Construction is ramping up at Tesla's Nevada gigafactory site

Construction is revving up this month at the Storey County site of Tesla Motors' future gigafactory, where thousands of workers are expected to find employment by next year.

Considered to be one of the biggest wins in economic development, Tesla is already paying dividends for the industrial park its gigafactory will call home, said Lance Gilman, principal for the Tahoe-Reno Industrial Center. Since Tesla arrived, the industrial center has sold off all available retail locations and continues to see activity for its other lots.

"We have 100,000 acres in play right now, including deals in escrow or contracts," Gilman said. "Our office has been incredibly busy, and having the most prized anchor in the world (in your industrial park) has been critical for us."

The Nevada Department of Transportation has also sent teams to the park to start work on roadways for improved access. The NDOT project is scheduled to be done by Dec. 2017 — the same expected date for the gigafactory's completion, Gilman said.

The activity generated by the project is no surprise. In addition to the halo effect associated with Tesla's name, the gigafactory breaks new ground as far as lithium-ion battery factories are concerned. Tesla CEO Elon Musk punctuated the point in Carson City during the official gigfactory announcement in September.

"It's worth highlighting the sheer scale of the gigafactory and why we even call it the gigafactory," Musk said. "It's not just the biggest lithium-ion factory in the world, but it's bigger than the sum of all lithium ion factories in the world. It's a heck of a big factory."

Apple's high-profile data center east of Sparks, for example, was estimated to create 500 construction jobs. In contrast, the gigafactory will create 3,600 jobs during construction of the 5-million-square-foot-facility. It still isn't as big as Las Vegas' CityCenter project, which generated more than 9,000 jobs in construction and has a campus spanning 18 million square feet. For a lithium ion battery factory, however, the gigafactory is essentially Godzilla.

Work is coming

Nevada JobConnect posted 28 gigafactory-related jobs last month, with some positions expected to close by mid-November. But that's just the start.

Tesla expects the gigafactory to create 6,500 full-time jobs once it is in full swing. The battery plant, however, is not expected hit 2,000 full-time workers until its third year of operation.

In the meantime, construction is expected to provide the short-term employment boost the area needs. In a letter sent to shareholders earlier this month, Tesla said the first cell production at the site will occur in 2016, which is "slightly earlier" than initially projected. The entire gigafactory complex is still slated to be finished in 2017.

Tesla estimates that building the battery facility will create 3,600 total jobs requiring more than 9.8 million man hours, according to documents obtained by the Reno Gazette-Journal. The total gross construction payroll generated by the project? More than $450 million.

All in all, the project will involve five overlapping phases from September 2014 to December 2017, which will allow production to start at the facility while construction continues. Tesla declined to provide exact details on its construction phases, though records detailing the company's capital investment plans for the facility mention building and site infrastructure; materials processing; and module, pack and battery assembly.

For manpower, key points for the construction project include:

• Tesla expects to have 1,000 construction workers on the site by mid-January, steadily growing to 2,500 by June as four phases of construction run at the same time.

• Construction hiring will peak just below 3,000 workers by December 2015, which is when the third and fourth phases of construction are expected to be in full swing. Employment will steadily decrease at that point until it dips below 500 workers in July 2016 with work finished on the first three phases.

• Construction will ramp up again to around 1,000 workers in the summer of 2017 for one last push during the fifth and final phase of gigafactory construction. Activity is slated to end in December of that year, when the battery plant is expected to become operational.

Labor concerns

With thousands of jobs at stake, it didn't take long for the Northern Nevada construction union to weigh in on the project. Topping the construction union's worries is whether Nevadans will get the opportunity to fill at least half the jobs, as required by law. If Tesla is unable to meet its construction demand with local labor, it can ask the state to waive the 50 percent local workers requirement.

It's important for Nevada to keep as much of the economic activity generated within the state — including labor, said Paul McKenzie, secretary and treasurer of the Building & Construction Trades Council of Northern Nevada. He also was elected to the Reno City Council this month.

"Traveling workers don't invest as much in state," McKenzie said. "Given how much Nevada has incentivized this project, we need to get the money (from the project) invested in our workers and our local economy."

The union is especially concerned about Tesla's approach to contracting jobs at the gigafactory site. Instead of having general contractor Yates Construction bid out all the work to various contractors at one time, contracting is being done "piece by piece" so far, McKenzie said.

It's akin to having different people build the various components of a car without knowing the model or what the final product will look like. In addition to potential logistics issues, the approach is affecting recruitment due to the lack of certainty it creates as far as steady employment, McKenzie said.

"If this piecemeal bidding continues, they're going to have manpower problems, equipment problems and material problems because they're not planning out far enough," McKenzie said. "This is the first time I've seen a project this size done this way."

Tesla, no stranger to having its business methods called unorthodox, stressed that there is nothing wrong about its contracting practices for the gigafactory. Instead, the decision boils down to exercising control over the process while increasing accountability for contractors and preventing unnecessary costs, the electric car maker said.

It's a source of pride for the company, which is "literally in the room" and involved in every contracting decision for the site, said Diarmuid O'Connell, vice president of corporate business and development for Tesla Motors.

"We are not simply handing the keys to the general contractor and walking away," O'Connell said. "We are working hand in hand with the general contractor to make sure we optimize the right product at the right cost. That's what we do."

Tesla vows to employ Nevadans

Attracting construction workers to Northern Nevada shouldn't be a problem, said Steve Hill, director of the Governor's Office of Economic Development. With the construction outlook improving in Northern Nevada, there's plenty of incentive for workers to stick around or move to the area.

"The prospects for the Reno market from a construction standpoint were already good prior to the Tesla announcement," Hill said. "I think Reno will be attractive to someone who works in the construction industry, whether it's working for Tesla or other projects going on in the community."

The improvement in construction activity is reflected in the union's own numbers. After seeing its membership drop from 5,000 workers in Northern Nevada in 2008 to 2,000 less than two years ago, union membership has since grown to 3,500, McKenzie said. Stronger competition for workers, however, could lead to difficulties in filling positions for the Tesla project, especially if workers are uncertain about their long-term prospects at the gigafactory site, according to McKenzie.

Construction's ongoing recovery in Nevada is also causing wages to rise, McKenzie said. For a project that does not have a wage requirement such as the gigafactory, it can be cheaper for Tesla to hire workers in places with depressed construction markets such as Mississippi, he added.

McKenzie also questioned the hiring of Mississippi-based Yates Construction for the general contractor position when a local contractor can do just as good a job, he said. The decision to hire Yates Construction, however, was based on merit, according to Tesla. A look at Yates' portfolio reveals experience in building automotive and battery facilities, including Nissan's vehicle assembly and battery plant in Tennessee.

Tesla also stressed that it will uphold its end of the deal when it comes to hiring Nevada workers.

"We are going to honor if not exceed the target that has been set for us to employ Nevadans," O'Connell said. "We are actually over-compliant with our promises to this point."

JOIN JASON HIDALGO AT TOWN HALL MEETING

Reporter Jason Hidalgo will talk about economic development in the Tesla era with host Brent Boynton, Mike Kazmierski of the Economic Development Authority of Western Nevada and Steve Hill of the Governor's Office on Economic Development at "Open Lines: Congratulations on Tesla — Now What?"

The program will air live from 8 to 9 p.m. Thursday on KNPB Channel 5. Audience members will be able to ask questions during the live show.

Call 775-682-7794 to reserve one of 65 seats. Audience members should arrive by 7:30 p.m. at KNPB offices, 1670 N. Virginia St. Free parking is available.

BUILDING A GIGAFACTORY

Tesla expects to build out its gigafactory in five overlapping phases. The project will require over 9.8 million man hours and generate more $450 million in payroll.

• Phase 1: Sept. 2014-Sept. 2015

• Phase 2: Dec. 2014-Dec. 2015

• Phase 3: April 2015-May 2016

• Phase 4: May 2015-Dec. 2016

• Phase 5: Aug. 2016-Dec. 2017

Source: Tesla filings