Dean Barber

Where Will the $1.6 Billion Toyota-Mazda Plant Land?

In Corporate Site Selection and Economic Development on August 13, 2017 at 9:03 am

Last week, I took a friend of mine, an economic developer from Alabama, on a tour around Dallas. One of the places we stopped was at the new North American headquarters of Toyota in Plano.

I stayed behind the wheel of my Toyota Tacoma truck while my friend stepped out to take pictures. When he returned, I said, “That’s likely where the decision is going to be made on the new plant.”

I was referring to an announced $1.6 billion joint venture manufacturing plant that will be built by Toyota and Mazda, well, somewhere. Making sense of the project, much less where it will ultimately land, is like putting a big jigsaw puzzle together, both for the two companies involved and observers alike.

Toyota, which has manufacturing plants scattered across multiple locations in the United States, will be taking a 5 percent ownership position in the much smaller Mazda, which has no manufacturing presence in the U.S.

This future U.S. plant, expected to open by 2021, will have a capacity of 300,000 vehicles annually and employ 4,000 people. It will produce Toyota Corollas and Mazda crossover models. The companies said they plan to work together to develop new technologies.

Toyota is currently assembling Corollas at its plant in Blue Springs, Miss. The company is also building a new $1 billion plant in Guanajuato, Mexico, that was to make the Corollas. Those plans have now changed. The future plant in Guanajuato will build Tacoma pickup trucks.

This project announcement frankly surprised me. It comes at a time when the auto industry is looking at a substantial and prolonged downturn, and when Mexico has been the preferred location for OEM assembly plants.

The Winds of Change

But things happen, and calculations do change. For one, we have a president in the White House who has openly criticized NAFTA and any company that would even consider expanding capacity in Mexico instead of the U.S.

President Donald Trump singled out Toyota in January for its plan to build a Corolla small-car factory in Mexico. As Toyota’s North American Chief Executive Officer Jim Lentz discussed setting up autonomous- and connected-car business units in the U.S. with Trump in March, the president cut him off and said the company needed to “build those new plants here.”

While the OEMs may deny it (and Toyota subsequently did as did Ford), even the smallest possibility of tariffs being imposed on imported vehicles from Mexico might prompt them into rethinking where they should build.

“The remarks of the U.S. president at the start of the year aren’t related at all” to the decision to build the new U.S. plant, Toyota President Akio Toyoda said at a joint press on Aug. 4 with Mazda chief Masamichi Kogai in Tokyo.

That might very well be true. But smart companies, and Toyota, the world’s largest automaker has proved to be just that, are cognizant of how the winds of change, in both politics and consumer choices, can affect future operations. In short, they can and will adapt.

Why Not Blue Springs?

In his Aug. 4 press conference, Mr. Toyoda said: “Taking into account competitiveness, demand, and getting the most from this joint venture, as well as the fact that we currently make the Corolla in Mississippi, we decided to consolidate production in the U.S.”

So why not just keep making Corollas and the Mazda crossovers at the 1,700-acre Blue Springs, Miss., site, half of which remains vacant, with roads and sewers already in place awaiting further investment?

Opened in 2011 as its sole U.S. assembly location for the Corolla, Blue Springs has proved itself. The plant reached 500,000 cars faster than any other plant in Toyota history, and last year it won a coveted J.D. Power Initial Quality award. Moreover, the existing supply chains for the Corolla in Blue Springs are already in place, which would maintain created efficiencies.

Despite all that, my best guess (and that is all it is) is that Toyota and Mazda won’t be choosing Blue Springs. By the very fact that Toyota and Mazda announced the joint venture project indicates they are unlikely to use an existing site, but seek greener (or at least different) pastures.

In short, they are shopping the project around for a reason, and I believe that gaining political favor is one key factor. And we’re not just talking about the Trump administration. It goes far beyond that.

Toyota wants governors, members of Congress and senators on their side, which I believe will be reflected in the site search for this future plant. More on that in a moment.

Eleven States

If you were to take the word of the Wall Street Journal as gospel, the Toyota-Mazda project has come down to 11 states. Those states are Alabama, Florida, Kentucky, Illinois, Indiana, Iowa, Michigan, Mississippi, North Carolina, South Carolina and Texas.

Some of that makes sense to me, some not so much. With this mix of Southern and Midwestern states, why aren’t Tennessee, Georgia, Arkansas and Ohio included in the mix? Georgia, in particular, makes imminent sense to me for this project.

One possibility is the Journal, which is a great newspaper, just got it wrong. Having been a former business reporter and editor, I can tell you that sometimes happens despite all the best efforts. I remember years ago when the Journal reported that Mercedes-Benz would land in North Carolina, when in fact it ended up in Alabama.

But if the Journal’s latest report is accurate and the search has indeed been relegated to these 11 states, then I am going to venture a guess (and that is all it is) on where this $1.6 billion-dollar plant will go.

History Can Provide a Clue

We cannot predict the future with absolute certainty under any conditions. However, we can often detect patterns from history, which allows us to make educated guesses. That is all that I am offering here, an educated case based on what Toyota has done in the past.

If you look at a map of the many points where Toyota has manufacturing plants in this country, you will notice that the company seldom puts facilities in the same states. This especially holds true with its large vehicle assembly plants. They are all in different states.

Why is that? I believe it is to hedge its bets and curry political favor. With 10 plants and a direct investment of $21.9 billion, soon to go higher, Toyota figures it cannot have too many friends in governor’s mansions and on Capitol Hill.

North Carolina Makes Sense

I will hazard a guess that if the Journal’s list of 11 states is correct, that the winning state will be North Carolina. Why North Carolina?

Ever the bride’s maid and never the bride in the competition for automotive assembly plants in the past, North Carolina is very much hungry for this type of project. The state also represents new ground for establishing new friends and allies, which has been the modus operandi for Toyota.

Florida, Illinois and Iowa could also fill that political bill, but Toyota may have overriding concerns about their strategic locations vis a vis their existing supplier network and customers, or in the case of Illinois, its business climate.

Again, if the Journal’s list proves true, Kentucky, Alabama, Mississippi, Indiana, and Texas are out, only because Toyota already has a big presence there. Those congressional delegations are pretty much locked down.

South Carolina, which I believe has one of the best business climates for manufacturing, is out only because it is a small state where BMW and Volvo have put down roots. BMW is especially the big fish there. Michigan, where Toyota has a design and technical center, is out because it is the legacy home of General Motors, Ford and Chrysler and Toyota’s voice would simply be one in the choir.

A Supplier State

That leaves North Carolina, a supplier state where Toyota buys automatic transmission parts, catalytic converters, driveshafts, window motors and tires. There are about 300 automotive suppliers in the state.

North Carolina is home to Research Triangle, anchored by North Carolina State University, Duke University, University of North Carolina at Chapel Hill, and the cities of Raleigh and Durham and the town of Chapel Hill. All that talent can be leveraged if needed. And it usually is.

What’s more, North Carolina has four mega-sites that could meet the needs an OEM assembly plant.  All four have convenient access to interstates and rail, and have undergone environmental audits, geo-technical studies, have water and sewer lines, offer low-carbon power and provide high-speed fiber optics connectivity.

If I were advising Toyota (hint, I’m only 20 minutes away from corporate headquarters) or Jones Lang LaSalle, which is handling the site search for Toyota, I would tell them to take a long hard look at:

  • The 1,449-acre Kingsboro CSX Select Site, 10 minutes east of Interstate 95 and one hour east of Raleigh
  • The 1,800-acre Chatham-Siler City Advanced Manufacturing Site in Chatham County in the center of the state
  • The 2,700-acre Moncure Megasite, only 20 minutes from Raleigh-Durham International Airport
  • The 1,500-acre Greensboro/Randolph Megasite, southeast of Greensboro

Of course, other sites in other states may fulfill the requirements of the Toyota-Mazda partnership. But North Carolina makes sense, due in part to Toyota’s proclivity to expand its geographical and political footprint, which I think is a very smart move.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Older Workers are the Future of Work

In Corporate Site Selection and Economic Development on August 1, 2017 at 4:11 pm

In my last blog, which I modestly titled, “The Future of Everything,” I said that predicting how technology will affect the future of work is pretty much a fool’s game.

We should keep in mind John Kenneth Galbraith’s reminder that, “We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know.”

The older I get, the more I realize how much I do not know. But if I were to hazard a guess, it would be that AI-engineered robots will probably not take all of our jobs and then kill us. But I could be wrong.

Also, as I outlined in my last blog, I believe the findings of a group called Shift: The Commission on Work, Workers, and Technology, a joint project of New America and Bloomberg, has great value as it portends to the future of work.

The Commission outlined four core scenarios that could play out in the next 10 to 20 years, each reflecting whether there will be more or less work, and whether work will exist in the form of jobs or fragmented into “tasks.”

If you want a quick snapshot of those four scenarios, again I would refer you to my last blog or better yet go to the Shift Commission website.

Shaping Places

The future of work will shape cities and regions, but I seldom hear my friends in economic development talk about it. Understandably, much of their focus is on the most pressing question as to whether people in their respective communities have the skills to perform the jobs today.

Disturbing to some, the data shows that the richest cities are pulling away from the rest, with discrepancies in access to education, technology, capital, and networking opportunities.

This is in keeping with Brooking Institution’s reports of the last few years that American cities and metropolitan areas have firmly established themselves as the engines of the nation’s economy and are the centers of technological innovation and global trade and investment.

(I hope to tackle this subject and the notion of innovation districts in cities in an upcoming blog.)

A Profound Impact

Millennials (adults ages 18 to 34), are now the largest share of the American workforce (more than one-in-three American workers), but older adults will have the most profound impact in the coming years on both the supply of labor and the demand for workers.

By 2024, the Shift Commission report notes, nearly one-quarter of the workforce is projected to be 55 or older — more than double the share in 1994. Falling fertility rates and tighter immigration rules mean U.S. employers will likely need to hire and keep older workers just to get the job done in coming decades.

“We will need older workers to do the work,” said MIT AgeLab Director Joseph Coughlin at the Milken Institute Global Conference.

Retiring Retirement

While many consumer companies are gearing their businesses toward a growing “active aging” market, many if not most companies still do not understand that it is in their long-term best interest to retire this whole idea of retirement.

“Older people have so much to offer as workers, colleagues and mentors. It is in the business community’s self-interest to recruit, train, promote and retain them,” wrote Paul Irving, chairman of the Milken Institute for the Future of Aging.

The concept of formally ending work at age 65, while it may have been appropriate in the last century, does not make a lot of sense today. Seventy-two percent of pre-retirees want to work past 65, and nearly half of current retirees either have worked in retirement or plan to, according to the Bank of America Merrill Lynch/Age Wave 2015 report, Work in Retirement: Myths and Motivations.

Major Cost Savings

Eventually, however, more companies will see the light and older workers will become more in demand particularly for reasons of costs. The fact that older workers on Medicare don’t require primary medical insurance will prove to be a major cost savings for employers.

Companies will also like the fact that millions of retirees will move to freelance, part-time or contract employment with no benefits having to be paid.

The Real Gig Workers

While young people are the supposed to be the vanguards of the new economy, valuing happiness over money, gigs over jobs, and flexibility and meaning rather than status and hours at work, older Americans are being more millennial than millennials.

People over the age of 65 are four times more likely to be self-employed than those under 34, and are more likely to work part-time jobs, according to the Bureau of Labor Statistics.

The labor force participation rate, or the share of American civilians over the age of 16 who are working or looking for a job, is expected to increase fastest for the oldest segments of the population—most notably, people ages 65 to 74 and 75 and older—through 2024. In contrast, participation rates for most other age groups in the labor force aren’t projected to change much over the 2014–24 decade.

The rise of “alternative work arrangements,” like freelancing or part-time work, jobs that often lack benefits like health care, have grown significantly in the last decade. As of late 2015, 24 percent of employed 55-75 year-olds were in alternative work arrangements, compared with just 14 percent of prime-age (25-54 year-old) workers, according to the economist Jed Kolko.

Many companies and entire industries are now beginning to realize that they are on the verge of losing a wealth of great talent. As of 2015, almost 33 percent of our workforce – including 48 percent of supervisors – was eligible to retire. Replacing that kind of talent isn’t easy.

A Rapidly Aging Workforce

The workforce is aging because the population is aging. By 2024, the U.S. Bureau of Labor Statistics projects that the labor force will grow to about 164 million people, of which 41 million people will be ages 55 and older—of whom about 13 million are expected to be ages 65 and older.

While they make up a smaller number of workers overall, the 65- to 74-year-old and 75-and-older age groups are projected to have faster rates of labor force growth annually than any other age groups. This in a nutshell means that tomorrow’s seniors will retire later.

Also, it should be noted that the aging population is creating demand for health care jobs, which are projected to lead employment growth over the next decade.

Older Workers are the Future

While the overall numbers favor the millennials, older workers find themselves the future of work. Employers, not wanting to lose valuable knowledge, will do a better job at finding ways to accommodate them, while millions of older workers will transition from full-time jobs to part-time work. Look for growing numbers of older Americans in the gig economy, working freelance, with short-term contracts or with pick-up jobs.

On a personal note, I have come to epitomize that older “boomer” gig economy group. I am a 62-year-old consultant doing contract/consulting work for economic development groups and companies needing help with corporate site selection.

Through the years, I have picked up some knowhow, and I want to continue to grow by learning new stuff. I think of it as expanding my horizons while helping others, which is a pretty good gig.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

The Future of Everything

In Corporate Site Selection and Economic Development on July 23, 2017 at 4:23 pm

For many of us, our last names reveal the work of our ancestors.

Common Anglo-Saxon names like Baker, Brewer, Butcher, Carpenter, Cooper, Mason, Miller, Sharp, Smith, and Tailor were all trade names, which required craft and expertise acquired over years and passed down through generations.

My last name is Barber. Back in the Middle Ages, Barbers did far more than haircutting. They also performed surgery, bloodletting and leeching, enemas, and teeth pulling, among a host of other things that would probably turn your stomach.  Gosh, I’m glad I didn’t live back then.

The Industrial Revolution wiped out these identities. And today, many of the factory and office jobs that replaced farming and craft trades are themselves disappearing.

We Don’t Know

Much of what I write about in this blog concerns the future of work. I will be the first to admit that while I ponder on the future, I don’t know, nor does anybody else, what lays in store.

I frequently joke that if I called myself a “futurist,” I could charge considerably more than I do now as a consultant for economic development organizations and companies on corporate site selection.

We all hope that the Digital Revolution, like the Industrial Revolution before it, will create as many jobs as it destroys. We sense that big changes are in the air and that dislocations are inevitable. Report after report, and this blog, say as much.

But will automation and artificial intelligence result in a fundamental rethinking of our relationship to work and to one another? How will we change?

The Predictions Differ

The World Economic Forum’s study into The Future of Jobs (2016) estimated that 65 percent of children entering primary school today will work in job types that don’t yet exist. 3.5 times as many jobs could be lost to disruptive labor market changes in the period 2015-2020 than are created.

The study saw job losses in routine white-collar office functions but gains in computing, mathematics, architecture, and engineering related fields.

Some believe that we could see 80 percent or more of current jobs disappearing in the next 20 years, whereas a McKinsey Global Institute report last year found that only 5 percent of jobs can be fully automated by adapting currently demonstrated technology, although for middle-skill categories this could rise to 20 percent.

A Complex Relationship

With all due respect to the World Economic Forum, McKinsey (a group I respect and often quote) and any and all of those who might hazard a guess on the future of work, history teaches us that it’s hard to predict how technological change will unfold.

The relationship between automation and employment is complex. When automation replaces human labor, it can also reduce cost and improve quality, which can increase demand and theoretically create new jobs.

Many assume that it’s going to be people or robots, all or nothing. I don’t quite see it that way. I tend to believe that advances in artificial intelligence will focus more on specific tasks rather than entire jobs. In that scenario, robots will mostly augment rather than replace humans. But what the hell do I know?

Four Futures of Work

Instead of obsessing on predictions, a group called Shift: The Commission on Work, Workers, and Technology, a joint project of New America and Bloomberg, took a different and I think more valuable approach. In its executive summary, the Commission opened with a line that will stick with me forever:

“The future of work is the future of everything.”

Convening more than 100 leaders from multiple sectors, including labor, civic, religious, academic, entrepreneurial, and more traditional business perspectives, the group was asked two basic questions:

(1) Will there be more or less work in the future? (2) Will work continue to be in its traditional form, full-time jobs, or separate into more “task” work (like short-term contracts, part-time gigs, or other alternative arrangements)?

The Commission distilled the common themes from these visions, some positive and some negative, and came up with four basic scenarios, four different futures of work. So what are these different futures? I quote from the Shift report.

Rock-Paper-Scissors Economy: Less work, mostly tasks.

“A community-based, local, and sustainable economy that prioritizes work in person to-person interactions. Advancing automation, in combination with a slowing of the overall economy due to rapidly aging population and a declining birth rate, leads to the elimination of many full-time jobs.

“Available work has been reconfigured to a task-based format; many people piece together their income — and, if they can, benefits — through a series of temporary gigs, identified by digital platforms and facilitated by smartphones.

“The winners are those who provide an experiential service based on a human interaction, activity, or skill, like cooking coaches, gardeners, and eldercare providers. Losers are those whose identities were so wed to a particular job that they opt out of the labor market instead of adapting.

“Of those open to entrepreneurial activities, many join the maker economy and produce organic goods in and for their neighborhoods; more people derive a sense of purpose from contributing to their families, their “contingent families” of friends, and their communities than from their jobs. Free time, once scarce in an economy that pushed people to work ever-harder to sustain high levels of consumerism, becomes a marker of status in an economy in which people work less.”

King of the Castle Economy: Less work, mostly jobs.

“A corporate-centered economy in which economic life is organized around large, profitable companies and those they employ. Increased automation keeps corporate productivity levels high but employment levels low, dampening consumer demand. This leads to less dynamism in the economy and decreased innovation overall as people become worried that leaving a full-time job means they won’t find a new one.

“Lower employment levels generate lower tax revenues and corporate philanthropies take over former city and state functions in the places they operate. Geographic and political tensions rise, and society splits into three clear social classes: those who work in high-tech jobs at large, profitable companies (and successfully defend their jobs, and generous benefit packages, from qualified outsiders); those who have full-time jobs protecting the people and assets in the corporate class, who struggle to assemble health-care and retirement benefits; and those who perform on-demand work when it’s available.”

Jump Rope Economy: More work, mostly tasks.

“A portfolio approach to work in which people build reputational rankings with each task they complete, combining multiple income streams to allow for a career that’s self-driven, entrepreneurial, and constantly changing. An aging workforce that stays engaged, combined with millennials seeking flexibility as they reach their peak parenting years and high consumer demand as a result of full employment, pushes the market into more discrete, task-based jobs.

“Technology assists in efficiently cataloging the different tasks that need doing and helps people develop and monetize their skills, which are always shared on social networks — every keystroke is public. The economy is buzzing, so people can be selective about what they do and can replace traditional corporate-provided benefits. As a result, most people do what they enjoy most of the time and are always on the lookout for the next opportunity.”

Go Economy: More work, mostly jobs.

“A technology-driven economy in which people embrace connectivity in every area of their lives and look for ways that machines can extend their capabilities through data-platforms, electronic devices, and virtual reality. Automation takes over almost all routine, data-processing jobs, freeing workers to focus on creative, strategic thinking.

“As people realize the ways in which AI can help them, they increasingly take risks in their jobs which results in more innovation. Benefits become progressively more generous over time, and eldercare becomes as standard a company benefit as childcare.

“Online retailers hire and train lots of warehouse robot monitors, lawyers take on many more cases as AI takes over the paperwork of discovery, and scientists and intellectuals use AI to file and monitor patent applications. Jobs multiply as new and novel platforms are invented on which to build new ideas.”

The Shaper of Cities and Regions

So there you have it, four different futures of work as envisioned by the Shift Commission. The group concluded that each could work out well for America, or poorly, depending on how we respond.

The commission found that most people want certainty more than making more money, more than doing work they feel is important and meaningful. They value stability of income, health care (Republican Party best be careful), retirement, and the other benefits we have come to expect.

Economic developers should take note that the future of work will shape cities and regions, and that the different futures might affect some areas in different ways than others.

It is very possible that I have provided you more questions than answers in this blog. Perhaps that is my aim.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com