Georgia’s recruitment of its single largest foreign investment project last week, a $1.67 billion commitment from a Korean manufacturer of hybrid electric vehicle batteries, may have President Trump to thank — indirectly anyway.
SK Innovation didn’t mention tariffs when announcing the deal, instead pointing to aggressive plans to increase global battery production capacity more than tenfold from its current 4.7GWh by building factories in China, Hungary and the U.S. The Georgia plant alone will produce 9.8GWh.
The Jackson County plant is a phased development that will eventually yield 2,000 jobs within a 1 million-square-foot facility in Commerce, Ga., half them in advanced manufacturing, according to Gov. Nathan Deal’s office.
“SK innovation has been actively looking for a production base to secure competitiveness in the battery business in the major global market,” said Kim Jun, chief executive of SK Innovation, in a news release. “With our business in the hub of the global auto industry, we will grow as a top player in the battery business.”
Still, the investment was announced during the waning days of a Section 232 investigation ordered by Mr. Trump to determine whether imported cars harm national security.
The president has threatened a 25 percent tariff on imported autos from all countries aside from USMCA partners Mexico and Canada, despite the fact that the U.S. and Korea recently completed a renegotiation of a free-trade agreement enacted in 2012 — at the U.S. president’s request. The new KORUS FTA still hasn’t been approved by the Korean legislature, which some reports have suggested is waiting on the outcome of the auto tariff discussion.
While the results of the investigation were expected in January, Reuters reported Thursday that Mr. Trump already had a report from the Commerce Department on his desk recommending he go ahead with the tariffs. Mr. Trump is traveling in Buenos Aires for the G-20 summit. He took time before leaving to suggest via Twitter that U.S. cars would do well if they enjoyed the same protection as American pickup trucks — a 25 percent tariff keeps foreign competitors practically locked out of the U.S. market.
SK Innovation doesn’t make cars, but it does supply large OEMs like Mercedes-Benz and Hyundai-Kia, and its expansion plans will require boosting market share with the many brands investing in electric models.
There’s a chance the company announced a massive plant in the U.S. to be closer to customers that will ramp up production at factories in the South in order to avoid being hit with a 25 percent levy, according to J.P. Shim, a professor at Georgia State Unversity’s Robinson College of Business.
But it’s equally likely that SK Innovation, which also owns Korea’s largest oil refiner and is part of the country’s third largest conglomerate, is simply looking to carry out a bold diversification strategy, he said.
“They’re looking for another new market,” said Dr. Shim, who is also head of GSU Robinson’s Korean American Business Center.
He added that Korean companies have become more aware of Georgia and the Southeast U.S. in recent years. Unlike Kia Motors, which set off a parade of supplier investments after announcing its $1.2 billion plant in West Point, more recent investors like SK have the benefit of talking to those that have gone before, Dr. Shim said.
Commerce, Ga., is also close enough to Suwanee and Duluth, the epicenters of Georgia’s nearly 100,000-strong Korean community, said Dr. Shim, a 35-year veteran of the U.S. South who has counseled Kia and other Korean firms on navigating the culture in this region.
“I think this is different for SK than if they moved to Tennessee or Kentucky,” he said.
A Georgia Department of Economic Development spokesperson declined to disclose the incentive package the company is set to receive, citing laws that allow the state to stay mum as long as the project is in active negotiations.
But Kia, a project with less capital investment, received more than $400 million in inducements and tax credits, sparking some criticism of so-called “corporate welfare.”
John Gornall, an Arnall Golden Gregory attorney who negotiates incentives packages for foreign investors and worked on the Kia negotiation, said the state has a sophisticated process for allocating incentives and ensuring they’re net positive in the long run for Georgia revenues.
Major capital investments like this can be transformative for small communities even when property taxes are temporarily abated, given how much the overall tax base grows and feeds the education system and other services, Mr. Gornall said.
He agreed with Dr. Shim that SK will enjoy a much smoother transition than Kia, which had to do much of the legwork on its own, without the benefit of what he called the Korean “service industry infrastructure.”
“Sometimes whenever you get a wave of investment, the earlier part of the wave, there’s just not enough good bilingual folks who are engineers or production managers, architects or contractors to go around,” Mr. Gornall said, likening the recent Korean influx to the Japanese wave in the 1980s.
Now things have changed: Not only does Georgia have an office in Korea, but it also has a Korean-speaking project manager, Yoonie Kim, who worked on the SK deal. Korean investors are now among the top generators of projects for the Georgia Department of Economic Development.
SK’s announcement comes after major Kia supplier expansions and the revelation this year that solar supplier Hanwha Q CELLS would put a module factory in northwest Georgia by 2019, creating 500 jobs.
SK’s new factory will begin construction next year and is to start production in 2022.