Suppliers Join Ford's Chicago Campus In a Model of Just-in-Time Manufacturing

[ By Ed Harrington ]

In August 2003, the Ford Motor Company started producing the first new models at its Torrence Avenue Assembly Plant in southeast Chicago in almost two decades. Since the mid 1920s, when it was making the Model T, and most recently the popular Ford Taurus and Mercury, Torrence Avenue has been one of Ford's top producers. But in a new era of just-in-time auto manufacturing, Ford is improving the way it builds cars and trucks.

The Chicago Manufacturing Campus, located just a quarter of a mile east of the Torrence Avenue Assembly Plant, is a groundbreaking development. The retooled Torrence Avenue Plant, now supported by a state-of-the-art supplier campus, will produce two new Ford models -- the Ford Freestyle and Ford Five Hundred, and one new Mercury - the Mercury Montego.

The recently completed 155-acre supplier park houses nine of the auto-maker's top-tier parts suppliers in four buildings, consisting of 1.6 million square feet of manufacturing space. Proximity to the Torrence Avenue facility allows the suppliers to produce parts and immediately send them to the assembly line, eliminating the inefficiencies associated with transporting and storing inventories.

The supplier park sets Torrence Avenue apart from other manufacturing facilities. Rather than having its suppliers in various geographic locations around the Midwest, they are now centralized in an industrial condominium complex near the assembly plant. As a result, the average distance for a given part to the assembly line has been reduced from 425 miles to 125 miles. Ford will also see the gains in efficiency on total assembly time, as mistakes and quality issues can be quickly addressed at the source before production continues. Key to the process is the increased level of communication between Ford and its suppliers, and between the individual suppliers. The location of the campus, and the implementation of a just-in-time manufacturing model, result in dramatic reductions in inventory and shipping costs and provide more flexibility for the Torrence Avenue plant. In fact, the plant is one of several of Ford's North American plants being adapted for flexible manufacturing, which allows several different automobile models to be built on a single assembly line. Not only will Ford be able to reduce its manufacturing costs, but also it will be able to modify its assembly lines to produce the most in-demand model.

Public/Private Partnership

In 2001, the Ford Motor Company selected a 155-acre former steel mill site in Chicago as the location of its new supplier campus. As is the case for any major site selection, the right combination of state and local financial incentives was critical to advancing the deal. Finding the right development partner was equally important. Considering the dozens of suppliers and governmental agencies involved in the project, in addition to the site's environmental issues, Ford Motor Company was looking for a developer with a successful history of brownfield redevelopment.

Ultimately, Ford Land (Ford Motor's real estate arm) chose CenterPoint Properties Trust (NYSE:CNT), an Oak Brook, Illinois-based REIT. CenterPoint and Ford Land Development formed a successful joint venture partnership to develop and market the property to Ford suppliers. CenterPoint is the largest owner and developer of industrial property in Chicago, owning and managing 36 million square feet of property and approximately 3,330 acres of developable land.

After Center-Point acquired the land, in conjunction with Ford Motor Company, the City of Chicago and the State of Illinois, it negotiated to secure an incentive package that would help Ford encourage its suppliers to locate to the campus. The city and state were primarily concerned with job growth, needing to insure that the incentives provided would ultimately result in job creation. Public support in the form of infrastructure improvement grants, Tax Increment Financing (TIF) and other incentives were critical factors in enabling the project to move forward. Ultimately, this assistance allowed for the redevelopment of a brownfield site in a manner that would attract suppliers and distributors to relocate their operations - primarily from other states - to the Chicago Manufacturing Campus. Ford identified the major parts suppliers to relocate their manufacturing operations to the park, promoting the cost savings of being less than a half-mile from the assembly plant. The venture was able to establish lease agreements after it sourced three major suppliers, Visteon Corporation, ZF Lemforder Corporation and Tower Automotive, to locate to the park.

With the knowledge that its three largest suppliers would be located in the campus, Ford was willing to insure that the jobs would be created. As a result, CenterPoint was able to secure the city and state funding, which included, in total, over $100 million in roadway improvements, $11 million in TIF financing and a $4.8 million Large Business Development Grant.

Cleaning Up an Urban Brownfield

Environmental remediation efforts at the Ford Chicago Manufacturing Campus have left lasting positive effects on the land. The contaminated site comprised two previously undeveloped properties formerly owned and operated by AlliedSignal and Republic Steel, who used the land for waste disposal associated with steel production byproducts. Off-site waste disposal had to be minimized as much as possible, while engineering the campus to manage the risk associated with the remaining impacted soils.

Risk management was largely achieved through the use of engineered barriers throughout most of the site, including a detention basin and green space areas. Traditional engineered barriers included building foundations and paving, while more innovative forms of engineered barriers included a permeable geosynthetic membrane clean fill. The entire site was enrolled in the Illinois Environmental Protection Agency's voluntary Site Remediation Program in order to secure 'No Further Remediation' (NFR) letters. NFRs have been granted for 80 acres, with another 15 acres pending.

Wetlands Restoration

Significant environmental achievements included innovative storm water drainage and natural landscaping on the site. An important Calumet Area water tributary, Wolf Lake, traversed a portion of the site and was in need of restoration. Working with the U.S. Forest Service, City of Chicago Department of Environment, U.S. Army Corps of Engineers and the Illinois Department of Natural Resources, CenterPoint was able to restore 2,300 feet of Wolf Creek that traverses the site to a more natural condition. The U.S. Army Corps of Engineers designated these areas as official conservation areas to preserve their new natural setting. The overall renovation transformed what was essentially a channelized ditch into a functioning creek corridor and wetlands/floodplain corridor.

New Growth

The Chicago Manufacturing Campus is a groundbreaking public/private economic development that continues to generate both economic and employment growth in the State of Illinois and the City of Chicago. In total, more than $210 million has been invested in the development of the campus and related infrastructure improvements (not including tenant improvements), bringing adaptive use to a site that sat abandoned for 40 years. The suppliers now located in the campus have made additional substantial direct investments in their spaces that include modern manufacturing equipment and related processes.

Currently, the campus employs more than 680 people. When fully operational in the third quarter of 2004, the campus is expected to create 1,000 to 1,200 high-quality manufacturing jobs. All of these jobs are new to the City of Chicago and all but 106 are new to the State of Illinois. The campus also retains 2,500 jobs at the existing Torrence Avenue Assembly Plant, in addition to 300 new jobs recently announced by Ford.

Lessons Learned

A project of this scope does not come without tremendous obstacles. Keeping the dozens of suppliers, state and local government agencies, the City of Chicago and the joint venture all heading toward the same goal became the project's toughest challenge. As the designs of the new cars were changing, so too were the needs of the suppliers, and ultimately, the entire development. Constant communication between the developer and all of the vested interests became critical to the project's success. In addition, CenterPoint's ability to align Ford's interests with the needs of the City of Chicago and the other environmental agencies early on in the process solidified the deal.

Developing Ford's Manufacturing Campus in the City of Chicago is of great importance to the city. Greater efficiency and excess capacity in the auto industry has increased competition not only for jobs, but also for the economic growth potential of automobile manufacturing and distribution. The vision of Ford Motor Company and CenterPoint Properties has put the City of Chicago and the State of Illinois in a position to enhance the viability of Ford's Chicago Assembly Plant and Chicago Heights Stamping Plant and to capitalize on the future growth of this industry.

Ed Harrington is a vice president of development at CenterPoint Properties Trust, focusing on the development of light manufacturing, industrial and logistic parks.

For more information

CenterPointProperties
www.centerpoint-prop.com

Online exclusive: Chicago Manufacturing Campus Powerpoint presentation from the I.con Conference, June 2004www.naiop.org/conferences/icon04/closeout/ford.ppt

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