Scott Malone looks out over the 450-acre site with the pride of a settler planting his flag.
The president of the Development Authority of LaGrange names two other success stories in sight: a new Badcock Furniture warehouse and the Indian-owned Jindal Films plant, a $200 million-plus investment, just visible above the tree line.
He points out the Sentury Tire North America plant’s eventual location at the bottom of a gentle slope, then shows the cleared spot where a tent welcomed Chinese executives on their final site visit in August 2016, just before they made the final decision to call Georgia home.
If their vision comes to fruition, Mr. Malone and his West Georgia community just off Interstate 85 will have indeed broken into new territory.
With Sentury Tire’s massive plant, the city of LaGrange has announced more than a billion dollars in investment projects within a three-square-mile area — all in the last two years and with the bulk of the dollars coming from overseas.
Poised to spend $530 million over the next decade, Sentury is on track to be one of the state’s biggest foreign direct investment projects in recent years. It could also vindicate Georgia’s dogged efforts to land a marquee Chinese project after more than a decade of fits and starts in the world’s second biggest economy. The state beat out 11 others over eight months to win Sentury’s business.
For now, the site reserved for Sentury’s highly automated factory, headquarters and warehouse is mostly brush and red clay. On a recent visit, a fallen tree blocked a gravel access road dotted with deer tracks, not those of the excavators and bulldozers that typically signal progress on a greenfield investment of this size.
Mr. Malone wasn’t worried, despite the fact that the date for this spring’s planned groundbreaking has come and gone without any dirt moving. The company is now eyeing early 2018 to begin initial site work, with production starting nearly a year behind schedule in late summer 2019, and that’s if all goes as planned.
Georgia has been burned before on Chinese projects that have been delayed or canceled altogether after much fanfare, but close working relationship with the Sentury U.S. team has allayed Mr. Malone’s concerns. Dubbing himself their built-in “problem solver,” he often joins executives for lunch at their go-to haunt in downtown LaGrange: Mare Sol.
Over country fried steak, Greek flatbreads and more, Mr. Malone admits that progress has been slow by U.S. standards but chalked it up to cultural issues typical in foreign deals. Translating and explaining the concept of local property tax abatements into Chinese, for instance, required late-night conference calls with up to 10 people on the line, he said.
“It’s all about culture,” said Mr. Malone, a Georgia Tech chemical engineer and Duke University MBA who consulted internationally before returning to the U.S. His father, Tom Malone, served as president of South Carolina-based textile manufacturer Milliken & Co., which is what first brought the family to LaGrange.
Despite quiet at the construction site, Sentury is at work negotiating with equipment vendors, talking plant design with its newly hired engineering firm and working on ambitious new products it won’t yet unveil publicly. That’s enough to keep Mr. Malone and his community stakeholders positive on what could be a game-changing development in their bid to win even more foreign investment.
“The key is, are we making progress? At any point are we stalling? And this thing keeps moving forward,” he told Global Atlanta.
Sentury has set up shop in cubicles at the city of LaGrange’s technology center, temporary office space offered as a small part of an incentive package that also is to include $7 million in a state REBA grant, 20 years of local property tax abatements through a bond-for-title deal and various tax credits based on jobs created, port use, research and development spending and other performance-based metrics. The company will also be exempt from state sales taxes on equipment purchases.
The LaGrange office houses a U.S. team, but most of its members aren’t American. Strangely, they’re not Chinese either.
Rami Helminen, the CEO, hails from Finland, where he was hired away from Nokian Tyres by Sentury after building a manufacturing relationship with the Chinese company. Raimo Mansikkaoja, a senior vice president and IT exec, also came over from Nokian. Chief Financial Officer Ken Vittrup of Denmark is a veteran of the European and American auto sectors. And Senior Vice President Warren Rudman, by all accounts a miracle worker with high-tech tire machines, hails from South Africa. Other leaders and staffers are U.S. citizens, like VP of sales Mike Perkins.
During Global Atlanta’s recent visit to LaGrange, Mr. Rudman was out of town visiting the Sentury plant in Rayong, Thailand, which will serve as a sort of prototype for the Georgia facility. It’s the 8-year-old company’s second plant after the one in its hometown of Qingdao, set up in part as a response to hefty duties imposed on Chinese-made tires exported to the U.S.
Sentury is a small player in the overall global industry, but what it has going is timing. Rubber trader Qin Long started the company in 2009, just as automated tire-making machines became widely available.
According to Mr. Helminen, that made the company nimbler than industry giants that have invested millions of dollars in old, manually operated equipment and therefore can’t afford to upgrade and boost efficiency. And having the machines connected to the Internet and each other produces data that helps prevent downtime.
“Sentury as a newcomer has been able to invest in modern technology from the very beginning,” Mr. Helminen said. “We offer legacy-brand quality at 30 percent less price.”
The U.S. is the top destination for Sentury’s aftermarket tires, sold here and in Europe under the Delinte, Landsail and Sentury brands. The Groundspeed line of truck and SUV tires recently launched and will be made in Thailand until the U.S. factory is on line. In China, the company also makes aircraft tires, though it has no plans for targeting that sector in the U.S.
When asked to join the Sentury team, Mr. Helminen said he jumped at the chance to be part of a relatively unknown upstart looking to reinvent tire production through a blend of automation and connectivity in what it calls “Industry 4.0 smart factories.” Moving into the U.S. was a key part of that strategy.
“The major issue is becoming local, being able to serve the customers better, have a better supply chain and start building our own reputation and brand. These are the key drivers of the business. We’ve got great technology, great production processes. Nobody really knows us. So we want to utilize that benefit of becoming local,” he said.
Eventual plans call for developing products locally through an R&D center and possibly serving auto plants like nearby Kia, but not until a substantial proportion of the 12 million in annual tire capacity is up and running.
A Hands-Off Approach on a Massive Deal
Mr. Helminen is the first to admit that he doesn’t understand China’s business culture, and while that has caused friction at times, he was chosen more for his familiarity with Western markets. Mr. Qin and Sentury’s global CEO, Lanny Lin, have mostly taken a hands-off approach, letting Mr. Helminen interface with industry leaders and local officials.
“Sentury Tire is the project, among all that I have worked on, that seems like they get a little bit more leeway or authority in doing different things,” said John Ling, the state of Georgia’s managing director for China investment. “They seem to have the trust and confidence from the headquarters on many things, at least so far.”
Mr. Ling made a name for himself in neighboring South Carolina, where he won hundreds of millions of dollars in Chinese deals. He told Global Atlanta Chinese executives tend to send over their own hand-picked managers from China when starting new plants. The level of autonomy handed over by Sentury’s leadership almost “never happens,” he said.
Mr. Ling joined Georgia just in time to join the state’s visit to Sentury’s Qingdao headquarters in August 2015. He first met with Mr. Lin a few months later and stayed in regular contact with the company on trips to China and by phone. At the same time, parallel talks were ongoing at various levels, with Georgia Department of Economic Development‘s Stella Xu, who works on China initiatives, and with foreign investment director Nico Wijnberg, as well as Mr. Malone in LaGrange.
Before Georgia came out on top, Sentury signaled that it had all but decided for a so-called “mega-site” near Memphis, Tenn., a state that offered a lot more in the way of cash.
Georgia’s Mr. Wijnberg and others, meanwhile, had emphasized its long-term business attributes and intangibles rather than the size of its deal-closing fund. Mr. Malone saw the Tennessee announcement as a negotiating tactic. He upped LaGrange’s offer to Mr. Helminen.
Mr. Ling, who had been meeting with Sentury’s Chinese leaders on a parallel track for nearly a year, knew the collaborative approach and paid off when he received a message on China’s most popular messaging app from Mr. Lin, Sentury’s global CEO.
“He WeChat’ed me with smiley face and victory sign. I took that as a sign that we won,” Mr. Ling told Global Atlanta. The deal was announced in early September.
Incentives were just one aspect of a more far-reaching evaluation of 40-plus sites in 12 states, Mr. Helminen said.
“Let’s put it this way: If we had chosen the one who offered the most incentives, we wouldn’t be here, so it’s part of the package, but it has to be a sort of balance,” Mr. Helminen told Global Atlanta.
Mr. Malone, who had worked the project since he joined LaGrange in February 2016, believes that along with its workforce (Sentury qualifies for Georgia Quick Start training assistance), cultural sensitivity helped.
When he had picked up Mr. Lin for the final site visit, for instance, Mr. Malone had installed new Sentury tires on his city vehicles, despite quizzical looks from city colleagues. The Chinese CEO, for one, loved the gesture.
“These are the things you do for no other reason than to say you’re going to pay attention to the little things,” Mr. Malone said. “It makes a big difference. Most people don’t pay attention to those details.”
Mr. Helminen confirmed that it largely came down to community. Just six miles north of the successful Kia plant, it was clear that an advanced factory could work in Georgia and that workers could be recruited to the LaGrange area.
“At least in Finland they say that it takes a whole village to raise a kid, and in this case it also takes the whole town to start up this company and we certainly need the whole community’s support to make this happen,” he said just before stepping away chat with his wife and daughter, who were visiting from Finland and staying at their house on West Point Lake. See more reasons Sentury picked Georgia here
Mr. Ling, the state’s China investment rep, believes Georgia’s win was both a sign of the state’s strength and the company’s maturity. Sentury had one of the fastest accelerations he’d seen from initial talks to site selection, where it got help from Atlanta-based Navigator Consulting, run by Georgia economic development veteran Jim Blair.
Sentury’s measured, deliberate approach — whether a result of talks about an initial public offering in China or simply due to switching engineering firms midstream — could be a positive thing, Mr. Ling said.
“It’s a good thing that they don’t want to rush themselves into something that they might later regret.”
China’s Investment Slowdown
Mr. Ling doesn’t believe Sentury’s moderated timeline has anything to do with a Chinese clampdown on outbound investment in recent months.
Just this week, the central government formally issued new guidelines for overseas deals in sectors like real estate and entertainment amid fears of currency flight and mounting debt after a record number of outbound deals in 2016.
Sandy Chu, national leader of the China business practice at Grant Thornton LLP, said these new regulations are targeted at protecting Chinese government loans and probably would not affect a company like Sentury.
She said Chinese subsidiaries sometimes face delays in the U.S. due to problems with local permitting or trouble getting money from the parent company out of China. Especially in state-owned companies, local managers often tap their feet while awaiting word from senior decision-makers back home.
Sentury, meanwhile is privately held company with some $300 million in sales, a reported figure from 2014 Mr. Helminen said was “in the ballpark” of the current figures, but he underscored what he called the company’s rapid growth trajectory. The U.S. operation has a clear line to Chairman Qin and CEO Lin, making it relatively simple for the company to pick a direction and move ahead.
Ms. Chu didn’t believe an IPO would hold up the U.S. plans. She also said a manufacturing project associated with the company’s core business usually wouldn’t raise eyebrows, especially if it’s under the $1 billion threshold that triggers the need for approval by China’s National Development and Reform Commission.
“If it’s a legitimate investment, it should have no problem. It will not be stopped. Borrowed funds, uncertain projects overseas: That’s really what will create a suspicion during the approval process,” Ms. Chu said.
Sentury is getting some backing from the China Development Bank, but it’s a small proportion of the overall spend, Mr. Helminen said. The bulk will come from company equity and private banks, and potentially the IPO. Working capital will likely be sourced locally. He added that the phased ramp-up will allow the company to spread out costs over time. It’s not like writing a one-time, $530 million check, in other words. Leases for the 24 machines it plans to purchase are also an option if needed.
The Sentury team has been going over site design with SSOE, which was selected in mid-July to draw up the 1.4 million-square-foot plant. Toward the end of that month, Mr. Helminen said about 30 percent of that process had been completed. Sentury had previously engaged Kajima Building and Design but abruptly dropped the Japanese-owned firm. Some suspect cultural issues were at play, as Japan and China have a history of enmity.
Either way, Ohio-based SSOE had some attractive attributes. It designed the nearby Kia plant in West Point, so it had key relationships with the city, state, local utilities and other stakeholders in Troup County. But it also had an office in Shanghai that the Sentury leadership could reach in the same time zone.
International projects take awhile, with many necessary approvals, from water to air to environment, said Alexandra Segers, a principal working on the Sentury Tire project for SSOE.
There’s also a steep learning curve, and in addition to the stresses of the job, expatriates have to get Social Security numbers and U.S. driver’s licenses.
“Besides the normal project work, there is much more activity going on, which forms very often a strong bond between the team members. It is always a pleasure to work on such projects, although it is extremely stressful and during construction you can forget about enjoying having weekends off,” Ms. Segers said.
Members of SSOE’s U.S. and Shanghai teams recently traveled to the Sentury Thailand plant to get a feel for how the use of robotics and automation affects the design.
“Despite the high level of automation, there will be still many jobs created – the design has to make sure that employees will work in a safe and also comfortable work environment,” Ms. Segers said.
Sentury’s tire machine operators will focus more on material feeding for multiple machines than crafting each tire individually, executives said. There will be three shifts of more than a hundred workers, probably 100 specific maintenance positions and a lot of manual logistics help, as tires need to be packed in a particular way to optimize shipping. That’s in addition to planned hiring of sales staff, a 100-person R&D center, executives and other front-office functions.
At the LaGrange site, one key design hurdle has been the slope of the land — how to grade it in a cost-effective way. SSOE believes it has landed on a design that balances the height of the various buildings in a way that heads off the need to import any “fill material.”
For Mr. Malone of LaGrange, a deal-maker and consummate salesman for his hometown, that’s just one minor detail: Even his city’s dirt is better than that of the competition.
Corrections: John Ling was hired by Georgia in August 2015, just in time to join the state’s first trip to Sentury Tire before it became an official investment prospect. A previous version said he came in 2016, late to the process of recruiting the Chinese firm.