KOSTAL Kontakt expands in Rochester Hills

German-based automotive parts supplier KOSTAL Kontakt Systeme (KKS) will be investing $57.8 million to construct a new North American headquarters and production facility along M-59 in Rochester Hills.

The proposed facility at Old Adams and M-59 would include an 18-acre parcel that would be utilized for office, production and warehousing uses. Currently, the company is located in a leased building at 1350 W. Hamlin Road. However, the company said it must relocate by 2021 to meet expanding demands.

"We see a positive forecast of growth for the automotive sector, specifically in the areas of E-mobility and autonomous driving, and this new Rochester Hills facility strengthens KKS' ability to deliver the most advanced connections to our customers," said Holger Lettmann, president and CEO of KKS's America location.

KOSTAL Kontakt Systeme is a fourth generation family business that manufactures electrical connectors, primarily for the automotive industry, under the ownership of the KOSTAL Group, which was founded in 1912, in Ludenscheid, Germany. The KOSTAL group is comprised of four independent divisions operating in 21 countries.

"The KOSTAL Group has 19,000 employees around the world," said Andreas Kostal, chairman of KOSTAL Group. "Our footprint is vast. Eighty percent of our workforce is located outside of Germany."

The expansion announcement comes about six months after Rochester Hills City Council approved amending a consent judgement involving KOSTAL, the city and the property owner, Grand/Sakwa. The previous agreement, which was entered into in 2003, oversaw the development of 104 acres of land surrounding the site. City officials said in April 2018 that the consent judgement would need to be amended by the court in order for the proposed development to move forward. In exchange for the necessary right-of-way, the city agreed upon flexible uses and site design for the subject property.

Rochester Mayor Bryan K. Barnett said that in order for the proposed development to move forward, the city and property owner needed to agree to amend the agreement, which dictates development issues at the site. He said Grand/Sakwa and the city have since come to an agreement that essentially gave the development a green light.

Rochester Hills Mayor Bryan K. Barnett said KOSTAL had outgrown its current 80,000 square foot facility, where it has been for the past seven years. He said he and Rochester Hills Economic Development Manager Pamela Valentik shared in the process of assisting with developing options for KOSTAL's expansion.

"I was delighted when I got the call from KOSTAL Kontakt Systeme sharing that future growth required them to start planning for a larger facility. KKS has been an outstanding corporate citizen and we certainly didn't want to lose them," Valentik said. "But with a vacancy rate of two percent and limited parcels left for development, I knew we had to be resourceful to find the right spot to retain this top employer in Rochester Hills."

Barnett said a deal was crafted to purchase 18 acres of vacant land near Adams with M-59 frontage. He said he and Valentik recently returned from an economic development trip to Europe with the announcement of the expansion.

The city has offered a 50 percent property tax abatement in support of the project, according to the Michigan Economic Development Corporation (MEDC), which awarded KOSTAL with a $320,000 Michigan Business Development Program performance-based grant. Michigan was chosen over a competing site in Alabama, the MEDC said.

"KOSTAL now brings even more investment in our community and additional high tech employment opportunities for our residents. We're continually impressed with their leadership and we were thrilled with the productive outcome of our discussions at their headquarters in Germany," he said. "Early on, we were successful at bringing the MEDC to the table to discuss a plan to ensure KKS' investment and job growth stayed in Michigan. KKS was looking at other states and we were thankful that the Michigan Strategic Fund approved a Business Development Grant for the expansion."

The MEDC said the expansion will add 32 additional jobs.

Markus Bergholz, CEO of the KKS division, said the new facility will employ about 206 people, with plans to grow up to 600 jobs at the campus.

"This location affords us to build a state-of-the-art facility that will house all engineering, sales production and distribution operations servicing the North American market," he said. "The first phase will be to construct 130,000 square feet, but this land provides us the opportunity to grow to 300,000 square feet."

Construction is expected to begin in 2020. The city also will need to approve official site plans and approve the tax abatement, neither of which have yet to be submitted.