The Cost of Salvation

By any accounts, it has been a long haul. We have been through the fire together.

When the history books are written, this Great Recession, which economists say ended in 2009, will be viewed as a much more difficult period than I think we even realize today.

And we are still trying to reclaim lost ground. The typical household has regained less than half its lost wealth, according to a recent analysis by the St. Louis Fed. Household wealth plunged $16 trillion from the third quarter of 2007 through the first quarter of 2009.

By the final three months of 2012, American households as a group had regained $14.7 trillion, but bank researchers say that data is misleading. They argue aggregate household net worth data isn’t adjusted for inflation, population growth or the nature of the wealth. The analysts  contend the average household has recovered only 45 percent of its wealth.

“Considering the uneven recovery of wealth across households, a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified,” the Fed researchers said.

I can buy that. The wounds are still evident, albeit our economy is healing. Consumer confidence is at a five-year high. Houses and cars are selling again, and the energy sector is booming.

Words of Hope, Signs of Growth

And despite a dysfunctional Washington, I hear words of hope and signs of growth just about everywhere I go, and I have been on the go a lot lately – Alaska, South Dakota, Missouri, Tennessee and Ohio, just in the past few weeks. I’m now in recovery mode at home in Texas, pondering what I have seen and heard from business people.

And I am encouraged, but fully appreciate that we have a long slog ahead. What I sense is that small businesses on Main Street continue to struggle to find customers, while many Fortune 500 companies are seeing record profits. So there is this rather odd dichotomy at work in the U.S. economy.

If there is anything this Great Recession taught business, big and small alike, it is that we can get by, even profit, by doing more with fewer people. This new digital machine age which I think we are just now entering will make it even more so.

(I give a rather sobering if not downright scary presentation called “Machines Rising.” You can see it at my LinkedIn profile.)

And don’t you know that presents quite the pickle for economic developers, who are too often judged solely by job creation, an unreasonable expectation in my view. But that’s whole nuther blog in itself.

Look, even with an unemployment rate that has dropped to 7.6 percent, we have 2.4 million fewer jobs today in this country than we did when the recession began. Adjusting for population growth, it will take more than nine years at the current rate of hiring to return to prerecession employment levels, according the Brookings Institution.

Consumers Rule

Consumers hold the key. They will propel this recovery forward as household purchases account for about 70 percent of the economy. I believe that to be particularly true with the automotive industry, in which vehicle sales for 2013 could reach 15.5 million, the highest in six years. 

Automotive plants today are operating at about 95 percent of capacity, with many running three shifts. As a result, companies are adding floor space and spending millions on new equipment. 

“We’re really bumping up against the edge,” said Michael Robinet, managing director of IHS Automotive in a recent interview with the Associated Press. “So it really is brick-and-mortar time.”

Just this past week, there have been such brick-and-mortar announcements. Nissan on Thursday said it would be adding 900 jobs to start making the Rogue crossover SUV at its Smyrna, Tenn., plant.

The new jobs are in addition to 800 positions added at the Smyrna plant last year, and will bring total employment at the suburban Nashville facility to more than 7,000. Rogue production is scheduled to begin this fall. 

Tennessee’s Megabet

When I was in Tennessee earlier this month, I learned more details about a nearly 4,000-acre megasite located between Memphis and Jackson, Tenn., off Interstate 40. The Memphis Regional Megasite, a certified site owned by the state, has been designed for a future automotive assembly plant, and that is what economic developers in the region are betting on. It could very well happen.

In a few weeks, I will be in Jackson, Tenn., which is about 100 miles from Toyota’s assembly plant in Blue Springs, Miss. (near Tupelo) and 150 miles from the Nissan plant in Symrna. With a rebounding automotive industry, I would expect some modest employment growth among Jackson’s nine automotive supplier companies. 

Big Announcements in Missouri

Also, this past this week, General Motors announced a $133 million expansion in Wentzville, Mo., about 40 miles west of St. Louis. It is the second expansion in less than two years at the facility, which employs about 2,000 people.

Construction will begin in July on a new 114,000-square-foot stamping press, which is expected to create or retain 55 jobs.

Earlier this year, Ford announced a third production shift for the Ford F-150 at its Claycomo plant, outside of Kansas City, adding another 900 new jobs. 

A couple of weeks ago, I was in Missouri, where I was an invited guest at “Lakeside with the Locators” and then subsequently spoke at the annual meeting of the Missouri Economic Development Council. It was there that I learned just how important the automotive industry was to the state. 

In fact, auto manufacturing contributes $2.6 billion to Missouri’s economy annually and represents its fourth-largest goods-producing sector. 

A Long Tradition in Northwest Ohio

Last week, I was in Northwest Ohio, which has historically been very much tied to the automotive industry and a manufacturing tradition. My host was the Toledo-based Regional Growth Partnership, an economic development representing 17 counties in Ohio, and with having close working ties to three counties in southern Michigan. 

Last year, the RGP worked 12 automotive related projects, representing capital investment of more than $74 million and resulting in more than 2,000 jobs created or retained. In the first quarter of 2013, the RGP has worked three projects, representing more than $40 million in capital expenditures, with more than 1,300 jobs created or retained.

RGP President Dean Monkse attributes the investment to the human resources of his region. 

“This ongoing investment in our regional automotive industry is a testament to an outstanding workforce that prides itself on continuous education and training,” he said. 

Judging from what I learned about Northwest Ohio, I think he is probably right.
 
The Toledo-built Jeep Wrangler set a sales record last year and is well on its way to a record in 2013. Parent company Chrysler is working to fill more than 1,000 new positions that will come to the Toledo assembly plant as it adds a second shift of production for the 2014 Jeep Cherokee.

As you can see, I have been doing a fair amount of traveling lately across this great country of ours. In the last three states where I have been – Tennessee, Missouri, and Ohio – the automotive industry plays a key role in those states’ economies. And the good news is that it is expanding. 

LMC Automotive, a forecasting firm, predicts sales will gradually reach 17 million in 2017. That would be almost equal to the boom years of the late 1990s and early 2000s. And hiring will no doubt follow. In 2005, before huge cuts began, more than 1.1 million people made motor vehicles and parts. Today, 798,000 do, according to the latest government statistics. 

The Center for Automotive Research predicts the industry to add 35,000 over the full year. Chrysler, GM and Ford, as well as Honda in Ohio and Alabama, and Mercedes-Benz in Alabama plan to add more than 13,000 people this year. And many of the Tier One and Tier Two suppliers will follow suit.

Reflecting on What Has Been

But sitting here at home in Plano, not 40 miles away from GM’s assembly plant in Arlington, Texas, I cannot help but reflect on the fact that it was not long ago when GM and Chrysler were in bankruptcy and facing the prospect of being dissolved. Federal intervention prevented that, and I think it was the right call, as not acting posed too many risks for too many people.

But there has been great cost to salvation, cost to this comeback. Thirty years ago, an auto worker made $40 an hour in today’s dollars, and paid zero for their health care. Today’s auto worker makes $17 an hour and must pay $200 a month for health care.

“So we have taken that manufacturing base and transferred it from the middle of the middle class to the working poor,” said Tim Leuliette, president and CEO of Visteon Corp., during the Detroit Regional Chamber’s Mackinac Policy Conference last month. 

“We have repotted the American manufacturing base to be globally competitive, but at a cost. We can’t attract some of the people we used to because the opportunity to make a good living is no longer there.”

Sobering words from Mr. Leuliette, a CEO with a tier one automotive supplier that has shrunk in the U.S. from three dozen plants down to four, from 12,000 employees to 1,200. Visteon now has 110 plants in China and is building more.

Yea, I think about these things. As a consultant, how can I not? I have to be constantly re-educating myself if I am to bring value to any client, be it a company looking for an optimal location for future operations or an economic development organization seeking to improve its competitive position.

But often the span of time illustrates truth. I think that is why I read history. I believe the history books yet to be written will tell us a lot. We have been through the fire, and yet somehow I have to think we are going to come out of this stronger and at least wiser. We can only hope that is so.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas — http://www.barberadvisors.com Telephone: 972-767-9518 Email: dbarber@barberadvisors.com

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. We will take you there. If your community needs to improve its business climate and competitive standing, we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

And They Will Prevail

RATTLESNAKE ISLAND, LAKE ERIE – Whether we like it or not, too often perception becomes reality. That’s just the way it is.

So to change reality, you work on perception. This is a marketing guidepost in selling just about anything from corn flakes to Cadillacs. If you are an economic development organization, your product is the state, region, county, city or town that you represent.

Naturally, most economic developers would want me and other site selection consultants to view their product with favor. When I was an economic developer, I was constantly thinking of ways to establish relationships and influence site selection consultants and corporate decision makers. But there were times when I felt akin to a used car salesman.

“I’m telling you, this building is a real creampuff. Just look at those dock doors and cranes. Pretty sweet, huh?”

So it was smart, really smart, when the economic developers essentially got out of the way to let the business people do the talking for Northwest Ohio. At that point, I felt I wasn’t so much being sold as being informed. And being informed always helps me overcome pre-conceived notions.

(Yes, it’s true. Even all-knowing “objective” site selection gurus can have their biases.)

From the Horse’s Mouth

So the Toledo-based Regional Growth Partnership, a regional group representing 17 counties, worked up an itinerary in which eight other consultants and me heard from the horse’s mouth so to speak. (We would later frequent a bar called Mr. Ed’s at Put-in-Bay, but we’ll touch on that later.)

We heard from executives from three Fortune 500 companies — Owens Corning; Owens Illinois, Marathon Petroleum Company – all of which have corporate headquarters in the region. We also heard from execs at First Solar Corporation; North Star Bluescope Steel Corporation; Sauder Woodworking and PRO-TEC.

From our Toledo-based companies, we learned that this was a small-town/big city with everything within a 20-minute drive. Inching along in congested traffic simply does not happen. But on a more telling note, we learned that Marathon Petroleum had an epiphany as a result of a devastating flood in 2007 in Findlay, 50 miles to the south of Toledo.

In the aftermath, the company could have chosen fight or flight. It chose to fight and remain a committed partner to the community. Bill Conlisk, manager of administrative sevices at the company, said the people made the difference.

“Bottom line, we are in Findlay because we like the workforce and the work ethic. The flood reaffirmed our faith in Northwest Ohio,” Conlisk said.

The Biggest Elephant

As a site selection consultant, I have learned that every community everywhere has a motivated workforce. I have also learned that from Maine to California, from Canada to Mexico, that everyone has a “central location.” The economic developers have told me so.

But when I hear major employers talk of a skilled workforce, of a loyal workforce, well, I am going to sit up and listen. I was also hearing, surprise, surprise, that they were operating non-union.

For me, it was the biggest elephant in the room — that union legacy of Toledo.  Yes, unions did at one time hold court here and could make life quite miserable for a company not willing to cooperate. And by cooperating, I meant companies where management was unwilling to essentially roll over and give the unions what they demanded.

But those times are gone. Today, most unions understand that they must cooperate with management if a company is to compete, much less survive. Even more galling for union leadership, many workers, especially younger workers, today are skeptical that unions provide any meaningful value at all.

Union influence has been on the wane for decades now in this country as union membership has dropped to a record low. In the private sector, it’s now down to 6.6 percent. And in the Toledo MSA, it’s at 6.9 percent.

The truth is that if a company pays a competitive wage and communicates with its workers, the chance of it getting a union today is quite remote. That’s just the way it is.

It’s true in Toledo and Northwest Ohio, and in neighboring Indiana and Michigan, states that have been historically the cornerstone to our nation’s industrial might. But the times, they are a changing.

Indiana stunned many observers in January 2012 by becoming the first Midwestern manufacturing bastion to become a right to work state. Even more shocking, Michigan, the virtual birthplace of industrial unions in the U.S., followed suit earlier this year.

More Perception than Reality

That now puts the onus on Ohio, which has privatized its state and regional economic initiatives under a Jobs Ohio banner, funded by liquor sales. Economic developers cannot help but look at their neighbors and wonder how many more looks they might get if only. For Northwest Ohio, that is especially true as the region borders both Michigan and Indiana.

For the record, I believe this right-to-work advantage is more perception than reality, but here again perception becomes a reality.  I will advise a corporate client that the advantages to a right-to-work state are rather miniscule.

Sometimes they listen and sometimes they do not. If they insist that the search area be limited to only right-to-work states, well, they are paying the freight.

For the uninitiated, in a right to work state, if a majority of those of working on a shop floor vote in favor of creating a union, you as an individual working there are not forced to join it. You can, essentially, opt out if you so choose.

Prediction: If Ohio Gov. John Kasich, who over-reached early in his first term back in 2011 and got his ears boxed when he tried to restrict collective bargaining rights of Ohio’s 350,000 public employees, gets a second term, he will push for right-to-work status.

Will it happen? I hope so, for no other reason than perception. In the end, this is a marketing ploy, to keep up with the neighbors pure and simple. The reality would probably be more looks by expanding companies.

No Palate for Unions

But if you take all the right to work stuff off the table, time and again I heard from manufacturers, courtesy of the RGP, that it was quite possible to operate non-union in Northwest Ohio. Heck, two steelmakers – North Star Bluescope Steel and PRO-TEC. – are doing it.

“If you treat people with respect, you get it back,” said Brian Vaughn, president of PRO-TEC, based in Leipsic. The company recently hired 80 workers for a new $400 million, state-of-the-art continuous annealing line for processed steel used primarily by the automotive industry.

Vaughn said workers at the plant are disinterested on the prospect of unionization.

“They certainly don’t seem to have a palate for it at all,” he said.

The same goes at North Star Bluescope Steel, a mini-mill in Delta, Ohio, turning out flat-roll products. 

“We are very beyond the issue of union and non-union,” said Rich Menzel, vice president of human resources at North Star. “We are at a point where our employees would never sign a card. We are thinking of being a world-class workforce.”

NorthStar has gone 4 ½ years without loss time due to an injury, and has a better attendance record than anyone in its industry.

“We believe we have the best possible workforce anywhere,” Menzel said.

On a site selection project, companies, particularly a manufacturers, will often have some general ideas on where they need to be based the location of customers and suppliers. My job is to hone the search down to those probably places where success can be optimized.

A Deep Bench

The human resources factor is critical. And if I am representing a manufacturer, I’m looking at communities where there has been a tradition of manufacturing, where there is a deep bench of talent and where there is a pipeline for future talent.

Just as most communities tout their workforce as being smart and motivated, they also point to their community colleges as the principle trainers for a future workforce.

The key, of course, is how linked in that community college really is to the needs of local industry. Are the educators and business people in fact talking and are they speaking the same language?

There are 22 community colleges in Ohio, four in the northwest region. I get the sense, and this would be something that I would want to further investigate, that these schools are in fact reaching out to local companies to meet their training needs.

Most of the liaisons and trainers at these community colleges have industry backgrounds and understand the language of manufacturing. They are not faculty-lounge types with no real-world experience.

“Academics bog things down,” said Jim Drewes, director of Custom Training Solutions at Northwest State Community College based in Archbold. “We are here to help.”

Satan’s Workshop

I wrote most of this blog while staying on Rattlesnake Island in Lake Erie, a beautiful if myth-shrouded place that served as a haunt for rum-runners during Prohibition. (They would smuggle the hooch down from Canada via boats.)

The place still retains this aura of secrecy and you can imagine that mobsters used it as a place to get away and relax. It’s the perfect spot to quietly reflect upon the gangland hit that you ordered or participated in.

I do know that the 85-acre very private Rattlesnake Island stands in stark contrast to another island, Put-In Bay, only a 20-minute boat ride away. Put-In Bay is the Key West of the Midwest, party down central, where rock and roll pulsates from the many nightclubs near a central park lining the marina.

At one point, we – the staff of the RGP and the consultants – having become consummate drinking buddies, ventured to a pool area behind Mr. Ed’s. As one of our more adroit hosts correctly put it, we were “at the epicenter of Satan’s workshop.” Shocked and appalled by the promiscuous behavior of the young people there, we only stayed a few hours, all the while contributing to Jobs Ohio funding.

Brave Words for a Brave People

Around these islands, emblazoned on flags and T-shirts, you will see the words, “Don’t Give Up the Ship.” Those same words were on the battle flag of the USS Niagara in 1813, when it was part of a nine-ship fleet that engaged six British warships. The 2 ½ hour battle would have been visible, at least initially, from Rattlesnake Island.

Ironically, American Commodore Oliver Hazard Perry had given up his ship, the USS Lawrence, which had become a hulking wreck as a result British gunfire. He transferred his surviving crew to the undamaged Niagara. The American fleet prevailed, which probably means that Toledo and Cleveland are not part of Canada today.

And while Ohio, with its manufacturing tradition, did take the full brunt of the Great Recession, it is clear that no one here gave up the ship. The fight continues for better jobs and a better future for future generations. And they will prevail.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

 

 

 

 

 

I Got Showed

One of the simple things that I enjoy in life is a drive out in the country. While I have become attuned to living in a large metro area, I have always been drawn to rural places.

This is where my gaze shifts to the lay of the land and I begin to marvel at the beauty of it all. Out in the country, my body seems to slow down and I find myself listening, smelling and seeing. I am calmed.

For a time when I was a boy, my family lived on the outskirts of Springfield, Mo. It was then and there where I became the great explorer. I was always traipsing through woods and fields and developed certain skills as a result. For example, I soon learned to recognize game trails where animals traveled.

Still, I could not have been all that observant. I remember walking head-on into a low-hanging hornet’s nest (the inhabitants got their revenge) and nearly stepping on a coiled rattlesnake. But I lived to survive and I soon knew that I wanted to be outside exploring with my trusty BB gun in hand in the mold of Lewis and Clark or Fremont.

Fifty years later, I still like to be outside and away from commercial glut, breathing better air and gazing on pastoral, rolling landscapes interspersed with woods. This past week, I traversed such ground in Missouri, and it only confirmed what I knew from my childhood, that this was and is a beautiful place.

Is that It?

“Pretty country” is how I described my first impressions to economic developers who gathered at a resort Lake of the Ozarks for an event billed as “Lakeside with the Locators.”  I’m sure they wanted something a little more in-depth from me, one of eight site selection consultants who were invited to attend the event.

At the very least, my audience wanted me to recognize that Missouri is a low-cost, pro-business place in comparison to much of the country and offering certain transportation amenities that are lacking elsewhere. And I believe that. I really do.

But I must have dashed their hopes by offering up that they lived in “pretty country.” I mean, come on, Dean, you’re not a tourist here.

Actually, that’s not all I said. During break-out sessions, I spoke about how I approached the site selection process and gave my views on trends in the automotive and food processing industry sectors.

I was also a co-speaker, with Chicago-based Sarah Raehl, of Deloitte Consulting, at the opening session of the Missouri Economic Development Council’s annual meeting. I think I told them that the robots were plotting our demise in this new digital machine age that we are entering. So I hope I provided some nugget of information that the economic developers could take home with them.

But I know that I kept looking out the window, wanting to be outside in that pretty country.

Cruising with Flat Harry

So they took me out on a boat at dusk. And it was a heck of boat, with I think three bedrooms, and three or four bathrooms. Out on the boat, I had good conversations with Chris Chung with the Missouri Partnership, who earlier in that morning explained the competitive advantages of Missouri.

Out on the boat, I stared at shorelines crammed with multi-million-dollar second homes, no doubt mostly from the well heeled of St. Louis and Kansas City.

But probably the biggest thing for me during the evening yacht cruise was meeting Flat Harry. I had my picture taken with him.  Wearing a Hawaiian shirt, red shorts, blue shoes and a yellow hat, the 33^rd president of the United States from Independence, Mo., was the life of the party. He didn’t say a word, almost unheard of for any politician, but there he was  – pasted on a six-inch stick, smiling and making us all feel  good.

If you want to see a picture of Flat Harry, posing with site selectors Minah Hall, of Chicago-based True Partners, and Tim Feemster, of Dallas-based Foremost Quality Logistics, and me, go to this link: https://www.facebook.com/flatharry123  Thank you, Jodi Krantz of Independence Economic Development, for introducing us to him.

Many thanks to the sponsors of Lakeside with the Locators — Cuba Development Group; Economic Development Center of St. Charles County; Missouri Partnership; Springfield Regional Economic Partnership and the St. Louis Regional Chamber. Kudos to Lori Becklenberg of the St. Louis Regional Chamber for her work in making the event a success.

My Stump Speeches

But my trip to Missouri would only get more interesting as I left Lake of the Ozarks to head 125 miles north into the four-county region as represented by the Moberly Area Economic Development Corporation. This was country for working people in the very heart of the nation. It smacked of Norman Rockwell, and as I would learn “the place to be.”

There I gave a series of three PowerPoint presentations to stakeholders within the region — one at breakfast in Booneville, one at lunch in Monroe City and one at a dinner in Moberly before the MAEDC board. My presentation was called “A Consultant’s View: How Communities Compete in a Site Selection Process.”

I think my talks were received reasonably well as not a single roll was hurled in my direction. Besides outlining some of the main factors considered during the site selection process, I emphasized how a regional approach to economic development served communities best. My message on that point was illustrated by a slide featuring a photograph of stacked boxes of boneless pork rectums. Well, I guess you had to be there.

I also hit home on the point that if a community or region should always engage in a program of business retention and expansion (BR&E), as most jobs are created by existing industry and not through the industry recruitment. Still, recruitment is important and if communities are to compete, they must have product, be that buildings and/or sites.

In Between Stuffings

In between my presentations and meal stuffings –folks in Missouri are hearty eaters and their roasted pork steaks are incredible — my hosts, MAEDC President Corey Mehaffy and David Gaines, vice president, spent an entire day showing me buildings and sites in Randolph, Cooper, Monroe and Howard counties.

Some of these available buildings and sites virtually fronted Interstate 70, the first interstate highway project in the United States. Whereas others were more isolated, a good deal more than 10 miles away from the interstate or U.S. 63, which served as a de facto interstate in the region as it was a divided, four-lane highway offering good trucking time running north into Iowa.

A few more words on I-70. This interstate, the fifth longest in the country, approximately traces the path of U.S. Route 40 (and also the old National Road) east of the Rocky Mountains, linking Baltimore to Denver. It ends or starts depending on your point of view in Utah. Sections of I-70 in Missouri claim to be the first interstate in the country.

The four-county region also is also served by three Class I railroads, Norfolk Southern, BNSF and UP, offering direct rail links to river ports on both the Missouri and Mississippi rivers. Both the St. Louis and Kansas City international airports are about a two-hour drive away.

Star Wars on the Highways

This is work country, where county commissioners are excused from meetings because they are “out in the fields.” I for one cannot think of a better reason to miss a meeting.

During my travels throughout these rural counties, I came up on farm equipment motoring along the highways that resembled something out of Star Wars. Even my hosts were perplexed by some of the strange machines that we encountered.

But it was also apparent that the Great Recession had left its mark, as there were places within the region where people were under pressure. The mayor of Monroe City lamented how much middle-class wealth in his community had evaporated over the years since he had been a boy growing up there. He told about how his town lost two major employers within months after first taking office. Talk about a trial by fire.

In Fayette, I saw a spec building, albeit built with low ceilings, that had never been occupied in its 17 or 18 years. In Paris, which had a beautiful historic courthouse, I learned of a population decline of 22 percent.

Still, I was encouraged and impressed when I learned from a city official that Paris was “the center of the universe.” I did not know this, but I do now.

Indeed, I was encouraged and impressed throughout my visit. Missouri is a hybrid. It’s on the doorstep of both the Midwest and the South, showing cultural aspects of both. Although I lived in Missouri only a short time, I believe that I reflect Missouri to the degree that I am also a hybrid, half Southern and half Midwestern.

Missouri is the Show-Me State and let me tell you, I got showed, from cruising on a boat with Flat Harry to shaking calloused hands that had come from the fields.

The night before I was to begin my community tour of the MAEDC’s region, I discovered that I had left the power cord to my laptop at home. David Gaines asked if he could take my laptop to see if he could get a chord for it.

I gave it to him thinking “lots of luck” but within an hour he was back at my door with laptop and cord in hand. That can-do spirit is alive and well in Missouri.

Did I tell you that it was pretty country?

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

 

 

 

 

 

 

 

Where the Four R’s Meet

When I first heard the words “location, location, location,” coming from a real estate broker, it was maybe 30 years ago and I thought, “Now how clever is that? He about sums it up.”

But that catchy phrase doesn’t sum it. The truth is that you may have the best strategic location for a given project, but if the pieces of the puzzle don’t come together, then you are not the right choice after all.

If a manufacturing client for example wants an existing 100,000-square-foot building with 32-footing ceilings and you don’t have anything close to it, then you are not in the running. Or let’s say we are looking for a 50-acre certified site where all the proper due diligence has been performed so that we can hit the ground running on a fast-track basis. If you don’t have it, we’re looking elsewhere.

Then again, you may have a great building or a site that fits the bill completely, but there is that one factor which you have no control over, which invariably gets you scratched. It’s a cruel world.

As a location investigator, which is what I ultimately am, I can tell you that the site selection process transcends location alone. So many factors are at work, which is why companies should not try this on their own. A mistake can be costly, even put a company in peril.

Last week, I wrote about how infrastructure was a basic building to commerce and an essential ingredient to site selection. I lamented how infrastructure in this country is getting old and rickety and how we need to invest in ourselves if we are to remain a competitive force.

A Place of the Four “R’s”

I just came from Memphis this past week. Here I found a lot of the basic building blocks in place – an air cargo hub ranked second in the world, five Class I railroads and three intermodal hubs, a convergence of highways, and a major port along the Mississippi River.

This is a place of four “r’s” —  runway, river, rail, and road.  Some professor somewhere, probably a fellow with a lot of time on his hands, called Memphis “America’s Aerotropolis.”

I do like the sound of that. I think I need to make me up some nifty words.

While I was in Memphis as the guest of the Greater Memphis Chamber this past week, I also found Graceland, the National Civil Rights Museum, and the Stax Records museum.

Yes, Memphis was fun and educational. I got my fill on blues, barbecue, baseball, Beale Street, Ghost River beer and was even regaled with tales of a bizarre barefooted provocateur by the name of Prince Mongo from the Planet Zambodia.

It seems he was a perennial mayoral candidate with his real estate parcels around town decorated with coffins, toilet bowls, mannequins, and beach umbrellas. He is now in Florida, causing a quite a ruckus down there from what I understand.

Move the Pipe

But I was more impressed with the real mayor, actually I should say mayors. AC Wharton is the mayor of Memphis, whereas Mark Luttrell is the mayor of Shelby County. I got to hear both of them speak, and they did a fine job. But I was taken more by Mayor Wharton’s deeds than his words. Here is the gist of the story as I remember it.

Mitsubishi Electric Power products will begin production next month in its newly constructed $200 million plant in Rivergate Industrial Park in Southwest Memphis.

The plant, which I had the opportunity to tour, will employ 300 people and it will be Mitsubishi’s first North American facility to manufacture the large power transformers that are sold to utility companies. Mitsubishi liked the site but there was a problem. A sewage pipe eight feet in diameter was buried 40 feet deep through the middle of the 100 acres.

If Memphis was to win the project, the city would have to spend $9 million to relocate the pipe. The decision rested with Mayor Wharton. His verdict: “Move the pipe.”

And the rest as they say is history. But the truth is that in many places in our great country, that pipe would not have been moved and those 300 jobs would have gone elsewhere, proving it’s not just location but sweat equity, too.

Controlled Chaos

They call it the Matrix and I think it rivals the movie in terms of confusion to the untrained eye. This is a place of controlled chaos. This is FedEx Corp.’s Memphis hub at midnight and for the next few hours, the Memphis International Airport is the busiest airport in the world. I was there. I saw it, and I was amazed.

The Hub covers 862.8 acres, contains 42 miles of conveyor belts and on an average night, the facility handles 150 airplanes and 1.5 million shipments. About 7,000 Memphians descend upon the Hub every night. Watching packages flow over a myriad of connecting conveyers is a jaw dropping experience.

I got back to the Peabody Hotel at 2:30 a.m. after my FedEx tour. I wondered if I might dream of being smothered in an avalanche of boxes and envelopes. Thankfully no such nightmare.

FedEx is Memphis’ largest private employer with 30,000 workers. The Hub pumps more than $27 billion a year into the area economy, helping support more than 200,000 jobs.

Medical Device Mecca

Medical device and other life science companies in particular have found that just a few hours advantage over the competition with deliveries can make a huge difference. With an extended business day via later pick-up times because of the FedEx Hub, Memphis, now the country’s second largest orthopedic device center, is home to major operations for Medtronic, Smith & Nephew, Wright Medical, Symmetry Medical, and NuVasive.

More than 70,000 Memphians are employed in the city’s broad-based collection of bioscience industries. Memphis biomedical device industry employment has grown 50 percent since 1999 – more than four times the national rate of growth. St. Jude Children’s Research Hospital, the University of Tennessee Health Science Center (UTHSC) and medical school, InMotion Musculoskeletal Institute, the Medical Education & Research Institute are among the major employers in the life sciences.

Tennessee’s Department of Economic and Community Development has identified medical device manufacturers as among the state’s most important exports, with U.S. Census data showing its $2.1 billion in 2012 ranks at the top of all state exports by dollar value.

Made in Memphis

During a luncheon, I listened to John Moore, president of the Greater Memphis Chamber,  tout a “Made in Memphis” report on the manufacturing sector showing that “miscellaneous” industries were the top category with 6,170 jobs, according to U.S. Bureau of Labor statistics.

“It means we are diversified,” he said.

U.S. Bureau of Labor Statistics figures show that there are 34,272 manufacturing jobs in the Memphis economy, led by paper manufacturing with 4,870 jobs followed by machinery, chemical, fabricated metal and food. Each of those four categories shows 3,412 to 3,843 jobs each.

The 2012 Made in Memphis report indicates that Memphis manufacturers will hire more than 4,000 employees through 2016 at an average annual pay of $32,180 with a direct wage impact of $128.7 million on the local economy.

“This trend diversifies the Memphis economy that has historically been dominated by logistics and distribution, healthcare and tourism,” according to the executive summary of the report. “The rapid growth presents an opportunity and a challenge to provide a skilled manufacturing workforce.”

Providing a skilled manufacturing workforce is an old tune now heard throughout much of this country. The report was quite pointed in its finding that, “Few employers reported working with educational institutions to recruit employees.”

While that is not good, it is sadly the norm in probably most places. Educators and manufacturers are two different tribes that often will not speak the same language.

Big Tracts in the Offing

But that doesn’t stop the economic developers from wanting to expand the real estate product that could be available to manufacturers. The Memphis-Shelby County Economic Development Growth Engine and the International Port of Memphis have plans to expand Presidents Island by 1,000 acres.

The city would look to leverage private investment at the 960-acre industrial park into what could be a $60 million project which would involve backfilling dirt into floodplain land and could be bordered by a planned Canadian National Railway rail line. At least that is the plan. Its fate now rest with the approval of a key federal grant.

Much farther along in reality is the 3,840 acre Memphis Regional Megasite, a property suitable for a major automotive manufacturing facility. The site, which is owned by state, is just north of Interstate 40 and 20 minutes east of the Memphis suburbs. It is adjacent to U.S. Highway 70/79 and the CSX Railroad on the north.

The Jackson Regional Partnership, an extension of the Jackson Chamber, is working with the Greater Memphis Chamber, Tennessee Department of Economic and Community Development, HTL Advantage, and Tennessee Valley Authority to market the site. The JRP is led by Kyle Spurgeon and a member advisory council from nine counties of Carroll, Chester, Crockett, Gibson, Hardeman, Haywood, Henderson, Madison and McNairy. 

Folks, this is how regionalism is supposed to work. It’s only a matter of time when something big happens here. Stay tuned.

I was one of a group of site selectors invited to Memphis this past week. We all learned so much, much more than from a website and had some fun to boot. A foundation for growth exists here, albeit Memphis has certain big city problems that most big cities will have. But the fundamentals are too strong for things not to happen here. You can’t ignore those four “r’s.”

I only wish I could name everyone who assisted me in gaining a better understanding of the Bluff City. If I started, I would certainly fail by leaving someone out.

But I do want to publicly thank “The Godfather.” Clifford Stockton, 80, was the first African-American managerial employee at the Memphis Chamber, hired on Jan. 20, 1969 in response to Dr. King’s assassination. He is a most modest man, but I sense that he was and continues to be a great healing agent for the city that he loves. 

Mr. Stockton, more than anyone else, has the institutional knowledge about Memphis and how it works. If I had a project where Memphis could be a possible fit, he would be the first man that I would want to talk to.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

Can We Cross that Bridge When We Come to It?

Infrastructure is the glue that connects our nation’s businesses, communities, and people. It is foundational to our economy and how we live our lives.

On a more micro level, infrastructure serves as a basic building block in the site selection process as it differentiates land from a site. It actually took me years to figure that out – that land does not equate to a site.

As a site selection consultant, I am not so much interested in raw land, as it poses too many risks for too many reasons. But a site where infrastructure exists in full or in part or a site where infrastructure is planned for with accompanying documentation with timelines and cost estimates, well that may just suit the bill for a corporate client. 

This is why there is the trend toward site certification, a service which I provide to economic development organizations. But enough on that. I am not here to sell you, at least not now. No, now I want to tell you a story.

What Agnes Taught Me

At the time, it was the costliest hurricane to hit the United States in recorded history. Hurricane Agnes was especially brutal on Pennsylvania, where floodwaters ravaged cities, towns and countryside.

The year was 1972 and I was 17 years old, that awkward stage on the cusp of becoming a man, but still very much a boy. I was living in Lebanon, Pa., and I can remember standing awestruck on the edge of fast-moving, churning brown floodwaters that had closed a highway on the outskirts of town. I walked through thigh-deep water in the downtown. It was quite the adventure.

But as a result of Agnes, I got my first job the following summer. It was a public works job, rebuilding curbs and sidewalks. I was now 18, and I got to wear a hard hat, work outside with my shirt off, and goggle at girls. I loved it.

By being armed with a shovel and part of a team, that job taught me things that I would carry with me later in life.  I learned there was an honor to work, even unskilled manual labor, and a certain freedom offered by having some money in my back pocket.

My job was to rebuild needed infrastructure that had been destroyed by the storm. Even then as a largely unfocused teenager, I sensed that I was working for the public good.

Today, 40 years later, I see the need for the building and the rebuilding of infrastructure as an essential public good. I truly believe it is key to keeping the United States a competitive world power.  We have to invest in ourselves.

Much Closer to Home

There is an old farmer’s saying that bears repeating: Good judgment comes from experience, and a lot of that comes from bad judgment.

It’s not London Bridge that is falling down. No, it’s much closer to home than that.

The collapse of the I-5 bridge over the Skagit River in Washington state, on the eve of the travel-heavy Memorial Day Weekend, was the latest sign of what’s ahead if we do not address our country’s deepening infrastructure deficit.  

The 58-year-old bridge had been listed as “functionally obsolete” in the 2012 National Bridge Inventory, meaning that it was no longer “functionally adequate for its task.”

In its 2013 Report Card for America’s Infrastructure, the American Society of Civil Engineers estimated that one-quarter of the 607,380 bridges nationwide were functionally obsolete or structurally deficient in 2012. It means it’s just a matter of time before another bridge comes falling down.

In its report card, the Society of Civil Engineers delivered grades of C+ for the nation’s bridges and D for its roads, and estimated that $846 billion will be needed to bring surface transportation up to a B grade by 2020.

This should not be a big surprise to anyone. Shelves of legislative reports and independent studies have confirmed that the highway infrastructure gap is becoming more serious by the year, and that state and federal gas tax revenues have not been able to keep up with the need to operate, maintain, repair and rebuild our roads.

Failure is Not an Option

Well, let me restate that, failure should not be an option. Just two days before the Skagit River collapse, Tony Puntin, the Society of Civil Engineers’ president-elect nominee, calculated the costs that will incur the U.S. by 2020 if we do not act and close the infrastructure gap.

These are jaw-dropping numbers, folks:  $3.1 trillion in gross domestic product; $1.1 trillion in trade; $3,100 per year in personal disposable income per household due to rolling blackouts, lost travel time and higher vehicle maintenance costs; and 3.5 million jobs.

Highway congestion costs American commuters $121 billion in lost time and 2.9 billion gallons of wasted fuel in 2011, according to a recent study by the Texas A&M Transportation Institute. That translates to $818 per U.S. commuter. Of that total, about $27 billion worth was wasted time and diesel fuel from trucks moving goods on the system.

The truth is that congested, aging, or inadequate infrastructure represents a major barrier to growth.

President Obama has called for spending $50 billion to pay for bridge and road construction, as well as setting up a national infrastructure bank. It’s an idea that’s gained little traction so far in Congress.

Rep. Janice Hahn (D-Calif.), a member of the House Transportation and Infrastructure Committee and a supporter of a national infrastructure bank, wants Congress to hold a hearing on bridge safety.

“At a time where our economy is still recovering and the unemployment rate in the communities that I represent is higher than the national average, infrastructure investment means much needed, good paying construction jobs,” she said in a prepared statement last month before the bridge collapse. 

I think the Congresswoman is right. Not only do we need to address real problems of deteriorating infrastructure, but we can put people back to work in the process. In short, we need to be serious about job creation and building the country back up. We can do this. We have done this before.

A Closer Look at Unemployment

The economy appears to be improving somewhat as the unemployment rate has fallen to a four-year low of 7.5 percent, down from 10 percent in October 2009.

But keep in mind that much of the decrease is because many people have given up looking for work. The government counts people as unemployed only if they are actively searching for a job.

There are about 6.7 million people have stopped looking for work since late 2007, says Heidi Shierholz, an economist with the Economic Policy Institute. These are not people who are collecting unemployment insurance. Rather, they have — at least, temporarily— exited the workforce. In March, the jobs report showed that 496,000 had essentially dropped out.

In addition to the discouraged who have quit looking, there still are nearly 8 million people in the U.S. who want a better job (the underemployed), while more than 11.5 million remain unemployed.

We can put millions back to work only if we act. The US Department of Transportation estimates that each $1 billion of transportation investment creates and supports over 47,000 jobs.

Out with the Old and in with the New

The problem is the old model of relying on some combination of tax increases, additional debt, and help from Washington has fallen victim to fiscal and political challenges. We are living in the days of austerity and sequestration, so any plan to increase infrastructure spending immediately becomes a political football.

As a result of these political issues, spending on infrastructure as a percentage of GDP has continued to drop since 2008. For their part, voters are dubious about funding infrastructure spending through tax hikes. That is the simple reality.

“Europe currently invests 5 percent of GDP on transportation infrastructure, while China is investing 9 percent. In the U.S., we’re stuck at 2.4 percent and begrudging every dollar. It won’t be long before the economic consequences from this investment gap start piling up,” wrote Jonathan Tisch, co-chairman of Loews Corp.

Borrowing from Silicon Valley, one idea is the civic crowdfunding.  The basic premise is simple: using sites that look much like Kickstarter, individual investors would pool their money together to build important new infrastructure projects, and in return, would receive some kind of perks in recognition for their civic virtue.

Tisch proposes public-private partnerships as an answer. He cites a study indicating $250 billion in private capital is available for infrastructure investments and that 50 pension funds with $38 billion in available funds have expressed interest in investing in infrastructure. That is a fraction of the estimated $3.6 trillion required to fix America’s massive infrastructure, but it is a start.

Of course, it wouldn’t hurt if we had a president who actually pushed hard for change instead of just talking about change. It would be most helpful if we had a Congress that could deliver a bipartisan infrastructure investment bill, in which ideology would take a back seat to pragmatic solutions.

However this gets done, either old model, new model or a combination of the two, we must lean forward to replace the smell of decay with the smell of construction. The nation’s surface transportation systems, wastewater treatment facilities, waterways, and airports are all in need of repair and updates.

The National Surface Transportation Policy and Revenue Study Commission concluded in 2009: “We need to invest at least $225 billion annually from all sources for the next 50 years to upgrade our existing system to a state of good repair and create a more advanced surface transportation system to sustain and ensure strong economic growth for our families. We are spending less than 40 percent of this amount today.”

When it comes to infrastructure, it’s no longer a case of we’ll cross that bridge when we come to it. That bridge might not be there.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or at dbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.