automotive industry supports over 136,000 jobs with a total payroll of $6.13 billion. However, the automotive industry is a hierarchy and it is more informative to analyze the levels separately.

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Kentucky’s four auto assembly plants employ over 16,000 people, with an average annual pay of $84,000. The Lexington Region has the highest concentration (49%) of automotive assembly plant jobs, but the Louisville Region is a close second with only 380 fewer jobs than the Lexington Region. Not surprisingly, the automotive industry supports mostly (28%) wholesale trade jobs (9,194 jobs) and jobs in eight motor vehicle manufacturing industries (3,609 jobs), such as engine parts manufacturing. The researchers found that assembly plants get most of their inputs (i.e., parts) from outside of Kentucky and that Kentucky parts manufacturers export between 10% and 70% of their products out of state.

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Unlike auto assembly jobs, employment in automotive body and parts manufacturing is not concentrated in only a few regions of the state. Regardless, the Lexington Region has the second-highest concentration of automotive body and parts manufacturing jobs (23%) behind Louisville. The average pay of automotive body and parts manufacturing is just below $48,000 per year, much lower than average annual wages at auto assembly plants, primarily due to the level of expertise and sophistication required in those positions. The largest share (14%) of jobs supported by these facilities are in wholesale trade (3,148 jobs).

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The researchers used country-level effective tax rates over the past three years to estimate Kentucky income and sales tax receipts from the automotive industry and associated revenue.

The automotive industry and all jobs supported by it contributed $488 million in state tax revenue in 2013. That’s $1 of every $14 in state taxes. The Lexington Region contributed 38% of direct state income tax revenue, 33% of all state income tax revenue, 36% of direct state sales tax revenue, and 31% of all state sales tax revenue associated with the automotive industry in 2013.

Almost 40% of all direct local occupational tax revenue derived from the auto industry went to the Lexington Region, totaling almost $20 million.  When tax revenue from indirect and induced jobs are included, the total local occupational tax revenue received by Lexington jumps to $41.6 million.

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