With Eyes Wide Open

The reason why I came to the U.S. Virgin Islands, indeed, the reason why I was invited is because I am one of the searchers.

My job in essence is to search for the truth in regard to a place or places and determine if it may be a good fit for a company. Some folks assign me an inordinate amount of power by calling me a site selector.

But I am far from that. Ultimately, it is the company, not me, that chooses a location from which to operate. And while I may give counsel, it is by no means a given that it will be taken.

Still, I believe my breadth of experience as a location investigator lends itself to saving a company time and money in terms of finding that special place for future operations. Without going into a treatise on how I go about the site selection process, I will say that determining a company’s needs and wants, the pre-phase stage, is critical to everything that follows.

Leave it to say that I am engaged in a winnowing process that involves twists and turns and almost invariably some surprises. Indeed, there are few places where I have set foot where I have not been surprised by something.

With the search, comes surprises, some good and some not so good.

Maybe my biggest surprise was simply being invited in the first place. When contacted by Developers Counsellors International about a familiarization tour of St. Thomas and St. Croix, I remember saying to another consultant, who was also invited, “What in the hell are we going to see there besides beaches and T-shirt shops?”

In short, I never expected to see or learn about any business ventures beyond that of tourism.

My eyes were opened on my first night on St. Thomas, and not simply because I was handed a local rum drink that only added to my natural state of being confused. The Cruzan Confusion, made from a mixture of Cruzan rums produced on neighboring St. Croix, was not so much a surprise as a confirmation that I should be very careful around such spirits.

The real surprise, at least the one I can remember, would come later that night when I found myself in a bar in Red Hook on St. Thomas talking to the owner of a software development company. He was absolutely convinced that this was truly the best place for him and his employees. I certainly wasn’t about to tell him he was wrong.

The next morning, I heard more testimonials from CEOs who said the Virgin Islands were far more than just sun and fun, but represented a place where a business, unrelated to tourism, could actually prosper.

Shaun Miller, founder of Massachusetts-based United Electronic Industries or UEI, moved his company’s ISO 9000-certified manufacturing operations to the Virgin Islands in 2012. UEI products are used primarily for data acquisition and industrial control in industries including the automotive and aerospace testing.

“We make 180 different products here in St. Thomas for the industries we serve worldwide,” Miller said. Companies served include Boeing, Sikorsky, Whirlpool, Raytheon and BAE Systems.

Because many of products made have military applications, Miller said there is a demand that components be made within the U.S., to which the Virgin Islands (not the nearby British Virgin Islands) fills that bill as a U.S. territory.

And now for your history lesson of the day. The U.S. purchased the U.S. Virgin Islands for $25 million from the Danish government in order to establish a naval base whose purpose was to prevent German expansion in the Western Hemisphere. The year was 1917.

With the U.S. flag flying over the islands, also come advantages of being in the U.S. eastern time zone, no currency exchange and an English-speaking workforce that is “very loyal and hard working,” Miller said.

“Once you’ve got them, you’ve got them for life, and they go the extra mile,” Miller said. “We have a phenomenal group of people here who make a fantastic team.”

But there are idiosyncrasies to doing business on the islands.

“Don’t expect to come in with guns blazing,” Miller said. “Listen, learn and you will be successful.”

Shipping costs can be costly, so Miller recommends that any manufacturer looking at the Virgin Islands as a prospective location should do so only if it is making small-sized, high-value products.

From Miller and a host of other business people, I learned that probably the biggest drawback of doing business in the Virgin Islands pertains to the cost of energy. On St. Thomas, the cost per kilowatt hour is astoundingly high at more than 50 cent. Now that goes into the not-so-pleasant surprise category.

The good news is that the cost of power is about half that at privately-owned St. Croix Renaissance Park, which has retained the right to generate its own power, stemming from its former days as a manufacturing facility operated by Alcoa from 1962 to 2000. And real estate costs are also considerably lower on St. Croix.

But to counter the high energy costs, the U.S. Virgin Islands has come up a series of very attractive tax exemptions that had me thinking “tax haven” or “tax shelter”, although that’s not quite right.

The reason: these tax incentives have been authorized by Congress. This is not Belize or the Cayman Islands. While incentives are not automatic and must granted through an approval process, if you play nice and meet certain requirements of with the Virgin Islands Economic Development Authority, chances are you will be treated well. Here is rundown of what you might get:

• 90 percent reduction in corporate income tax
• 90 percent reduction in personal income tax
• Reduction in the customs duty from the standard 6 percent to 1 percent.
• 100 percent exemption on excise tax payments
• 100 percent exemption on business property tax
• 100 percent exemption on gross receipt tax

Add to those tax advantages that you are working with U.S. currency, have American courts and flag protection, duty free exporting of USVI-made goods to the mainland U.S., and can sport the good old “Made in the USA” label, and you might just have yourself a business model by which to work from.

Space in this blog does not allow me to tell you all the good things that are happening at the University of the Virgin Islands, but President David Hall is a visionary leader who understand the school’s role in grooming talent for business and quality of life. A new medical school that will start in 2015 is a testament to that commitment of excellence.

I never made it over to St. John, which is the least developed of the three islands, because two-thirds of it is a national park. After spending a day and half in St. Thomas, I made it over to St. Croix, the largest of the three islands, being 28 by 7 miles.

St. Croix is flatter, less congested and more laid back than St. Thomas, which if it has a straight road, I never found it. And while St. Thomas dominates in terms of commerce, the potential for business growth on St. Croix looms, with its lower utility costs and the availability of more developable land for industrial use.

St. Croix not only lost Alcoa, but another bombshell went off on Jan. 18, 2012 with the announced closing of HOVENSA, one of the world’s largest oil refineries.

HOVENSA was a joint venture owned and operated by U.S.-based Hess Corporation, and Petroleos de Venezuela, SA (PDVSA), the national oil company of Venezuela. The refinery employed the refinery employed 1,200 residents and 950 contractors.

A common refrain once heard from women to would-be suitors may not be heard much these days on St. Croix – “I don’t need you. I got me a Hess man.”

If there is a silver lining to the HOVENSA shutdown, there may be a buyer in the works. Please understand that I have no insider information. But I hear that talks may be taking place. If I had to guess, I wouldn’t doubt if the buyer is Chinese. But again that’s just a guess, based on China’s buying binge of natural resources and energy assets.

As I earlier mentioned, all places offer surprises, even to someone who has been around. I’ve seen things in my time, but I am always delighted and somewhat surprised when I come across genuine hospitality and good will.

Having said that, the staff of the Virgin Islands Economic Development Authority are consummate professionals that are willing to go the extra mile. They are fine folks, committed to what they do, and I only wish I could thank them all by name. But if I tried, I would leave somebody out, which would not be fair.

As a former economic developer, I know and can appreciate that they are trying to sell their place as a viable place for business. That’s part of the job, and they did that as I left the islands with eyes wide open.

But they are also searchers – trying to determine the truth in ways that could actually transform their home into a better place. This thing called economic development can really touch lives, and I wish them the best.

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.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.

One Win Begats Another

Setting the tone for a corporate culture starts at the top. It is the top boss, the CEO, that forges what can be a tradition of success.

In sports, legendary football coaches Bear Bryant in Alabama; Vince Lombardi in Green Bay, and Chuck Noll in Pittsburgh created winning traditions by showing, teaching and insisting on how to win. One win begats another, which begats another until a tradition is born.

I think a culture of excellence, a winning tradition, can hold true in business and even government. In last week’s blog, I lauded the efforts of Michigan Gov. Rick Snyder, a former venture capitalist, in turning around that state’s business climate. It’s been a rather dramatic comeback story.

South Carolina has long had a better business climate. But that does not necessarily translate into meaning that all its past governors have been champions of economic development.

Some, for example, preferred a nice hike on the Appalachian Trail.

Call Me

Current Gov. Nikki Haley, by all accounts I’ve heard, is very much a hands-on economic development governor, which is why I gave her an honorable mention in last week’s blog.

She dutifully makes the telephone calls to company CEOs, and if and when they do come to visit the state, she is well briefed and prepared when she meets with them, often providing her personal cell phone with assurances that she is there to help.

“My governor writes her cell phone number down and says something to the effect. ‘I’ll work for you. Call me for anything you need,’ ‘’ said state Commerce Secretary Bobby Hitt.

“CEOs want to meet with the CEO. They want to look them in the eye and take a measure of them and know that if they come to this state there is someone there who cares about their business and that’s why they come.”

Points on the Board

And they have been coming. Since Gov. Haley took office in 2011, 371 projects have been announced, which include both new businesses and expansion of existing businesses. About 380 projects are listed as active.

Since 2011, about $12.5 billion in new investment has been announced in the Palmetto state, with 77 percent in manufacturing and 37 percent have been of international origin, according to the state commerce department. (With Japan, China and Germany leading the way in the past year.)

About 49,000 new jobs have been announced in association with those projects, of which 25,000 have been in manufacturing.

Like her counterpart in Michigan, Gov. Haley is campaigning for re-election on a platform of job growth. Not surprisingly, her challengers are contending that the announced numbers are inflated and not representative of what has truly happened on the ground.

Well to some degree that happens everywhere. I have worked a number of projects in which the announced job numbers and capital investment dollars never came to full fruition. And that’s because we live in a market economy and things change.

I have also worked projects in which jobs and capital investment came to exceed the initial expectations of both the company and the state. Like I said, stuff happens.

Project Managers Hear from the Top

When the governor does get a call from a CEO, Hitt said she will often subsequently telephone the project manager that has been working with the company to pass along any additional intel that she may have picked up, as well as offer guidance on what should be done to win the project.

“Now maybe half of our project managers are under 30. So I have a governor calling a 20 something and saying, ‘I just got off the phone with Dean Barber with Barber Manufacturing, and he tells me that he is happy with X, Y, and Z, but that he is have a problem with this. We need to see what we can do.’”

(Barber Manufacturing soon will be coming out with a new line of multi-colored nasal strips for horses, cows, goats, sheep, and llamas to complement our existing livestock earmuff line. Stay tuned.)

The typical breakdown of corporate dollars invested in the state is 70 percent expansion/30 percent new, Hitt said. Lately the numbers have been trending differently.

“We’re still getting all the expansions that we should have been getting, but 45 percent of our book now are new companies bringing new money, setting up new operations in South Carolina and that is cool,” Hitt said.

BMW, Michelin, Continental Tire and Boeing have all invested billions in factories in the state, making South Carolina a true manufacturing hotspot.

“We have gotten to the point where some trade publications are now referring to South Carolina as ‘the beast of the Southeast’ due to its economic development success. I like that,” Hitt said.

Still, the gross domestic product (GDP) increased in South Carolina by only 1.2 percent in 2013, well below the national rate of 1.8 percent. TD Bank predicts 1.6 percent GDP growth for South Carolina this year. Not bad numbers, but not beastly either.

The Upstate Rocks

I was in South Carolina last week as the guest of the Upstate Alliance, a public-private marketing organization. It is one of eight regional economic development organizations in the state and is based in Greenville, which sits midway between Atlanta and Charlotte off Interstate 85. I arrived via a direct flight from Dallas to the Greenville-Spartanburg International Airport.

I was there on a “fam tour’ with six other site selection consultants to learn more about the 10-county Upstate region, with a population of 1.4 million.

During my one day of exploring, I went to Greenwood and Abbeville counties. Greenwood surprised me with its Greenwood Genetic Center, a nonprofit organization advancing the field of medical genetics and caring for families impacted by genetic disease and birth defects.

Clemson University plans to build a facility next to the center’s JC Self Research Institute to provide increased collaboration among GGC and Clemson scientists in areas such as autism and oncology.

FDI Rules Here

On Oct. 7th, 1988, Fujifilm held its first of what would become many ground-breaking ceremonies in Greenwood. The company has since invested about $1.8 billion on a 500-acre complex which includes 2.5 million square feet of manufacturing space. Fuji produces recyclable cameras, inkjet photographic paper, color photographic paper, and digital printing plates in Greenwood.

Fuji is a prime example of how and why the Upstate has become a cradle for foreign direct investment. About 375 foreign companies have business operations here, representing 31 countries.

Among them is BMW, which announced a $1 billion investment in Spartanburg plant earlier this year, increasing capacity by 50 percent and making it the German carmaker’s largest factory in the world with 8,800 employees by 2017.

BMW was instrumental in the development of an inland port just off I-85 in Greer, connected via Norfolk Southern rail 212 miles “deep” from the Port of Charleston. It opened in October 2013.

Tire Capital of the U.S.

Since 1973, Michelin has invested more than $5 billion in various facilities in the Upstate. The French company has announced investments of $1.15 billion in the past two years and currently employs more than 8,000 employees in the state. (Bridgestone and Continental also produce tires in South Carolina, making it the tire-making capital of the U.S.)

In 2014, A Brookings Institution found that among the largest 100 metropolitan areas, Greenville ranks 23rd for share of jobs in foreign-owned enterprises (FOEs) at 6.1 percent. The report also found that among 366 metropolitan areas:

• Spartanburg ranks third for share of jobs in FOEs, at 18.0 percent.
• Anderson ranks seventh for share of jobs in FOEs, at 13.4 percent.
• Greenville ranks 67th for share of jobs in FOEs, at 6.1 percent.

Over the last seven years, the Upstate has seen $13 billion in capital investment and 38,000 new jobs. About $3.7 billion in capital investment and 4,000 new jobs have been announced so far this year.

ReadySC is a recruit, hire and training program offered by the state to companies. It includes an apprenticeship program in manufacturing that I will probably focus on in future blogs. Leave to it say, I liked it.

Indeed, there is a lot I like about South Carolina and particularly the Upstate, which I am more familiar with. The winning of new capital projects has become a tradition there, where one win begats another.

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.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.

A Comeback Story

People love stories. I love stories and sometimes will frequently tell them in order to make a point.

I am by no means an accomplished storyteller, as I can recognize squirming body language and the pained expression of someone trying to be polite. Still, I will inflict a story upon others in the belief that it may touch them in some way for the better.

In helping companies find that best and most efficient place from which to operate, I am hugely dependent on data, most of it unsurprising and mundane. At those times, when pouring over columns of numbers, I am engaged in abstract or analytical thinking in order to make any sense of it. And to stay awake.

How About a Little Exceptional?

Narrative thinking, encapsulated in storytelling, is a different animal. It is ideally suited to the exceptional, which is what I would think that any economic developer would want to convey about his or her community.

Pull up a chair, Mr. Dean Barber, and let me tell you why Skunkfoot is so very special. As I see myself a participant in a largely incomprehensible cosmic play with its own conflicts, characters, beginning, middle, and end, chances are I am going to take the time to listen.

Even if it is not a particularly good story, I will most likely get something from it. But if it’s a great story, well, you might just have me hooked.

Jesus, Abraham Lincoln, and Mark Twain were all great storytellers. Their stories thrived on conflict and disruptions from the ordinary. And so they were irreverent and poked fun and criticized the way things were but also shed light on the way things could be. I would advise you read them.

But Now I See

This past week, I was in Ann Arbor, Mich., and the surrounding region. Like all places, I needed data, by which I could flip on the analytical switch and make deductions. But I also wanted to hear stories, because that would give me further meaning of the place.

The big story, the over-riding story of Michigan, and not just of the Ann Arbor region, is one of comeback. And everybody loves a comeback or a turnaround story as it plays to the dramatic narrative. As the old hymn reminded us, “I once was lost, but now I’m found. Was blind but now I see.”

Said Doug Rothwell, president and CEO of Business Leaders for Michigan: “There’s really been a big, big change recently.”

I credit much of the positive change to Gov. Rick Snyder, who just might be my favorite economic development governor now. I like the efforts put forth by Nikki Haley in South Carolina, Rick Scott in Florida and Dennis Daugaard in South Dakota, who comes across as almost weirdly humble. Bobby Jindal in Louisiana and Rick Perry in Texas also seem quite keen on economic development in their respective states.

Snyder’s Way

But Snyder, a former venture capitalist and chairman of Gateway Computer, has been the principal architect of a wholesale recovery plan the likes of which I don’t think I have ever seen before.

Since taking office in January 2011, about 300,000 new private sector jobs have been created under Snyder’s watch and the unemployment rate has been nearly halved from 13.6 percent to 7.4 percent.

The Tax Foundation, a Washington D.C.-based think tank, ranked Michigan’s corporate tax climate ninth most favorable in the country for 2014. The state was ranked 48th in 2011, before the Michigan Business Tax, an unpopular value-added tax, was repealed soon after Snyder took office.

Michigan now ranks sixth nationwide for the best entrepreneurial climate, up from 41st in 2007 and 2008, according to MiQuest, a Lansing-based nonprofit.

The state had 103 active venture-backed firms in 2014, up 66 percent in the last five years, according to a report released earlier this year by the Michigan Venture Capital Association.

Under Snyder’s watch, an unemployment trust fund that had a deficit of $3.9 billion now has a $1.5 billion surplus.

A Tectonic Shift

But in terms of grabbing headlines and creating the most chatter, Michigan becoming a right-to-work state is something akin to a tectonic shift. I know that it fascinated me and that I wrote plenty about it, because it happened in the very cradle of organized labor.

Snyder maintains the right-to-work issue wasn’t on his agenda until unions backed a voter proposal to place collective bargaining rights in the state constitution — a move he said would have been disastrous for the state’s already tarnished business climate.

“I didn’t go looking for this one, but when it’s put on the table, I don’t back away from a tough issue,” Snyder said.

And that seems to be the gist of why the business community supports him and hopes to stay the course with a second Snyder term. (But it is by no means a certainty, as polls indicate a tight race with Democratic challenger Mark Schauer.)

Snyder cultivates an image of being “one tough nerd” who is bi-partisan in his efforts to fix things that need fixing.

Business Backing

“For a while we were headed in the wrong way,” said Mark Alyea, president emeritus, Alro Steel Corporation. “That’s no longer true.”

Kurt Darrow, chairman, president and CEO of La-Z-Boy, which has been based in Michigan 89 years and recently moved into a new headquarters building in Monroe, said most business leaders are committed to Snyder’s reform agenda.

“We’re tired of being beat down and like the time when we were a top ten state,” Darrow said. “We’re going to do all we can get him re-elected because the alternative would be a big step backwards.”

Stephanie Hickman Boyse, CEO of Brazeway Inc., based in Adrian, said there has been “a complete change in culture with the workforce in Michigan” and yet the state retains a much deeper bench of skilled labor than in other states where it operates.

“The skill base is here. You can hire great engineers and great IT people, but we also have found higher skilled non-degreed people here in Michigan,” said Ms. Boyse, whose company manufactures HVAC, automotive, and refrigeration aluminum products.

“We cannot fill those jobs in Kentucky, Indiana, and Mexico like we can here. And that’s been an epiphany for our company.”

Like her fellow CEO members of Business Leaders for Michigan, she credits Snyder for much of the turnaround of the state’s fortunes.

“He’s a very down-to-earth, get-it-done kind of governor. His approach is ‘how quickly can we get this done?’ and ‘what is the right thing to do?’ He works with people to get a collaborative resolution in solving problems in a very nonpolitical manner. Rick has gotten people excited about the state of Michigan again.”

During my few days in Michigan last week, I came away with my own story based on hearing stories from others. I know this place now is a far bigger than Detroit alone, where a very positive story is playing out.

And while much of Michigan’s economy is tied to automotive manufacturing, there is a much wider diversity of companies making and doing other things. Michigan is the home of such prominent names as Whirlpool, Steelcase, Domino’s Pizza, Stryker Corp., Dow Chemical, Quicken Loans, and La-Z-Boy. And Google has initiated a growing tech cluster in downtown Ann Arbor.

In Harmony

Ann Arbor is also the home of what is ostensibly a pretty off-the-wall company called Zingerman’s, a multi-faceted $56 million, 700-employee food service business.

I had the pleasure, along with some fellow site selection consultants, to sit in a meeting where staff members reported on what was happening in their particular parts of the company. I remember one staffer saying that miniature-sized goats provided an inordinate amount of milk based on their size, which was certainly news to me.

I don’t know how I will ever be able to use that information, but it is nonetheless burnt in my brain as being exceptional. So, too, was hearing co-founder Ari Weinzberg, dressed in black jeans and a black t-shirt with rolled-up sleeves, explain how he wanted his company to “operate in harmony with nature.”

I just knew this was a fella who could tell a good story, but I had to leave before hearing one. At least I have one of his books – “A Lapsed Anarchist’s Approach to Building a Great Business.”

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.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.