Lear plans $13M investment in Erie Co.

Lear Corporation, a Fortune 500 company headquartered in Southfield, Michigan, is currently planning an equipment expansion at its plant in Huron, Ohio, located in Erie County. The Huron plant makes injection-molded interior parts, such as hard trim, instrument panels and center consoles for the Big

The proposed project would involve a fixed asset investment of at least $13 million including $340,000 in new construction and $12.7 million in new and relocated machinery and equipment. The building addition involves adding 11,000 square feet to two ends of the current facility for additional storage, totaling 22,000 square feet.

Asked if the potential expansion in Huron is connected to the company's announcement earlier this year that it is beginning a company-wide restructuring, Andrea Puchalsky, director of corporate communications for Lear, stated: "One might assume that it is related because the restructuring will mean some facilities will close, so maybe Huron will benefit somewhat, but I wouldn't tie this project to the restructuring... [The project in Huron] is related to new business for that facility."

Lear met with state, city, and county officials asking if they would provide incentives if the company were to source new business to the Huron plant. As we go to press, Lear has not officially been awarded the new business. If the new business is awarded, the company could create up to 220 new jobs within three years.

The Ohio Tax Credit Authority has approved a 60 percent, seven-year tax credit to Lear Corporation for the creation of 220 new full-time jobs and the retention of 778 existing jobs that would result from the company's expansion of its Huron facility. As a part of the tax credit agreement, the authority would require the company to maintain operations at the project site for at least 14 years. The tax credit will begin in December 2006 and will end December 2012.

The job creation tax credit is a major factor in this project proceeding in the State of Ohio, according to the Ohio Department of Development (ODOD). The company has manufacturing facilities in approximately 20 states, and the corporation has been negotiating with several different states regarding incentives. The tax credit is necessary to enable the Huron facility to remain cost competitive with the other facilities located in the states of Indiana, Michigan, Tennessee, and Virginia.

With the recent tax reforms in Ohio, creating a local match of 25 percent for the state funds has become more challenging. "The bulk of the investment is in machinery and equipment and inventory, and now with tax reform in Ohio, we can't abate a tax that's not being collected by the State," explained Mark Litten, executive director, Greater Erie County Marketing Group (GEM). "So there was no tax abatement involved in this project."

"Essentially, the State is providing a 60 percent tax credit for 7 years on 220 new jobs. That credit is estimated to be worth about $900,000," explained Litten. "ODOD is also going to do an Ohio Investment in Training Program grant up to $110,000, $55,000 from FY 2006 and $55,000 from FY 2007 funds. They're also going to do a 412 Business Development Account grant of up to $ 100,000 to Lear towards the cost of the acquisition and installation of machinery and equipment."

Locally, the City of Huron will provide a Municipal Income Tax Credit of 25 percent of the municipal income tax paid by the 220 new employees. The city collects 1 percent in income tax, and plans to credit 1/4 of that 1 percent to Lear. The City will also grant Lear a 50 percent credit against its quarterly water bill. Lear's water bill averages $6,400 per quarter, which means the credit will save them about $12,800 per year. The length of the credit will be seven years, the same as the State's job creation tax credit. The City also agreed to waive the building permit fees for the 22,000 square foot addition.

"The City and GEM will also work with Lear to help them attract their 220 new jobs by working with the local job store to do prescreening of employees," Litten stated. "Firelands College, Bowling Green State University's branch campus here in Huron, will be available to provide customized' training, since Lear received the training grant through the State. They can also use EHOVE Career Center, which is our local vocational school. When they define what they need, we're here to help them."

"Tax reform has essentially required us to do this, because in the past the State always looked for the locals to do Enterprise Zone agreements, and that was our local match," stated Litten. "But now that's not on the table - unless a company is adding bricks and mortar, there aren't going to be any Enterprise Zone agreements. So we have to work very closely with our political subdivisions to be able to come up with incentives because, if we can't come up with them, then the State's incentives might not be approved. Communities are going to have to reassess where they're at with their incentives policies and how pro-business do they want to be. Fortunately in this case, the City of Huron is extremely pro-business. 'through a collaborative effort of the City of Huron, GEM, ODOD, and Lear, we were able to bring this project to fruition."

"I'm not criticizing the state, but you might see some deals not happening because local communities don't have anything to offer, especially the rural- areas," Litten added. "There are some issues, and we just have to find some common ground that we can all work on so we're not leaving deals on the table."

Lear focuses on integrating complete automotive interiors, including seat systems, interior trim, and electrical systems. With annual net sales of $17 billion in 2004, Lear is a leading automotive interior systems supplier. The company's products are designed, engineered, and manufactured by more than 110,000 employees located in 34 countries. Lear has manufacturing facilities in approximately 20 states including facilities located in Huron, Sidney, Warren, Wauseon, and Zanesville, Ohio.

Lear was founded in 1917 in Detroit as American Metal Products, a manufacturer of tubular, welded, and stamped assemblies for the automotive and aircraft industries. It has grown with 18 major acquisitions since 1994, when Lear went public. It has reported sales growth from $160 million in 1983 to $17.0 billion in annual net sales for 2004.

Lear is a full-service, Tier One automotive supplier with complete research, design, engineering, testing, and manufacturing capabilities. Today, the company exclusively serves the global automotive industry and supplies product for all five major interior systems: seat, instrument panel / cockpit, door and trim, overhead and flooring, and acoustics. Lear is also a global automotive supplier in electronic and electrical products.

Lear announced plans earlier this year to implement a global restructuring plan designed to address unfavorable automotive industry conditions and position Lear for improved long-term competitiveness and profitability.

The initial phase of restructuring activity affected five facilities in North America and Europe, as well as certain administrative functions. These actions are the initial phase of a more comprehensive restructuring strategy intended to better align Lear's manufacturing capacity with the changing needs of its customers; eliminate excess capacity and lower operating costs, and streamline. Lear's organizational structure. According to Lear, the restructuring will primarily consist of facility consolidations and closures, including the movement of certain manufacturing operations to lower-cost countries, and census reductions.

Commenting on the restructuring, Bob Rossiter, chairman and chief executive officer of Lear, stated: "We are implementing this restructuring plan to improve our overall competitive position in light of extremely challenging industry conditions. While the actions we are taking are difficult, these steps are consistent with our strategy to deliver superior long-term value to our customers and shareholders."