PK USA has landed a contract to supply parts for Ford’s Bronco line and new equipment is needed to fulfill that contract.
On Thursday morning, PK USA representatives discussed the nearly $20 million purchase of new equipment and upgrade of current equipment with the City of Shelbyville’s Tax Abatement Committee.
A 10-year tax abatement is being sought to help offset the financial costs at one of Shelbyville’s long-standing employers. There will be a clawback provision in the contract should PK USA move its operations.
There will not be any new employees added with the new contract with Ford which is bolstering the company that has been hampered by Nissan’s recent struggles, which includes the arrest of the company’s CEO, Carlos Ghosn, for underreporting his pay package.
At one time, supplying Nissan was roughly 75 percent of PK USA’s business, according to Bill Kent, vice president of corporate relations.
“Nissan is maybe half of our business now,” said Kent during the tax abatement committee meeting. “Part of our desire and goal is to remake our business model so we’re not reliant on one company.”
And while not reliant on a tax abatement, Kent views PK USA’s relationship with the city as a partnership that benefits both sides.
“The investment is high,” explained Kent after the meeting. “It takes a lot of capital to bring in equipment. Automotive runs on razor-thin margins so any assistance we can get helps us as we look at additional business. It we can get tax abatements, we can invest this much money also.”
Tax abatements, which in the formula the city typically follows, includes zero taxes in year one of the abatement with 10 percent less of an abatement every year after that to year 10. It is a recruitment tool for new business and a way to assist companies that already have invested locally.
“Quite frankly, there is competition nationwide for manufacturing,” said Kent. “It’s so important that localities offer tax abatements. When we were looking at a facility in the south, specifically Mississippi, it had a big push to get manufacturing down there. They were offering to build your factory because there is such a downflow (financially).
“You bring in a big automotive manufacturer or supplier and the downflow locally is phenomenal. Over half our workforce comes from this community. I checked our purchasing department to see how many checks we write to local suppliers and it was over 250.”
In reference to the partnership mentality, Kent doesn’t believe a company should accept tax abatements and not funnel funds into its community.
“Part of the issue with tax abatements is those companies that don’t invest in the local communities – and that’s wrong,” said Kent emphatically. “I look at this as a partnership. That’s the reason I have to go before the city council four times a year to let them know what we are doing.”
The equipment for the new production is expected to arrive in February and March with production to begin in December 2020.
The tax abatement committee – Rob Nolley, Joanne Bowen and David Phares – unanimously approved a recommendation to the city council, which will make the final decision on the abatement at Monday morning’s meeting at City Hall.