Gentex lands state incentives for $300 million expansion already underway

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ZEELAND — tier 1 automotive supplier Gentex Corp. received about $11.2 million in state grants and tax incentives for a $300 million expansion project that began in January and could create up to 500 jobs when completed in 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 today acknowledged the project had already begun before the incentives were approved.

Gentex (Nasdaq: GNTX) – a provider of dimmable devices, sensors, vision systems and advanced electronics for the automotive, aerospace and fire protection industries – adds 600 000 square feet of manufacturing and distribution space in the township of Zeeland as well as 60,000 square feet at an existing manufacturing facility in the city of Zeeland.

The expansion of the Township of Zeeland, located at 9001 N. Riley St., will allow the company to increase its glass processing capacity as well as manufacture auto-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 creating immediate job growth in the region through the expansion of this important automotive supplier,” Michigan Economic Development Corporation. Chairman and CEO Quentin Messer, Jr. said at a press conference this morning.

The Michigan Strategic Fund Board approved a pair of performance-based grants, $5.5 million through the Michigan Business Development Program and $1.89 million from the Jobs Ready Michigan Program, and a 100% waiver State Essential Services Assessment (SESA) worth 15 years. over $1.89 million. The tax incentive exempts manufacturers from paying SESA, which is required if they do not pay tax on qualifying personal property.

The company expects the expansion project could add up to 500 new jobs to the company’s current workforce of 5,000 in the greater Zeeland region, where it has production space of 1.5 million square feet. Gentex is the largest employer in Ottawa County.

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

“However, due to COVID-19 and being considered non-essential for some time, the company is now reviewing its risk outlook for future investments. The other states have provided comprehensive incentive proposals to the company which, combined to the diminishing risk outlook, have prompted the company to more seriously consider establishing a presence outside of Michigan,” according to the memo.

Erik Wilford, senior business development project manager at the MEDC, told a press conference today that there is sometimes a delay between the offer of incentives from the MEDC and formal approval from MSF.

“There is a process of vetting companies after an offer is made, so sometimes – between the actual offer and the approval – there may be some time in between. It just depends on the company’s schedule. for the project.

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

The Canton of Zeeland also plans to provide a property tax abatement in support of the project.

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

“The Company believes that its existing and planned facilities are currently suitable, adequate and have the required capacity for current and anticipated near-term activities. Nonetheless, the company continues to assess longer-term facility needs,” Gentex said in its annual report.

The company further noted that its current build capacity supports manufacturing 34-37 million auto-dimming interior mirrors per year. In 2021, Gentex shipped 27.2 million interior mirrors and 14.6 million auto-dimming exterior mirrors.

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

Focus on product redesign

In a call last week with analysts to discuss second quarter results, Gentex officials explained how a series of supply chain shortages caused the company to focus on revamping products to avoid delays for customers. According to CTO Neil Boehm, “up to 30% of our development team focused on redesigning products to avoid constrained components for our customer.”

For example, with the company’s innovative full-view mirrors (FDM), where the rear-view mirror becomes a display screen for various information, CEO Steve Downing said the biggest challenge isn’t customer demand. , “It’s our ability to get components. So literally when Neil mentioned that up to 30% of his engineering team’s time was spent on redesigns, that’s in support of that. There have literally been instances in the last two quarters where we have had to tell OEMs that we cannot increase volumes to what they would like them to be because there simply was no components available.

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

Downing also noted that the company “has seen some stabilization in our sales levels due to the significant amount of redesign work we have completed over the past few quarters and we have seen some modest improvements in the supply base. Unfortunately, many of these improvements have been offset by further component shortages, changes to customer orders and volatility that we expect will continue through 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 technologies and our team’s ability to manage cost challenges. flooding our industry”.

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

MiBiz editor Joe Boomgaard contributed to this report.

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