MIDLAND, MICH. — Once seen as a fading industry, the automotive sector in the state of Michigan is seeing an economic resurgence in the field of next-generation automotive technology. No better evidence exists for this than the recent groundbreaking for Dow Kokam's new automotive battery production facility in Midland.
The two-phase, approximately $600 million project will consist of the construction of an 800,000-square-foot, large-format battery manufacturing facility. The batteries will primarily be used to supply power to the next generation of hybrid-electric and electric vehicles. Phase I of the project will be able to produce batteries for 30,000 electric vehicles (assuming a 20kWh operating system) when fully operational and will employ 320 people full-time. The project has been supported by government on all levels. The state of Michigan is providing more than $180 million in tax incentives, and the Department of Energy awarded Dow Kokam $161 million in grant funding from the American Recovery and Reinvestment Act for Phase I of the project.
Phase II of the project could begin as early as 2011. This $300 – $400 million phase will double the plant's capacity and add up to 400 additional employees. At full operation, which could come as early as 2015, the Dow Kokam facility will employ 720 people full-time and produce 1.2 million watt hours of battery power. It is estimated that 2,000 construction jobs could be created by the project as well.
“Dow Kokam's groundbreaking was a milestone for Michigan and for the adoption of alternative energy by the automotive industry,” said Dow Kokam spokesperson Kristina Schnepf in an email. “However we believe the event also represents a significant opportunity to diversify Michigan's economy and advance its leadership position in new energy sectors.”
As the automotive sector changes, Michigan is changing with it. The company has made a big push to attract high-tech companies to the state, especially those related to the auto industry. In a statement following Dow Kokam's groundbreaking, U.S. Senator Debbie Stabenow, a representative from Michigan and a member of the Senate Finance Committee, said, “When we passed the Recovery Act last year, Michigan companies received over half of the national battery funding available. Now, Michigan ranks third in the country for clean energy patents.”
Dow Kokam's battery plant is actually one of five that are currently under construction in the state. In Holland, two plants are under construction. Johnson Controls – Saft is on track to complete a conversion of an existing 129,040-square-foot electronics production facility by the end of the summer. The converted battery plant will only assemble batteries at first, but once its manufacturing portion comes online in 2011, it will have the capacity to produce 15 million cells annually — which equates to approximately 150,000 hybrid-electric vehicles. Johnson Controls is also in the planning stages for a second battery plant, and Michigan is on the short list for it.
The other Holland plant currently under construction is owned by LG Chem and Compact Power. Slated to come online in 2012, the facility will be providing batteries for the new Chevrolet Volt electric car. In Livonia, A123 Systems will open a new plant in the fall. Finally, Fortu PowerCell currently has a plant under construction in Muskegon.
In the past several years, much of the heavy manufacturing related to the auto industry has left Michigan for cheaper markets. While it remains to be seen if that activity is coming back, Michigan is being presented with the rate opportunity to evolve its industrial sector.
“The silver lining, if there is one, is we have a market that has experienced an overall drop in lease rates. We have properties available,” says Paul Kerber, a senior vice president of investments with Marcus & Millichap in Detroit. “This new hybrid battery technology sector is a classic example of people coming to Michigan and, not only utilizing state incentives, but finding really good deals on real estate.”
Announcements such as these battery plants coming to the state are giving many in the real estate community a reason too be optimistic about the state's future.
“Where a drop in value has occurred, investors will come in, and the market will be born again,” Kerber says. “I think you will see new growth and new investment capital coming to southeast Michigan.”
— Coleman Wood