A new joint venture between Magna International Inc. and LAN Manufacturing Group LLC plans to open a seating plant at the former site of Sakthi Automotive Group in southwest Detroit and create 390 jobs.
Magna, a Canadian automotive supply giant, and the Detroit-based, minority-owned supplier expect a capital investment of up to $18.1 million (all figures in USD) at the Bedrock-owned industrial site, where the companies will make seats for Ford Motor Co. trucks and SUVs, according to a Magna news release.
Production at the existing 296,000-square-foot (27,500-square-metre) building in southwest Detroit is expected to start in the second quarter of 2023.
The Dan Gilbert-owned real estate company bought the site for $38.5 million in 2020, a year after the defunct Sakthi closed its plant. Sakthi, whose former CEO is in nonautomotive-related legal trouble, supplied knuckle and steering arms at the plant just five years before folding.
Sakthi's failure was a blow for the city and Mayor Mike Duggan, who touted the plant with a groundbreaking ceremony and tour after its completion. The Magna-LAN plans signaled potential redemption for the site.
"This announcement is the latest sign of the resurgence of Detroit's auto manufacturing industry and expanding opportunity for Detroiters," Duggan said in a Bedrock news release. "We are fortunate to have this team come together to re-occupy the former Sakthi campus, bringing nearly 400 jobs to an area of the city that needs them and making the hiring of Detroit residents a priority."
The jobs will pay an average of $900 per week plus benefits, according to a briefing memo from the Michigan Economic Development Corp. Additionally, the city of Detroit will provide a property tax abatement for the project, which is located within a Michigan Strategic Fund Designated Renaissance Zone.
The project is being supported by a $2 million Michigan Business Development Program grant from the state. MEDC officials said the grant was needed to convince the company to open the plant in Detroit as opposed to Lancaster, Ohio, where Magna could have ramped up production at a plant it opened there in 2019.
"The Company is attracted to locating this facility to Michigan due to the site and the existing presence of part of the joint venture," the MEDC memo states. "Even though the Company would like to locate in Michigan, incentive assistance is necessary to ensure the project moves forward in Michigan."
The joint venture, called LM Manufacturing, was announced Tuesday in tandem with the MEDC incentives approval. The company will be led by President and CEO Sylvester Hester, who has been president of LAN Manufacturing since 2019.
"As a minority business enterprise, we are especially excited to invest in the city of Detroit and to work with Magna, a leading mobility technology company," Hester said in a news release.
Magna will own a 49 per cent stake in the company but will provide all the financing for the project in Detroit, according to the MEDC memo.
"We are excited about this opportunity with LM Manufacturing as we continue supporting Ford on some of their high-volume vehicle programs," Magna Seating President John Wyskiel said in the release.
The Magna-LAN move is the latest new supplier plant landed by Detroit. Lear Corp. is aiming to open its seating plant at the former site of the Cadillac Stamping Plant in Detroit by mid-year. Other suppliers that have set up new plants in Detroit recently include Flex-N-Gate and Dakkota Integrated Systems, as well as parts sequencing facilities supporting Stellantis on the east side and operated by logistics companies including Moroun-owned Universal Logistics.
"If you think about what those three manufacturers (GM, Ford and Stellantis) want, they want their supply chain as close by as possible," Duggan told Crain's in a recent interview. "They're not trying to place them in Mexico anymore, and so to the extent you can get a site in Detroit near the freeway system, it's ideal for the long term for the manufacturing company, and obviously we have a workforce here that wants to work, is ready to work."
Bedrock also celebrated the plant announcement as a big win for its first industrial pursuit.
"The U.S. demand for modern and adaptable industrial space has grown exponentially over the past decade," Bedrock CEO Kofi Bonner said in the release. "In order to retain a competitive edge, it is imperative that Detroit maintains development-ready sites that incorporate modern industrial facilities to not only foster business growth and expansion but provide access to much-needed job opportunities."