ElringKlinger: Negotiating Incentives for New Production Plant in Indiana

Project Brief

ElringKlinger is a leading technology partner to automotive OEM’s. In response to shifting global customer demand and in anticipation of new market developments, EK planned to expand its physical footprint in the U.S. Initially the company considered three options: 1) Adding an entirely new production plant in a new location to the portfolio; 2) expanding an existing location in the Midwest; 3) or expanding an existing location in the Southeast.

Solution

Navigator Consulting was brought into the project as an external sounding board to review and give feedback on the company’s rationale behind the three different expansion scenarios and as an experienced advisor in structuring and negotiating incentives. In that capacity, our team took on the role as liaison between ElringKlinger and state and community officials in the respective target regions. Our activities included:

• Helping our client prepare the documentation necessary to apply for initial start-up support from the various state and local authorities;
• Analyzing and benchmarking all proposals;
• Advising on the mechanism and impact of each proposed element of support. This was done in close cooperation with the Group’s CFO and their external tax accountant to better understand implications for domestic and foreign entities;
• Negotiating power rates with regional utility providers.

After the due diligence and negotiations for each option had been completed, company management decided in favor of locating new production in Fort Wayne, Indiana, (Allen County). The community provides a feasible site and building, good logistical profile and access to a relevant labor draw, which will help the company to fill the 120 new jobs in the plant. It is public record that the state and local authorities offered to support this job creation and the company’s promise to invest $23.2 million, with no less than $1.9 million in start-up support.

To further alleviate company management from the burden of having to comply with all the rules and regulations associated with having been offered a generous incentives package, our team agreed to administer the compliance work for at least one year. As part of that work, Navigator Consulting helped to establish a compliance system and we will transfer responsibility to the designated member of staff at an appropriate time.

Value

• Reduction of clients’ time commitment and coordination cost through an effective project and stakeholder management
• Offsetting initial capital investment and start-up cost through state and local incentives and in-kind support
• Long-term savings on operational cost via successful negotiations of utility rates
• Ease new compliance officials into their role by transferring compliance system in first year of operations
• Enable ‘soft-landing’ in finalist community through effective relationship building with community leadership

Honorable Mentions

We would like to thank the representatives of Fort Wayne, the State of Indiana and the Northeast Indiana Regional Partnership who all pulled in the same direction to assist us in helping EK in understanding how best to structure their incentives request.

About ElringKlinger

ElringKlinger is a global technology leader in the field of lightweight engineering. The automotive supplier designs and produces lightweight components for all drive systems with the goal of reducing weight, and thus emissions, in motor vehicles whilst maintaining product robustness. 9,000 employees in over 40 locations worldwide contribute to the success of this publicly-owned group and generated $1.55 billion in annual sales in 2016.