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Published in Manufacturing
Gentex plans to invest $300 million to expand manufacturing and distribution capabilities in the city of Zeeland and Zeeland Charter Township. Gentex plans to invest $300 million to expand manufacturing and distribution capabilities in the city of Zeeland and Zeeland Charter Township. COURTESY PHOTO

Gentex lands state incentives for $300M expansion already underway

BY Tuesday, July 26, 2022 01:02pm

ZEELAND — Tier 1 automotive supplier Gentex Corp. has received roughly $11.2 million in state grants and tax incentives for a $300 million expansion project that started in January and could create up to 500 jobs when it’s completed at the end of next year.

The Michigan Strategic Fund Board today approved the $11.2 million in grants and tax exemptions. The company disclosed the expansion in its 2021 annual report, and state economic development officials acknowledged today that the project had already started before the incentives were approved.

Gentex (Nasdaq: GNTX) — a supplier of dimmable devices, sensors, vision systems and advanced electronic products for automotive, aerospace and fire protection industries — is adding 600,000 square feet of manufacturing and distribution space in Zeeland Township as well as 60,000 square feet at an existing manufacturing facility in the city of Zeeland.

The Zeeland Township expansion, located at 9001 N. Riley St., will allow the company to increase capacity for glass processing as well as the manufacturing of automatic dimming interior and exterior mirrors and other displays in various types of vehicles.

“This project will continue to position Michigan as a global leader in the future of mobility while also creating immediate job growth in the region through the expansion of this significant automotive supplier,” Michigan Economic Development Corp. President and CEO Quentin Messer, Jr. said during a media briefing this morning.

The Michigan Strategic Fund Board approved a pair of performance-based grants, $5.5 million via the Michigan Business Development Program and $1.89 million from the Jobs Ready Michigan Program, and a 15-year, 100-percent State Essential Services Assessment (SESA) exemption worth more than $1.89 million. The tax incentive exempts manufacturers from paying the SESA, which is required if they don’t pay tax on eligible personal property.

The company expects the expansion project could add as many as 500 new jobs to the company’s existing 5,000-person workforce in the greater Zeeland area, where it has an existing 1.5 million square feet of production space. Gentex is the largest employer in Ottawa County.

MEDC officials said Gentex was considering facilities in South Carolina, Alabama, Tennessee, Ohio and Virginia, even though it has historically “solely invested in Michigan,” according to an MEDC memo on the project.

“However, due to COVID-19 and being considered non-essential for a period of time, the Company is now looking at its risk perspectives for future investment. The other states provided comprehensive incentive proposals to the Company which, coupled with mitigating the risk perspectives, made the Company take a more serious look at establishing a presence outside of Michigan,” according to the memo.

Erik Wilford, senior business development project manager at the MEDC, said during a media briefing today that occasionally a delay exists between the MEDC’s offer of incentives and MSF’s formal approval.

“There is a vetting process of companies after an offer is made, so sometimes — between the actual offer and the approval — there might be some time between there. It just depends on what the company’s timeline is for the project.”

It was not immediately clear when Gentex submitted a request for the incentives. A Gentex spokesperson could not immediately be reached for comment.

Zeeland Township also expects to provide a property tax abatement in support of the project.

According to Gentex’s 2021 annual report, the company began construction on a 345,000-square-foot manufacturing facility at the 140-acre site in January 2022. The company is funding the project, valued at $60 million to $70 million, with cash on hand.

“The Company believes its existing and planned facilities are currently suitable, adequate, and have the capacity required for current and near-term planned business. Nevertheless, the Company continues to evaluate longer term facilities needs,” Gentex said in its annual report.

The company further noted that its current building capacity supports the manufacturing of 34 million to 37 million interior automatic-dimming mirror units a year. In 2021, Gentex shipped 27.2 million interior and 14.6 million exterior automatic-dimming mirrors.

Based on light vehicle production forecasts, Gentex anticipates roughly $150 million in capital expenditures, “a majority of which will be production equipment purchases but also includes an estimated $60 (million to) 65 million in construction costs related to the construction of a new 345,000 square foot manufacturing facility, which began in January 2022.” 

Product redesign focus

In a call last week with analysts to discuss second-quarter results, Gentex officials discussed how a range of supply chain shortages have caused the company to focus on redesigning products to avoid delays for customers. According to Chief Technology Officer Neil Boehm, “as much as 30 percent of our development team focused on product redesigns to avoid constrained components for our customer.” 

For example, with the company’s innovative Full Display Mirrors (FDM), where the rearview mirror becomes a display screen for various information, CEO Steve Downing said the largest challenge isn’t customer demand, “it’s our ability to get components. So literally when Neil mentioned up to 30 percent of … his engineering team’s time has been on redesigns, it’s in support of that. There’s literally been instances in the last two quarters where we’ve had to tell OEMs we can’t increase volumes to what they would like them to be because there’s just not availability of components. 

“It’s been very chaotic, a tremendous amount of work from the team just to get to this level. There’s definitely more demand on the OEM side for FDMs right now than what we could produce.”

Downing also noted that the company “did see some stabilization in our sales levels due to the significant amount of redesign work that we have completed over the last several quarters and we have observed some modest improvements in the overall supply base. Unfortunately, many of these improvements were offset by new component shortages and customer order changes and volatility that we expect to continue throughout the rest of 2022 and into 2023.”

Downing added that while some “inflationary aspects” of the business will need to be addressed, “we are optimistic about our growth opportunities driven by our commitment to new technology and our team’s ability to handle the cost challenges that are inundating our industry.”

Meanwhile, Gentex also lowered its guidance for capital expenditures for 2022. In its first-quarter earnings report, executives said capital expenditures would range from $150 million to $175 million. They lowered that forecast with the second quarter earnings report to a range of $125 million to $150 million, which is still up significantly from $75.1 million last year. 

MiBiz editor Joe Boomgaard contributed to this report.

Read 2557 times Last modified on Tuesday, 26 July 2022 13:11
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