Dean Barber

Holy $#@T: My Industrial Park Tour in Mexico

In Corporate Site Selection and Economic Development on May 15, 2016 at 10:19 am

Even Donald Trump would have been impressed. After all, he is a real estate developer, a businessman.

Last week, I spent several days in San Luis Potosi, Mexico, a place that I will wager that most Americans have never heard of but they should.

This is a city in central Mexico with a metro area population of about 1.5 million people. But more importantly, and the reason why I was there, it is a hotspot for manufacturing.

Indeed, what I saw in the industrial zone south of the city literally took my breath away and left me wondering about previously held beliefs.

I rode past a $550 million Goodyear plant under construction. I walked on a graded site where Ford will build a $1.6 billion assembly plant.  Only last month, Ford confirmed that it would build the plant, which Trump has termed “an absolute disgrace.”

On the way to the Ford site, I passed by a 2-million-square-foot General Motors plant completed in 2009. I also saw the construction site for a future $1 billion BMW plant.

Keep in mind, all of these sites are within a few miles of each other.

Holy (insert word here)

I also toured, again in this same very area, one of the finest industrial parks that I have ever seen.

The entire park is a free trade zone, the first in Mexico, and it featured the largest intermodal hub facility in the country, owned and operated by the Kansas City Southern railway. With a customs office in the park, product-laden trains roll north unencumbered, not having to stop at the border and tariff free because of NAFTA.

One final thing, the workers in this ultra-modern industrial park, occupied by blue-chip companies, are being paid $8 to $10 a day. (Minimum wage in San Luis is about $4 a day.)

To which, I thought to myself, “Holy Toledo. (You may insert another word for Toledo.) How in the blue hades can we (the United States) compete with this?”

And all on the doorstep of the U.S.

Our Story Begins

A few weeks back, I got a call from my friend Dave Lewis. Dave is an industrial architect based in Greenville, S.C. He heads a firm called Context Design, and we’ve known each other for many years, principally through automotive projects.

“Hey, Dean, I want you to see something in Mexico. You ever heard of San Luis Potosi.”

“Yeah, believe it or not, about 15 years ago, I actually drove through San Luis. I was headed down to San Miguel de Allende for some R&R.”

“Well, it’s changed a lot since then. I want you to see an industrial park down there where I have done some work. The owners will take care of your travel expenses. Interested?”

“Sure, why not. I could use a little adventure.”

“You won’t be sorry.”

Not a Good Start

My flight from Dallas was like something out a Six Flags, a real roller coaster affair because of turbulence.

I arrived at my hotel about midnight, two hours late because of the weather. To his credit, Dave had sat up and met me at the entrance of the lobby. He could tell I was in a foul mood, and immediately got me a drink from the bar, which was closing.

I grumbled thanks and went to my room, with drink in hand, wondering what I was getting into.

But the next day was a new day, and after breakfast we were soon on the road in a bus marked “WTC Industrial.”  I would soon learn in a meeting that WTC is a subsidiary of Grupo Valoran, a privately-owned conglomerate based in San Luis.

You name it, and they probably do it. They do real estate development (commercial, industrial and residential) highway construction, wastewater treatment plants, concrete construction, fast food franchises, gas stations, restaurants, logistics, and funeral homes.

The owner, Vincente Rangel Jr., lives with his family in Houston. I couldn’t find much on him with an internet search, probably by design.

On the WTC bus, I was headed to his WTC Industrial park, referred to as WTC 1, where I would have a series of meetings with my hosts and then tour the park. I would also see WTC 2, but more on that later.

No Rhyme or Reason Until …

I’m convinced that our eyes become accustomed to certain surroundings, and that when we are thrust into new environments, it takes us awhile to get our bearings.

To me, as an outsider, San Luis Potosi seemed a jumbled affair, where nice, modern buildings sat next to other buildings that had a distinct third world look.

A strip joint might set next to an auto repair garage, next to an office building, next to homes, next to whatever the heck that building is. Zoning be damned, which probably works fine for San Luis. For my eyes, a bit confusing.

Even the industrial zone had a jumbled look to it. There was seemingly no rhyme or reason for where certain factories sat,  as if some manufacturing god tossed dominoes in the air to see where they would land. That is until we arrived at the park.

Here the world suddenly became very orderly. Here we entered an ultra-modern master-planned realm. And it was here in WTC 1 where I saw top-ranked companies from the U.S., Europe and Asia. Such names as MetoKote, Faurecia, Valeo, Dräxlmaier, TI Automotive, ABB and Nippon Express, to name a few.

Two Premiere Parks

The $550 million Goodyear plant that I mentioned is being built in WTC 1, which is now almost built out. WTC 1 is 1,610 acres or 700 hectares, as commonly measured in Mexico.

The new Ford facility will go up in WTC 2, a park twice the size of WTC 1, meaning 1,400 hectares or 3,220 acres. And I wouldn’t be surprised if a future WTC 3 might be in the works.

I’ve been in many, many industrial parks over all the U.S., and very few, if any, would compare to WTC 1. The truth is that most of our parks pale in comparison.

Here in the U.S., we have a penchant for big box, metal buildings, devoid of any architecture. Such parks don’t particularly age well. They get ugly fast.

Ostensibly, I was to offer my WTC hosts learned counsel, being that I am a learned site selection consultant. In reality, about all I could say was, “keep up the good work because it’s obvious that you are doing something right.”  Two other site selection consultants present really couldn’t offer much more either.

The truth is that WTC Industrial brought us there so that we might spread the word to any corporate clients about these premiere parks. And I must admit that San Luis is now an intriguing option.

I Have to Wonder    

That is not to say that I don’t questions. The parks, which sit in an arid region, are dependent on drilled wells for water. I was assured that sufficient capacity is there, but I would want to learn more. I wonder about the current state of the aquifer below.

Also, with all these mega projects in the works, on top of the existing companies, most of which are automotive suppliers, I wonder about the availability of labor.

Will all these big projects suck the oxygen out of the room? Will there be the quality and quantity of labor to meet the needs of these companies? So I have to wonder.

No local economic developers were present in our meetings to give me assurance about existing worker training programs. So I have to wonder.

After all, site selection is about risk assessment and you can never get too much information.

More Plants on the Way

If you were to do an internet search for automotive news in Mexico, you would see a story about Milwaukee-based Strattec Security Corp., the world’s largest producer of automotive locks and keys, having just broken ground on a $22 million factory in Leon, Mexico. It’s also in that central valley area, just south of San Luis Potosi.

In 2015, the Mexican auto industry set numerous records. Production rose 5.6 percent from a year earlier to 3.4 million vehicles. Exports grew 4.4 percent to 2.76 million, and local sales jumped 19 percent to 1.35 million cars and light trucks, according to the Mexican Automotive Industry Association.

And while auto exports have dropped 7.4 percent in the first four months of this year to 854,118 vehicles, compared with 922,029 last year, capacity will be growing. Kia will open a new car assembly plant in coming weeks and Audi plans to open a light-truck factory in the second half of the year.

The new factories could add about 100,000 units to Mexico’s light-vehicle production tally for the year, putting it back into record territory by the end of 2016.

My Kind Hosts

On a personal note, I must say that I really liked my hosts at WTC Industrial. Michele Porrino, Esteban Puente Bustindui, and Fermin Rodriguez Sosa, were great guys, very professional and yet fun to be around.

I’ve always liked Mexico, with its rich cultural history and friendly people, and this trip only reinforced that. The people smile even with my horrible attempts at speaking Spanish.

Still, I recognize that there are problems. Most Mexicans would agree that corruption remains a huge problem, and drug gang violence, while waning and limited to certain areas, do give companies pause. But the WTC parks in the central region are removed from that, and I consider them safe and secure.

San Luis Potosi sits in the center of Mexico’s golden triangle — Monterrey to the north, Guadalajara to the southwest, and Mexico City to the southeast. It is here where 76 percent of the country’s gross national product is derived.

The big question is whether I would take a corporate client, so inclined, to look here. The answer is yes, and the WTC parks might very well be the answer.

But I must confess that I am now questioning my previously held beliefs on free trade. Both parties comprising the political establishment in the U.S. have favored free trade, but $8 to $10 a day? And with millions of U.S. manufacturing jobs lost?

Well, I have to wonder. You have probably noticed that I wonder a lot.

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. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.  Mr. Barber is available as a keynote speaker.

The Answers Have to Be Yours

In Corporate Site Selection and Economic Development on May 1, 2016 at 12:22 pm

The company had reached out to me, and I was scheduled to have a conference call with the CEO. As a consultant, that’s music to my ears.

Not wanting to go into the conversation cold. I had to bone up for the call. Reading the company’s website helped, as did some recent news stories about its activities.

It turned out this was a real estate development company that specialized in specific types of industrial properties. But why did this CEO want to talk to me?

Relying on an Old Trick

Ten minutes before the scheduled call, I pulled out a notepad and wrote this at the top of the page:

“Who, what, when, where, how, why and why not?”

This was an old trick or habit from my newspaper days. You get answers to these questions and chances are that you are going to have a pretty good idea of what’s going on.

And worked it to the extent that I came away from the conversation knowing what CEO wanted. I’m still ruminating on whether I will be able help in a meaningful way.

I Still Interview

I’ve been out of the newspaper world for 20 years, but I frequently interview people in my role as a consultant. I do this simply to figure out what is going on and how I can possibly be of help.

After all, that’s what I am supposed to do as a consultant – help.

Whether it is a corporate site selection project — helping a company find an optimal location for future operations — or an economic development consulting project — helping a community with direction and focus – I am going to ask a lot of questions.

Probably the biggest compliment I have received of late was when another consultant who I was partnered with on a project said, sort of in awe, “Wow, Dean, people tell you stuff.”

To which I replied, “Yes they do.”

I’m on Their Side

And the reason they do is that I ask questions in a non-threatening, conversational manner. I want them to know that I’m on their side. I want to get their take, their input, so that I can be of help.

On a corporate site search, having a deep understanding of why senior management wants to expand to a new location is critical,  as is determining what is the most important criteria for a best possible location. It’s not the same for every company.

For me to develop that deep understanding and ultimately serve the company well, I have to interview senior management to learn the hows and whys of the project.

The same goes with communities. When we do a strategic/action plan for an economic development group, more often than not, we will do a SWOT analysis in which we come to a community and interview stakeholders, all off the record.

Trust is Paramount

That means nobody will be quoted. We just want to get a better understanding of the place, its strengths, weaknesses, opportunities and threats. This will be the foundation from which we will build upon.

Not surprisingly, trust is paramount. I learned a long time ago as a reporter that people won’t talk to you if they think you might burn them. You have to protect your sources.

Off the record or not for attribution means we may use something you tell us, but nobody is going to know what you told us. We’re not quoting anybody for purposes of our report.

Conflicting Opinions are Good

When we interview senior managers for a corporate location analysis project, we often get different takes on why the expansion should happen and what are the most important factors are to be considered.

But that’s Ok. That gives us a greater breadth of understanding the company’s needs.

The same holds true for communities. We expect conflicting ideas and opinions. If everybody said the same thing, I would start to wonder if the people we were talking to were scripted and for what reason.

If we ask the right questions of the right people, a bigger picture will emerge and a plan can evolve.

I Can Only Ask

Management consultant and business visionary. Peter F. Drucker, once said:  “My greatest strength as a consultant is to be ignorant and ask a few questions. I can only ask questions. The answers have to be yours.”

Sometimes, with permission, I will record interviews. And sometimes I will get very angry with myself in listening to the recordings.

I’ll catch myself cutting somebody off when they were elaborating on an answer that would be very useful. Or I will miss asking an obvious follow-up question that was staring me in the face.

“Dean, you friggin’ idiot,” I may say out loud, upon listening to the recording.

You don’t have to be a former journalist to interview people. Just write the “five W’s and one H” at the top of your note-taking page — “who, what, when, where, how, why and why not? (That’s actually six W’s.) – and go for it.

The good part is that the more you do it, the better you get at it. Also, the people you are interviewing don’t need to think of it as an interview, but rather a conversation, which takes the pressure off everyone.

You are seeking their thoughts, getting their take, and people are often flattered by that.  Oh, tell me, wise one, what is the true meaning of life?

Love and chocolate, my son. Now go in peace.

A Quick Study on Drones

This coming week I will be in New Orleans attending XPONENTIAL 2016, a trade show put on by the Association for Unmanned Vehicle Systems International, which is committed to fostering, developing, and promoting unmanned systems and robotics technologies.

I expect much of the focus, although not all, will be on unmanned aerial vehicles, aircraft with no pilot on board. We commonly refer to them as drones.

So I hope to become a quick study on drones. This is a relatively new industry that is causing disruption, consternation, and a great opening of new possibilities, which means it is a pretty fluid and exciting time.

We think of drones as a relatively recent phenomenon used by our military to watch and take out jihadists. But during the Civil War, both confederate and union forces used balloons for reconnaissance, having that eye in the sky.

New Rules for a New Industry

But with anything new, there is a bit of a fumbling around, with mistakes, growing pains, and regulatory concerns.

The Federal Aviation Administration is moving forward on a plan to integrate small, commercial drones into the National Airspace System, as the industry needs a clear set of rules to begin capturing the untapped opportunities presented by this innovative technology.

Industry analysts say unmanned aerial systems could create $13.6 billion in economic value and 70,000 new jobs within the first three years after this plan comes to fruition.

The Possibilities Seem Almost Endless

On April 20, the Information Technology and Innovation Foundation filed comments with the FAA urging agency to adopt a regulatory framework that encourages commercial applications and bolsters U.S. competitiveness with the use of unmanned aerial vehicles. In its conclusion, ITIF said this:

“With this technology, energy companies, construction companies, and government transportation departments will be able to inspect their infrastructure without endangering workers. Search and-rescue operations will be able to cover more ground and potentially save more lives.

“Artists, photographers, and cinematographers will be able to enhance their art by capturing high-quality photos and film with low-cost alternatives to helicopters. Journalists will be able to use UAS technologies to better cover disasters, weather, sports, and the environment.

“Farmers will be able to use drones to improve their efficiency, monitor their livestock, protect their crops, and cut their costs. Retailers will be able to deliver goods to consumers faster and more efficiently. There could be vast improvement to Americans’ daily lives if this technology is interwoven into society—including cost savings, innovative services, and more jobs.”

Wow, the possibilities seem almost endless, which makes for a pretty exciting landscape. If you are in New Orleans this coming week, feel free to look me up.

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. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.

When Companies Lie

In Corporate Site Selection and Economic Development on April 25, 2016 at 11:59 am

Companies are made up of people (Mitt Romney got that part right), and people are, well, people.

And we know this about people — we are capable of being generous and doing wonderful things for others. We are also capable of lying and research shows that we do it on a regular basis.

Self-esteem as one of the biggest reasons for lying, according to psychologist Robert Feldman, author of The Liar In Your Life: The Way To Truthful Relationships.

“We find that as soon as people feel that their self-esteem is threatened, they immediately begin to lie at higher levels.”

Pretty Baby, Lunch with Elon

Sometimes we tell a deliberate untruth to smooth things over in our relations with others. We may think of these as small, little white lies, designed to avoid conflict.

“No, dear, you do not look fat in that dress.” (When she is busting out the seams.)

“Oh what a pretty baby.” (I am reminded of the Flip Wilson joke: And maybe we can find a banana for your monkey.)

Sometimes we tell ties to inflate our importance with others. Here’s one that I have yet to try out. It’s still in the formative stage.

“I was having lunch the other day with Elon Musk. Bright guy, but he wanted to get my ideas on a few things that he was working on. So during our lunch, Warren Buffet kept calling me on my cell phone and leaving messages. I finally got back to him later in the day. It was about a company that he was considering buying. You know, Warren really didn’t need my advice on that. ”

Bombarded Daily

Lies are no stranger to business and commerce. You could rightly argue that we are barraged every day with a multitude of misleading, deceptive messages from companies wanting us to buy this product or that service.

Occasionally the Federal Trade Commission will come down hard on a company whose claims go too far, a late-night info-commercial having you believe that mixing Siberian mud into your food will shed pounds off your body. (I’m making this up.)

In December 2015, LifeLock, an identity theft protection company, agreed to pay $100 million for violating an FTC order that prohibited the company from engaging in deceptive advertising regarding the security of consumer data, among other things.

The FTC said LifeLock falsely advertised that it would send alerts “as soon as” it received a report of identity theft and that it used the same high-level safeguards used by financial institutions to protect consumer data. Both of these claims were found to be deceptive.

The Big One

One big fat lie played a major role in the late-2000s global financial crisis, sparked by mortgage fraud and predatory lending. Fraudulent financial instruments invented by investment banks on Wall Street, things called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), ultimately brought about massive defaults and a subprime mortgage crisis.

The result was the worst global recession since World War II. Nearly 9 million jobs were lost in the United States during 2008 and 2009, roughly 6 percent of the workforce. One estimate of lost output from the crisis comes to “at least 40% of 2007 gross domestic product.”

Strangely, no one went to jail for what was purposeful deceit, but Lehman Brothers Holdings Inc., the fourth-largest investment bank in the U.S., did not survive.

Recommendation: Watch the movie The Big Short, which I think explains how a housing bubble happened, and how it ultimately burst and wreaked financial havoc on just about everyone.

While its scope does not measure up to the Great Recession, the recent emissions-cheating scandal with Volkswagen will be one for the history books and it is playing out right now.

A Fraudulent Conspiracy of Epic Proportions

If you haven’t already heard, Volkswagen last week said it was taking an $18.85 billion charge against 2015 earnings, pushing the company to a record loss, to pay for all known costs associated with its emissions scam.

The deal gives U.S. customers the option of selling their car back to Volkswagen or having it fixed. We’re talking about half a million cars.

It is not clear whether the consumers behind the 600 class actions filed over the scandal will accept Volkswagen’s offer or choose to keep litigating.

Volkswagen has admitted to engaging in a 10-year secret effort to skirt vehicle emissions regulations by installing in 11 million diesel vehicles software designed to fool emissions tests.

By any measure, this is a fraudulent conspiracy of epic proportions, which is why the U.S. Department of Justice said its criminal investigation of Europe’s largest car manufacturer remains ongoing. A multi-state probe into consumer and environmental violations also continues, according to the New York Attorney General’s office.

Using software and on-board sensors, the deception allowed VW cars to automatically recognize lab test conditions and run in full pollution control mode, so limiting the level of emissions. Driven on the road, the system turns off, resulting in actual levels of pollutants that can be 40 times higher than allowable U.S. limits.

Inside observers now say that not only was the emissions cheating allowed to go on for years, but cultural problems at VW appear to have gone far beyond a distain for regulations. VW’s culture was one of top-down arrogance, which demanded conformity, discouraged divergent thinking, and punished failure rather than learning from it.

But Wait, There’s More

In Japan, Mitsubishi Motors Corp. last week admitted that it manipulated fuel-economy tests to mislead consumers.

Also last week, Daimler AG confirmed that it had been asked by the U.S. Department of Justice to investigate the certification process of its cars. The internal probe follows U.S. class action suits that allege Mercedes-Benz clean-diesel models contain a device that turns off a system meant to reduce polluting nitrogen oxides in its exhaust.

Daimler AG Chief Executive Officer Dieter Zetsche is now saying that carmakers have to be more transparent about how they certify their fuel economy and emission ratings.

“You can only be transparent and if there’s any shortfalls anywhere, fix them and move forward,” Zetsche told Bloomberg News.

Bringing It Closer to Home

Lying is not a good long-term proposition for a company. Customers can and frequently do check the facts for themselves. They can root out lies.

Years ago, when I was the business editor of The Birmingham News, business people in after-hours situations would ask me how to “handle” the press. I would say something like this:

“Look, you don’t have to talk to a reporter who comes calling. It may or may not be in your best interest to do so. If you do choose to talk, you are entitled to put your spin on the story, to tell it from your perspective.

“But never, ever lie to a reporter. Because if you do, and we find out that you lied, then you have lost all credibility with us here at the newspaper. That’s just the way it is. Again, you don’t have to comment or answer every question, but don’t lie, because it will come back to bite you.”

Fast forward to today. Today, I am a consultant serving companies on corporate site selection and incentive negotiations. I also take economic development organizations as clients to help them on matters of direction and competitiveness.

To my corporate clients, I would say that if incentives are at all important to you, even if they are not the driving factor (and they shouldn’t be) in a process of selecting an optimal location for future operations, then it is in your best interest to be considering multiple locations.

To have leverage with finalist communities, they must understand that they are competing with other communities to win your project. We cannot lie and say we are considering other locations. We really have to be considering other locations. Understood?

To economic development organizations, I would say leverage your community’s strengths, but admit to its shortcomings when queried about them. Don’t ever try to cover up, because we will find out. Credibility is all you have.

Actually, credibility is all that any of us have in business. We may have a better mousetrap or a better way of doing things, but if our customers have found reason not believe us, well, we’re in a very bad place.

Which is why I’m not inclined to buy a Volkswagen anytime soon.

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. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.

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