Dean Barber

Archive for January, 2015|Monthly archive page

DETROIT VS EVERYBODY

In Site Selection on January 19, 2015 at 10:39 am

DETROIT – Every January, Cobo Center, now in the final stages of a $279-million expansion and upgrade, is the scene of the North American International Auto Show.

The city is expecting more than 800,000 visitors to the downtown convention center for the public days of the auto show, which started on Saturday.

But the show had opened a week earlier to 5,000 or more news media analysts and industry executives and other representatives from 60 countries. I was among that group, courtesy of the Michigan Economic Development Corporation and the Detroit Regional Chamber.

And it became quite the glitzy affair, with an “auto show prom night” – real name Charity Preview gala — where attendees paid $400 a ticket to stroll between shiny cars with champagne in hand, decked out in evening gowns and tuxedos.

Truly, this was Detroit’s night to shine. I can tell you that many of the sleek models on display caught my eye, and I liked the cars, too.

But more impressive than the show itself is what I sensed was happening outside the Cobo Center, where I continued to pick up on this sense of pride and even defiance. The city has been down, no question about that, but it was far from out.

And if you were to go downtown, you very well might be surprised. I know I was, as there is an economic vitality that I think many cities would envy.

And so in the wake of bankruptcy, now over and now viewed as the right thing to do by most,  there is recognition that big problems remain – restoring city services, removing blight, and fixing broken public schools top the list — but there is a widespread belief that things are getting better.

And I witnessed concrete evidence to show that it is so. This was my second trip to Detroit in 18 months, and I saw things that I hadn’t seen on my first trip.

A Neighborhood in the Making

The blockbuster is the future Red Wings stadium district, a $650 million project now under construction. I say “district” because that is what is planned — a 45-block neighborhood with residential, retail and offices in addition to a big red bowl that will be Red Wings Stadium.

Just under $300 million will come from public monies, with the rest from the family-owned Ilitch Holdings, owner of the Red Wings. This project has all the makings of a game changer.

Likewise, public/private partnership funding has resulted in the construction of the $140 million Woodward Avenue M-1 Rail streetcar project. The 3.3-mile light rail line will link downtown to the New Center area, a prominent commercial and residential historic district located uptown.

Woodward Avenue continues to be the economic spine of the city, where young professionals, mostly casually dressed, dominate. This is urban hipster territory.

If you want to find an apartment here, good luck. The residential occupancy rate in the downtown/Woodward Avenue corridor is at 98 percent.

Dan’s Downtown

Despite that, Dan Gilbert, the CEO and owner Quicken Loans, wants his mostly young workforce to live in close proximity to the financial empire and real estate holdings that he is building downtown.

Gilbert and other downtown employers are incentivizing employees to live downtown — $5,000 for apartment dwellers, $25,000 for home buyers.

Back in 2013, Gilbert’s downtown real estate holdings extended to more than 30 buildings. Today, they are more than 70.

I took a tour of several of the Quicken Loan operational centers downtown. They were mostly staffed by what I thought of were “kids,” albeit very bright kids. I left impressed but also feeling this was no country for old men.

Naturally, the same held true at the private College for Creative Studies in midtown Detroit, where 1,400 students are learning to be visual communicators, pursuing degrees in a plethora of product design and creative functions that would appeal to numerous industries.

Shinola Shines Here

One company that found Detroit and CCS in particular a draw was Shinola, which moved a large building with the college in 2013.

Originally called the Argonaut Building when it was built in 1928 for General Motors, it was renamed the A. Alfred Taubman Center for Design Education in 2009 soon after it was donated by carmaker to the school.

The building’s DNA is that of design and creativity, and for that reason alone, Shinola, a maker of luxury goods, must feel at home. The 760,000-square-foot building housed GM’s first automotive design studio under Harley Earl, and the world’s first concept car, the Buick Y-Job, was born here.

Now I do no proclaim to be the smartest fellow in the room, but I can recognize scheisse from Shinola. And let me tell you, Shinola does not make scheisse (look it up).

What Shinola does make is a wonderful line of watches, high quality leather and paper journals, and way cool bicycles. And much of its operations are housed in the former Argonaut building with the CCS.

The Backbone of the Country

Shinola President Jacques Panis, a native Virginian who bought a home in Detroit last year, said Detroit was really the only place for his company.

“The middle class of America was built right here. This city built our country. It was the backbone of our country. And to look past this place in our opinion is the wrong thing to do. It’s here.  The people are here, the work ethic is here.

“They are proud people and they want to work. And they are excited to be here.”

I got to see the watch assembly and the leather works firsthand. It was evident the workers were engaged and took pride in their work.

It was then that I understood what “DETROIT VS EVERYBODY” really meant. I had seen it emblazoned on hoodie sweatshirts in storefront windows at the airport and other places.

This not so much belligerent speak as a statement of faith – that our city can and will compete against all comers. Never ever write us off. We have something to prove.

A Manufacturing Innovation Center

No American city contributed more to the Allied powers during WWII than Detroit. It was “The Arsenal of Democracy,” producing jeeps, tanks, and B-24 bombers. By the summer of 1944, Ford’s Willow Run plant was cranking out one bomber an hour.

It was a dangerous time and it remains a dangerous time now. Manufacturing is inextricably linked to our national defense. I was reminded of that while attending ribbon cutting ceremony at a newly renovated 100,000-square foot building in a neighborhood called Corktown.

“When we fail to manufacture, we fail to innovate,” said Lawrence Brown, executive director of the American Lightweight Materials Manufacturing Innovation Institute.

“We fail to innovate, we find ourselves beholden to another country.”

Brown spoke before a sizable audience that had gathered inside what will become the Institute’s innovation center, designed to speed up the pace of moving lightweight metal products from labs to factories.

The center will also train workers on how to use the new technology to help boost energy efficiency, reduce emissions and enhance military missions.

The $148-million public-private project is being funded by the U.S. Naval Research Laboratory, and companies, including Alcoa, Boeing and Johnson Controls. The University of Michigan, and (the) Ohio State University, strange bedfellows to be sure, are also partners in the project.

The center, still empty of machines, was originally slated to be based in Canton, Mich., but was lured to Detroit by Mayor Mike Duggan last summer after a lease agreement fell through.

Leave No One Behind

As I alluded to earlier in this blog, all things are not well in Detroit, which has a 38 percent poverty rate. Away from the glitz and the glory, there remains a large underclass of people who are struggling out in the neighborhoods away from the downtown.

The truth is they have little saleable skills in the job marketplace and have difficulty accessing opportunities for their lack of education and the lack of transportation.

In a city known for moving people via the auto industry, they find themselves isolated as public transportation here is spotty at best. Life may not improve for them substantially anytime soon, unless they can somehow break away or get a break.

Economic development should leave no one behind. In next week’s blog, I’m going to tell you about a newly started program in Michigan to reach those in need of a job who might be considered unemployable.

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.http://www.barberadvisors.com

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

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

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Culture Shock May Give Unions Inroads

In Site Selection on January 5, 2015 at 11:41 am

Some years back, I was touring a Korean automotive parts manufacturing plant in Alabama, where the HR director told me that her biggest challenge was educating management on how to talk to Alabamians.

Part of the difficulties lie in the difference in cultures as well as the English skills of the Korean managers. She said they would say things like “I command you to do” such and such.

The HR director said she had to keep reminding the Koreans that you don’t “command” these Alabama workers to do anything. If you simply ask with a semblance of respect, they will do it.

She also confided that the Korean managers of this tier one automotive supplier to Hyundai had little notion of worker safety or the fact that there was something out there called OSHA, which could make life very uncomfortable for the company.

I left that new plant thinking that if there was a fertile ground for a union, this would be it. But it never happened. The plant was, after all, in the rural Alabama, where just having a job is considered a blessing.

It’s no great secret that Alabama, like its neighboring right-to-work states, doesn’t so much cotton to unions, especially in comparison to the Midwest and Northeast.

Culture Matters

So again, culture matters, and not just between countries, which I believe may be creating certain inroads for certain unions, but even between regions of this country. Southerners, by and large, are more suspicious of unions.

Like the Korean automotive supplier plant in Alabama, I think the evolving story of Volkswagen in Chattanooga, Tenn., also illustrates some profound differences in culture.

As you may recall, workers at the Volkswagen plant in Chattanooga voted 712-626 against UAW representation last February. I subsequently proclaimed in my all knowing, consultant guru wisdom that the industrialized union movement in this country was pretty much dead.

As proof, I cited that Michigan and Indiana had become right-to-work states, and that efforts to unionize a new steel plant in Akron, Ohio, about a year ago had failed miserably with workers voting two-to-one against union representation.

I wrote a blog with a rather catchy title – “The Night the Union Died.” Man, did I get that one wrong. (A blasphemous remark for a consultant.)

They Did Not Go Away

For the UAW did not just slink away from Chattanooga like a beaten dog. That’s because I believe the union got a tacit “stick around” message from VW management, who needed the UAW so that the company could initiate its tried and true works council model.

And so the union did stick around, announcing in July, four months after losing the National Labor Relations Board vote, the formation of Local 42. A charter-signing ceremony was held a few miles from the plant, where 1,500 workers assemble the Volkswagen Passat sedan.

And now here we are in 2015, and the UAW is on the precipice of reaching its longstanding goal of organizing a foreign-owned automotive manufacturer in the South, albeit with a little help from management.

Now this scenario is inconceivable for most U.S. companies, which have historically viewed unions as at the very least an impediment and at the worst a threat. Union activity or the mere presence of unions is often a factor in a site selection project as some companies will go to great lengths to avoid them.

VW’s World

But Volkswagen, Europe’s biggest automaker, is not like most U.S. companies and here is where culture again comes in. The truth is the German industrial sector is far more accepting of trade unions and this quasi-union thing called works councils. (They also incorporate worker apprenticeship programs which I believe U.S. manufacturers could actually learn from.)

Under German law, a works council’s explicit charge is to work for the interests of blue-collar and white-collar workers and company, finding non-conflictual ways of dealing with new technologies, reorganization of jobs, and plant closings. Works council members are elected by non-management employees and are paid by management.

But here’s the rub: The works council model, commonplace in Germany, is contrary to U.S. labor law, which says that management cannot “dominate” a labor organization nor “contribute financial or other support to it.”

VW soon figured out that a works council only would be legal in this country if the workers had their own independent representative: a union. And so the UAW fills that bill.

Management’s New Engagement Policy

You can bet that the company’s Global Works Council, with representatives from factories around the world, noted that Chattanooga plant was the only major VW facility in the world not to have a works council. As labor represents 10 of the company’s 20-member supervisory board, management got its marching orders.

The company’s solution was unveiled that past fall with the unveiling of a new policy that it called a “community organization engagement policy.”

The stated policy does fall short of recognizing the UAW as the only bargaining agent, but it does say that an organization that has membership support from more than 45 percent of the employees becomes entitled, among other things, to meet biweekly with VW management.

Not surprisingly, the other shoe dropped last month when an accounting firm hired by the company verified that the UAW had membership support from more than 45 percent of VW employees at the Chattanooga plant.

And now representatives of Local 42 will be attending VW’s Global Works Council meeting at corporate headquarters in Wolfsburg, Germany, later this month.

Mercedes in the Crosshairs

About 200 miles southwest of Chattanooga, in Tuscaloosa, Ala., Mercedes Benz has also been dealing with a revived UAW, which officially established Local 112 in October.

There is no indication that the company is playing footsy with the union, as the NLRB in November upheld a ruling that Mercedes violated federal labor laws by stopping UAW union supporters from handing out literature inside its Alabama plant.

As a result, Mercedes must update its employee handbook to say that workers are allowed to discuss union issues during non-work times and that they can solicit their colleagues in mixed-use areas like team centers and atriums.

The factory must also post notices to acknowledge the violation and to reaffirm that management won’t “interfere with, restrain, or coerce” workers seeking to unionize the plant.

Mercedes management officially is taking a “neutral position” on union representation, which in itself is a culture shift from most U.S. companies.

A Governor Pleas

But Alabama Gov. Robert Bentley, like his counterpart in Tennessee, Gov. Bill Haslam, has made it clear that he would prefer no unions, citing the belief that they would hamper the state’s ability to attract future corporate investment.

Bentley went so far as to write a letter on Nov. 5 to workers at the $100 million, Chinese-owned Golden Dragon Copper USA plant, urging them to vote against representation by the United Steelworkers.

A vote for a union “could have a possible negative impact on your community by discouraging other companies from locating there,” Bentley wrote. The governor said he believed Golden Dragon was “firmly committed” to competitive wage and benefit packages.

By the narrowest of margins, workers at the plant in Pine Hill, Ala., which began operations last May, rejected Bentley’s plea, and voted in favor of the union, 75 to 74. Objections to the vote were immediately filed and a hearing was held last month. An NLRB ruling is expected soon.

Culture Weighs on Both Sides

Thomasville, Ala., Mayor Sheldon Day, who played a role recruiting the company to the area, told the news organization al.com that cultural and language barriers weighed heavily “on both sides” — the Chinese and local residents.

And the company’s use of proprietary methods at the copper tube manufacturing plant meant many of the engineers came in China, which didn’t help.

In business as in life, cultures can and frequently do clash. Foreign-based companies establishing new manufacturing operations in the U.S. need to be highly aware of this.

Not surprisingly such conflicts are foundational to the UAW’s “southern strategy.” Let’s watch how this thing plays out.

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.http://www.barberadvisors.com

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

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