If I were to simplify the process of corporate site selection, which is far from being simple, I would boil it down to four main areas of subject matter to be investigated and documented.
One is human resources. We will decipher both quantity and quality of an available workforce and the attendant costs at any given location. I always liked the term “human resources” – even if it does sound a bit sterile — because people truly are a resource for any company.
The second is infrastructure. We’re essentially looking to see if the basic building blocks are in place (or can be in place) – whether it be roads, utilities, schools, and other physical assets – in a community for a company to have long-term sustainable operations there.
Real estate would be number three. It almost always comes down to whether a building or a site can work or be made to work. The real estate component is often hand in glove with infrastructure.
Finally, I would label my fourth silo of information with the ubiquitous term “other,” which admittedly is a vague cop out. Here we are examining other factors that can have substantial impact on future operating costs and therefore could very well play a determining role in where a project finally lands.
We’re talking about things such as energy costs, taxes, quality of life, logistics, business climate, a lot of different stuff.
During the 3 ½ years that I have been writing this blog, which is designed for both a corporate and an economic development audience, I’ve touched on many of these cost factors and how they may figure into the decision making process.
(Later in this blog entry, we’ll expound on infrastructure – the state of roads and bridges in rural America — and human resources with the latest strategic moves by the United Auto Workers.)
While every project is different, because the needs of companies are frequently different, there remains a commonality to the type of information we seek and steps taken in a process designed to eliminate locations and thereby let the proverbial cream rise to the top.
So to recap, human resources, infrastructure, real estate and my not so telling “other” are things that I am slicing and dicing with the help of some trusted specialists. And that holds true not only for a corporate client on a site search but also for an economic development client on a strategic plan.
Deficient or Obsoletes
Even the most unskilled eye among us can recognize obsolete or aged infrastructure. We have all driven on roads that are either in a state of disrepair or just woefully inadequate for the volume of traffic on them.
I know I have driven across more than a few bridges in my time, especially in rural settings, where I gave a sigh of relief once I got to the other side.
This past week, the national transportation research group TRIP released a report that found that 55 percent of the nation’s rural roads were rated poor, mediocre or just fair. And 23 percent of rural bridges were either structurally deficient or functionally obsolete. The group also reported that the rural road fatality rate is three times higher than all other roads.
“The development of rural America — the primary and rapidly increasing source of the nation’s energy, food and fiber — is being hindered by a transportation system that has significant road and bridge deterioration,” says Rocky Moretti, TRIP’s director of policy and research.
Roads to Market
In Texas, where I live, there are Farm to Market Roads and Ranch to Market Roads, which are designed to transport product from agricultural areas to towns and cities. They are abbreviated “FM” and “RM” on signs.
But when you think about it, virtually all roads, in both urban and rural settings alike, are roads to market, as they are connecting you to an aspect of commerce – whether it is your commute to work or the places where you shop.
And because many products remain agriculturally based in origin, particularly our food and energy, it is important that we have a robust and well-maintained road system in rural America. I happen to believe this is the one of the better ways for rural communities to compete for corporate capital investment projects and essentially make themselves less isolated.
In short, if you going to move product from a rural setting, and absent a practical rail option, let it be on improved roads where a truck can make good time in bringing goods to market. A first-class road system also ensures that our nation can better compete on a global scale.
“Employers understand all too well that when rural roads crumble, bridges deteriorate and safety declines, virtually every aspect of the American economy suffers,” said Stephen E. Sandherr, the chief executive officer of the Associated General Contractors of America. “The best way to boost our economy, support private sector growth and cut unemployment is to pass a new surface transportation bill.”
The TRIP report, “Rural Connections: Challenges and Opportunities in America’s Heartland”, stated that the highway fatality rate on the nation’s rural roads was 2.31 deaths for every 100 million vehicle miles of travel, three times the fatality rate on all other roads.
The study ranked states based on their rural fatality rates, rural road conditions and the state of their rural bridges. Not surprising, the states ranked as having the worst rural roads experience tougher winters. When water freezes and thaws, it plays hells on road surfaces.
The TRIP report illustrated “that the U.S. must continue to invest in transportation infrastructure to ensure that whether people live in rural, suburban or urban areas they have access to economic opportunities and a high quality of life,” said Bud Wright, executive director of the American Association of State Highway and Transportation Officials.
My own personal experience is that I have been on many a potential development site that was served by poor roads in need of upgrading as well as other inadequate infrastructure. Absent an approved plan of improvement with timelines, we usually will pass on such sites as the risks simply outweigh the benefits.
The Old Tennessee Two-Step
Back in February, the United Auto Workers suffered a bitter setback to organize its first foreign-owned plant in the South when workers at the Volkswagen plant in Chattanooga rejected UAW representation by a 712-626 vote.
I proclaimed afterward in a blog that the union was effectively dead. Little did I know or suspect that the union and the company might set out to do the old Tennessee two-step with one another.
So last week, in what can only be described as an unorthodox move, the UAW said it had reached a “consensus” with VW management by which the company will recognize the union if it signs up enough workers at a newly created local. What “enough” is, I’m not quite sure at this point.
But by creating UAW Local 42, the union hopes to avoid the need for another election and the accompanying “third-party interference,” which it blames for losing the earlier vote. The UAW is saying that no employee will be required to join the local and that no dues will be collected until after a collective bargaining agreement is reached.
“We have a consensus,” Gary Casteel, the UAW’s secretary-treasurer, told the Associated Press. “This is not something the UAW is doing unilaterally. It’s been thoroughly discussed with VW over an extended period of time.”
Volkswagen wants a German-style works council at the plant to represent both salaried and blue-collar workers, but the company’s has said it can’t do so without the involvement of a union.
BREAKING NEWS: VW announced Monday that it will assemble a new family-hauling crossover at its Chattanooga plant and invest $900 million to expand the factory in a push to double U.S. sales of VW-brand vehicles by 2018. The company will add about 2,000 jobs.
What is going to be interesting to watch is whether the Republican-controlled state Legislature, which is heavily anti-union, will approve a $300 million incentives package for the plant expansion. There are those hotheads who are opposed to the awarding of incentives precisely because of the VW/UAW relationship
“VW ignored workers’ decision to reject the union, inviting the UAW in anyway,” Justin Owen, CEO of the Beacon Center of Tennessee, told the AP. “It doesn’t deserve a penny of our money.”
Leave it to say, this is an evolving story worth watching.
Also Watch Cleveland
Even before LeBron James announced his return to Cleveland on Friday, residents there have been seeing signs of a substantial recovery, with billions of dollars are being plowed into new hotels, a casino, a convention center and a riverside promenade in the revitalized downtown district.
Tourism is up, with 16.2 million out-of-towners having visited the city last year and more expected for 2014. And also last week, the Republican National Committee picked the city to host its 2016 convention. No doubt about it, good things are happening in Cleveland, and LeBron coming home will only help create more optimism.
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 based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.
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