Generator transfer switches using industrial motor-control contactors have the advantage of simplicity and long-life, typically over 500,000 operations at rated load. They also use standard off-the-shelf components that can be purchased almost anywhere.
The primary disadvantage is that they do not meet National Electrical Code requirements in the United States for Automatic Transfer Switches for emergency and legally required standby power use. They do not satisfy the two requirements of NEC [700.5(C)] and [701.5(C)] (2011):
Optional Standby systems as defined in [702.4] are not bound by these legal requirements for transfer switches.
The biggest disadvantage of an ATS is that the contacts are typically rated for less then 5000 transfers at rated load, at which point the contacts must be replaced, and frequently the electro-mechanical actuator as well. In locations where electric power is reliable, this is typically not an issue as 5000 transfers will take several decades to accumulate. In locations with unreliable power this number of transfers can be accumulated in just a few years.
An ATS is also physically large compared to a set of contactors, which can otherwise be carried in an airline suitcase. That in particular makes this design more suitable for remote locations, as the parts can be carried in and assembled on location in a short time.
Contactors K-U  and K-G  are mechanically and electrically interlocked to ensure that only one can be closed at a time.