Dean Barber

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Where Will the $1.6 Billion Toyota-Mazda Plant Land?

In Corporate Site Selection and Economic Development on August 13, 2017 at 9:03 am

Last week, I took a friend of mine, an economic developer from Alabama, on a tour around Dallas. One of the places we stopped was at the new North American headquarters of Toyota in Plano.

I stayed behind the wheel of my Toyota Tacoma truck while my friend stepped out to take pictures. When he returned, I said, “That’s likely where the decision is going to be made on the new plant.”

I was referring to an announced $1.6 billion joint venture manufacturing plant that will be built by Toyota and Mazda, well, somewhere. Making sense of the project, much less where it will ultimately land, is like putting a big jigsaw puzzle together, both for the two companies involved and observers alike.

Toyota, which has manufacturing plants scattered across multiple locations in the United States, will be taking a 5 percent ownership position in the much smaller Mazda, which has no manufacturing presence in the U.S.

This future U.S. plant, expected to open by 2021, will have a capacity of 300,000 vehicles annually and employ 4,000 people. It will produce Toyota Corollas and Mazda crossover models. The companies said they plan to work together to develop new technologies.

Toyota is currently assembling Corollas at its plant in Blue Springs, Miss. The company is also building a new $1 billion plant in Guanajuato, Mexico, that was to make the Corollas. Those plans have now changed. The future plant in Guanajuato will build Tacoma pickup trucks.

This project announcement frankly surprised me. It comes at a time when the auto industry is looking at a substantial and prolonged downturn, and when Mexico has been the preferred location for OEM assembly plants.

The Winds of Change

But things happen, and calculations do change. For one, we have a president in the White House who has openly criticized NAFTA and any company that would even consider expanding capacity in Mexico instead of the U.S.

President Donald Trump singled out Toyota in January for its plan to build a Corolla small-car factory in Mexico. As Toyota’s North American Chief Executive Officer Jim Lentz discussed setting up autonomous- and connected-car business units in the U.S. with Trump in March, the president cut him off and said the company needed to “build those new plants here.”

While the OEMs may deny it (and Toyota subsequently did as did Ford), even the smallest possibility of tariffs being imposed on imported vehicles from Mexico might prompt them into rethinking where they should build.

“The remarks of the U.S. president at the start of the year aren’t related at all” to the decision to build the new U.S. plant, Toyota President Akio Toyoda said at a joint press on Aug. 4 with Mazda chief Masamichi Kogai in Tokyo.

That might very well be true. But smart companies, and Toyota, the world’s largest automaker has proved to be just that, are cognizant of how the winds of change, in both politics and consumer choices, can affect future operations. In short, they can and will adapt.

Why Not Blue Springs?

In his Aug. 4 press conference, Mr. Toyoda said: “Taking into account competitiveness, demand, and getting the most from this joint venture, as well as the fact that we currently make the Corolla in Mississippi, we decided to consolidate production in the U.S.”

So why not just keep making Corollas and the Mazda crossovers at the 1,700-acre Blue Springs, Miss., site, half of which remains vacant, with roads and sewers already in place awaiting further investment?

Opened in 2011 as its sole U.S. assembly location for the Corolla, Blue Springs has proved itself. The plant reached 500,000 cars faster than any other plant in Toyota history, and last year it won a coveted J.D. Power Initial Quality award. Moreover, the existing supply chains for the Corolla in Blue Springs are already in place, which would maintain created efficiencies.

Despite all that, my best guess (and that is all it is) is that Toyota and Mazda won’t be choosing Blue Springs. By the very fact that Toyota and Mazda announced the joint venture project indicates they are unlikely to use an existing site, but seek greener (or at least different) pastures.

In short, they are shopping the project around for a reason, and I believe that gaining political favor is one key factor. And we’re not just talking about the Trump administration. It goes far beyond that.

Toyota wants governors, members of Congress and senators on their side, which I believe will be reflected in the site search for this future plant. More on that in a moment.

Eleven States

If you were to take the word of the Wall Street Journal as gospel, the Toyota-Mazda project has come down to 11 states. Those states are Alabama, Florida, Kentucky, Illinois, Indiana, Iowa, Michigan, Mississippi, North Carolina, South Carolina and Texas.

Some of that makes sense to me, some not so much. With this mix of Southern and Midwestern states, why aren’t Tennessee, Georgia, Arkansas and Ohio included in the mix? Georgia, in particular, makes imminent sense to me for this project.

One possibility is the Journal, which is a great newspaper, just got it wrong. Having been a former business reporter and editor, I can tell you that sometimes happens despite all the best efforts. I remember years ago when the Journal reported that Mercedes-Benz would land in North Carolina, when in fact it ended up in Alabama.

But if the Journal’s latest report is accurate and the search has indeed been relegated to these 11 states, then I am going to venture a guess (and that is all it is) on where this $1.6 billion-dollar plant will go.

History Can Provide a Clue

We cannot predict the future with absolute certainty under any conditions. However, we can often detect patterns from history, which allows us to make educated guesses. That is all that I am offering here, an educated case based on what Toyota has done in the past.

If you look at a map of the many points where Toyota has manufacturing plants in this country, you will notice that the company seldom puts facilities in the same states. This especially holds true with its large vehicle assembly plants. They are all in different states.

Why is that? I believe it is to hedge its bets and curry political favor. With 10 plants and a direct investment of $21.9 billion, soon to go higher, Toyota figures it cannot have too many friends in governor’s mansions and on Capitol Hill.

North Carolina Makes Sense

I will hazard a guess that if the Journal’s list of 11 states is correct, that the winning state will be North Carolina. Why North Carolina?

Ever the bride’s maid and never the bride in the competition for automotive assembly plants in the past, North Carolina is very much hungry for this type of project. The state also represents new ground for establishing new friends and allies, which has been the modus operandi for Toyota.

Florida, Illinois and Iowa could also fill that political bill, but Toyota may have overriding concerns about their strategic locations vis a vis their existing supplier network and customers, or in the case of Illinois, its business climate.

Again, if the Journal’s list proves true, Kentucky, Alabama, Mississippi, Indiana, and Texas are out, only because Toyota already has a big presence there. Those congressional delegations are pretty much locked down.

South Carolina, which I believe has one of the best business climates for manufacturing, is out only because it is a small state where BMW and Volvo have put down roots. BMW is especially the big fish there. Michigan, where Toyota has a design and technical center, is out because it is the legacy home of General Motors, Ford and Chrysler and Toyota’s voice would simply be one in the choir.

A Supplier State

That leaves North Carolina, a supplier state where Toyota buys automatic transmission parts, catalytic converters, driveshafts, window motors and tires. There are about 300 automotive suppliers in the state.

North Carolina is home to Research Triangle, anchored by North Carolina State University, Duke University, University of North Carolina at Chapel Hill, and the cities of Raleigh and Durham and the town of Chapel Hill. All that talent can be leveraged if needed. And it usually is.

What’s more, North Carolina has four mega-sites that could meet the needs an OEM assembly plant.  All four have convenient access to interstates and rail, and have undergone environmental audits, geo-technical studies, have water and sewer lines, offer low-carbon power and provide high-speed fiber optics connectivity.

If I were advising Toyota (hint, I’m only 20 minutes away from corporate headquarters) or Jones Lang LaSalle, which is handling the site search for Toyota, I would tell them to take a long hard look at:

  • The 1,449-acre Kingsboro CSX Select Site, 10 minutes east of Interstate 95 and one hour east of Raleigh
  • The 1,800-acre Chatham-Siler City Advanced Manufacturing Site in Chatham County in the center of the state
  • The 2,700-acre Moncure Megasite, only 20 minutes from Raleigh-Durham International Airport
  • The 1,500-acre Greensboro/Randolph Megasite, southeast of Greensboro

Of course, other sites in other states may fulfill the requirements of the Toyota-Mazda partnership. But North Carolina makes sense, due in part to Toyota’s proclivity to expand its geographical and political footprint, which I think is a very smart move.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. (Send us your RFPs.) Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Older Workers are the Future of Work

In Corporate Site Selection and Economic Development on August 1, 2017 at 4:11 pm

In my last blog, which I modestly titled, “The Future of Everything,” I said that predicting how technology will affect the future of work is pretty much a fool’s game.

We should keep in mind John Kenneth Galbraith’s reminder that, “We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know.”

The older I get, the more I realize how much I do not know. But if I were to hazard a guess, it would be that AI-engineered robots will probably not take all of our jobs and then kill us. But I could be wrong.

Also, as I outlined in my last blog, I believe the findings of a group called Shift: The Commission on Work, Workers, and Technology, a joint project of New America and Bloomberg, has great value as it portends to the future of work.

The Commission outlined four core scenarios that could play out in the next 10 to 20 years, each reflecting whether there will be more or less work, and whether work will exist in the form of jobs or fragmented into “tasks.”

If you want a quick snapshot of those four scenarios, again I would refer you to my last blog or better yet go to the Shift Commission website.

Shaping Places

The future of work will shape cities and regions, but I seldom hear my friends in economic development talk about it. Understandably, much of their focus is on the most pressing question as to whether people in their respective communities have the skills to perform the jobs today.

Disturbing to some, the data shows that the richest cities are pulling away from the rest, with discrepancies in access to education, technology, capital, and networking opportunities.

This is in keeping with Brooking Institution’s reports of the last few years that American cities and metropolitan areas have firmly established themselves as the engines of the nation’s economy and are the centers of technological innovation and global trade and investment.

(I hope to tackle this subject and the notion of innovation districts in cities in an upcoming blog.)

A Profound Impact

Millennials (adults ages 18 to 34), are now the largest share of the American workforce (more than one-in-three American workers), but older adults will have the most profound impact in the coming years on both the supply of labor and the demand for workers.

By 2024, the Shift Commission report notes, nearly one-quarter of the workforce is projected to be 55 or older — more than double the share in 1994. Falling fertility rates and tighter immigration rules mean U.S. employers will likely need to hire and keep older workers just to get the job done in coming decades.

“We will need older workers to do the work,” said MIT AgeLab Director Joseph Coughlin at the Milken Institute Global Conference.

Retiring Retirement

While many consumer companies are gearing their businesses toward a growing “active aging” market, many if not most companies still do not understand that it is in their long-term best interest to retire this whole idea of retirement.

“Older people have so much to offer as workers, colleagues and mentors. It is in the business community’s self-interest to recruit, train, promote and retain them,” wrote Paul Irving, chairman of the Milken Institute for the Future of Aging.

The concept of formally ending work at age 65, while it may have been appropriate in the last century, does not make a lot of sense today. Seventy-two percent of pre-retirees want to work past 65, and nearly half of current retirees either have worked in retirement or plan to, according to the Bank of America Merrill Lynch/Age Wave 2015 report, Work in Retirement: Myths and Motivations.

Major Cost Savings

Eventually, however, more companies will see the light and older workers will become more in demand particularly for reasons of costs. The fact that older workers on Medicare don’t require primary medical insurance will prove to be a major cost savings for employers.

Companies will also like the fact that millions of retirees will move to freelance, part-time or contract employment with no benefits having to be paid.

The Real Gig Workers

While young people are the supposed to be the vanguards of the new economy, valuing happiness over money, gigs over jobs, and flexibility and meaning rather than status and hours at work, older Americans are being more millennial than millennials.

People over the age of 65 are four times more likely to be self-employed than those under 34, and are more likely to work part-time jobs, according to the Bureau of Labor Statistics.

The labor force participation rate, or the share of American civilians over the age of 16 who are working or looking for a job, is expected to increase fastest for the oldest segments of the population—most notably, people ages 65 to 74 and 75 and older—through 2024. In contrast, participation rates for most other age groups in the labor force aren’t projected to change much over the 2014–24 decade.

The rise of “alternative work arrangements,” like freelancing or part-time work, jobs that often lack benefits like health care, have grown significantly in the last decade. As of late 2015, 24 percent of employed 55-75 year-olds were in alternative work arrangements, compared with just 14 percent of prime-age (25-54 year-old) workers, according to the economist Jed Kolko.

Many companies and entire industries are now beginning to realize that they are on the verge of losing a wealth of great talent. As of 2015, almost 33 percent of our workforce – including 48 percent of supervisors – was eligible to retire. Replacing that kind of talent isn’t easy.

A Rapidly Aging Workforce

The workforce is aging because the population is aging. By 2024, the U.S. Bureau of Labor Statistics projects that the labor force will grow to about 164 million people, of which 41 million people will be ages 55 and older—of whom about 13 million are expected to be ages 65 and older.

While they make up a smaller number of workers overall, the 65- to 74-year-old and 75-and-older age groups are projected to have faster rates of labor force growth annually than any other age groups. This in a nutshell means that tomorrow’s seniors will retire later.

Also, it should be noted that the aging population is creating demand for health care jobs, which are projected to lead employment growth over the next decade.

Older Workers are the Future

While the overall numbers favor the millennials, older workers find themselves the future of work. Employers, not wanting to lose valuable knowledge, will do a better job at finding ways to accommodate them, while millions of older workers will transition from full-time jobs to part-time work. Look for growing numbers of older Americans in the gig economy, working freelance, with short-term contracts or with pick-up jobs.

On a personal note, I have come to epitomize that older “boomer” gig economy group. I am a 62-year-old consultant doing contract/consulting work for economic development groups and companies needing help with corporate site selection.

Through the years, I have picked up some knowhow, and I want to continue to grow by learning new stuff. I think of it as expanding my horizons while helping others, which is a pretty good gig.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

The Future of Everything

In Corporate Site Selection and Economic Development on July 23, 2017 at 4:23 pm

For many of us, our last names reveal the work of our ancestors.

Common Anglo-Saxon names like Baker, Brewer, Butcher, Carpenter, Cooper, Mason, Miller, Sharp, Smith, and Tailor were all trade names, which required craft and expertise acquired over years and passed down through generations.

My last name is Barber. Back in the Middle Ages, Barbers did far more than haircutting. They also performed surgery, bloodletting and leeching, enemas, and teeth pulling, among a host of other things that would probably turn your stomach.  Gosh, I’m glad I didn’t live back then.

The Industrial Revolution wiped out these identities. And today, many of the factory and office jobs that replaced farming and craft trades are themselves disappearing.

We Don’t Know

Much of what I write about in this blog concerns the future of work. I will be the first to admit that while I ponder on the future, I don’t know, nor does anybody else, what lays in store.

I frequently joke that if I called myself a “futurist,” I could charge considerably more than I do now as a consultant for economic development organizations and companies on corporate site selection.

We all hope that the Digital Revolution, like the Industrial Revolution before it, will create as many jobs as it destroys. We sense that big changes are in the air and that dislocations are inevitable. Report after report, and this blog, say as much.

But will automation and artificial intelligence result in a fundamental rethinking of our relationship to work and to one another? How will we change?

The Predictions Differ

The World Economic Forum’s study into The Future of Jobs (2016) estimated that 65 percent of children entering primary school today will work in job types that don’t yet exist. 3.5 times as many jobs could be lost to disruptive labor market changes in the period 2015-2020 than are created.

The study saw job losses in routine white-collar office functions but gains in computing, mathematics, architecture, and engineering related fields.

Some believe that we could see 80 percent or more of current jobs disappearing in the next 20 years, whereas a McKinsey Global Institute report last year found that only 5 percent of jobs can be fully automated by adapting currently demonstrated technology, although for middle-skill categories this could rise to 20 percent.

A Complex Relationship

With all due respect to the World Economic Forum, McKinsey (a group I respect and often quote) and any and all of those who might hazard a guess on the future of work, history teaches us that it’s hard to predict how technological change will unfold.

The relationship between automation and employment is complex. When automation replaces human labor, it can also reduce cost and improve quality, which can increase demand and theoretically create new jobs.

Many assume that it’s going to be people or robots, all or nothing. I don’t quite see it that way. I tend to believe that advances in artificial intelligence will focus more on specific tasks rather than entire jobs. In that scenario, robots will mostly augment rather than replace humans. But what the hell do I know?

Four Futures of Work

Instead of obsessing on predictions, a group called Shift: The Commission on Work, Workers, and Technology, a joint project of New America and Bloomberg, took a different and I think more valuable approach. In its executive summary, the Commission opened with a line that will stick with me forever:

“The future of work is the future of everything.”

Convening more than 100 leaders from multiple sectors, including labor, civic, religious, academic, entrepreneurial, and more traditional business perspectives, the group was asked two basic questions:

(1) Will there be more or less work in the future? (2) Will work continue to be in its traditional form, full-time jobs, or separate into more “task” work (like short-term contracts, part-time gigs, or other alternative arrangements)?

The Commission distilled the common themes from these visions, some positive and some negative, and came up with four basic scenarios, four different futures of work. So what are these different futures? I quote from the Shift report.

Rock-Paper-Scissors Economy: Less work, mostly tasks.

“A community-based, local, and sustainable economy that prioritizes work in person to-person interactions. Advancing automation, in combination with a slowing of the overall economy due to rapidly aging population and a declining birth rate, leads to the elimination of many full-time jobs.

“Available work has been reconfigured to a task-based format; many people piece together their income — and, if they can, benefits — through a series of temporary gigs, identified by digital platforms and facilitated by smartphones.

“The winners are those who provide an experiential service based on a human interaction, activity, or skill, like cooking coaches, gardeners, and eldercare providers. Losers are those whose identities were so wed to a particular job that they opt out of the labor market instead of adapting.

“Of those open to entrepreneurial activities, many join the maker economy and produce organic goods in and for their neighborhoods; more people derive a sense of purpose from contributing to their families, their “contingent families” of friends, and their communities than from their jobs. Free time, once scarce in an economy that pushed people to work ever-harder to sustain high levels of consumerism, becomes a marker of status in an economy in which people work less.”

King of the Castle Economy: Less work, mostly jobs.

“A corporate-centered economy in which economic life is organized around large, profitable companies and those they employ. Increased automation keeps corporate productivity levels high but employment levels low, dampening consumer demand. This leads to less dynamism in the economy and decreased innovation overall as people become worried that leaving a full-time job means they won’t find a new one.

“Lower employment levels generate lower tax revenues and corporate philanthropies take over former city and state functions in the places they operate. Geographic and political tensions rise, and society splits into three clear social classes: those who work in high-tech jobs at large, profitable companies (and successfully defend their jobs, and generous benefit packages, from qualified outsiders); those who have full-time jobs protecting the people and assets in the corporate class, who struggle to assemble health-care and retirement benefits; and those who perform on-demand work when it’s available.”

Jump Rope Economy: More work, mostly tasks.

“A portfolio approach to work in which people build reputational rankings with each task they complete, combining multiple income streams to allow for a career that’s self-driven, entrepreneurial, and constantly changing. An aging workforce that stays engaged, combined with millennials seeking flexibility as they reach their peak parenting years and high consumer demand as a result of full employment, pushes the market into more discrete, task-based jobs.

“Technology assists in efficiently cataloging the different tasks that need doing and helps people develop and monetize their skills, which are always shared on social networks — every keystroke is public. The economy is buzzing, so people can be selective about what they do and can replace traditional corporate-provided benefits. As a result, most people do what they enjoy most of the time and are always on the lookout for the next opportunity.”

Go Economy: More work, mostly jobs.

“A technology-driven economy in which people embrace connectivity in every area of their lives and look for ways that machines can extend their capabilities through data-platforms, electronic devices, and virtual reality. Automation takes over almost all routine, data-processing jobs, freeing workers to focus on creative, strategic thinking.

“As people realize the ways in which AI can help them, they increasingly take risks in their jobs which results in more innovation. Benefits become progressively more generous over time, and eldercare becomes as standard a company benefit as childcare.

“Online retailers hire and train lots of warehouse robot monitors, lawyers take on many more cases as AI takes over the paperwork of discovery, and scientists and intellectuals use AI to file and monitor patent applications. Jobs multiply as new and novel platforms are invented on which to build new ideas.”

The Shaper of Cities and Regions

So there you have it, four different futures of work as envisioned by the Shift Commission. The group concluded that each could work out well for America, or poorly, depending on how we respond.

The commission found that most people want certainty more than making more money, more than doing work they feel is important and meaningful. They value stability of income, health care (Republican Party best be careful), retirement, and the other benefits we have come to expect.

Economic developers should take note that the future of work will shape cities and regions, and that the different futures might affect some areas in different ways than others.

It is very possible that I have provided you more questions than answers in this blog. Perhaps that is my aim.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

The Price of Prejudice Looms Large in Texas

In Corporate Site Selection and Economic Development on July 15, 2017 at 11:49 pm

Newton’s third law is: For every action, there is an equal and opposite reaction. This is a truism in the world of physics.

In the world of business and politics, for every action, there is a reaction, which may get loud, public and ugly. And so it is happening in Texas, where I live.

The Texas Legislature meets on Tuesday, in a 30-day special session called by Gov. Greg Abbott, who has laid out 20 issues that he wants state lawmakers to tackle. Included in the governor’s agenda is a North Carolina-style “bathroom bill,” which would limit which restrooms transgender people can use.

The “bathroom bill” failed to advance in the last regular session, which was marred by a shoving match and threatened gunplay. (In their infinite wisdom, legislators did pass a bill allowing feral hog hunting from hot-air balloons.)

A Full-Page AD

IBM, the tech giant that employs more than 10,000 people in Texas, is taking out full-page advertisements today (Sunday, July 16) in The Dallas Morning NewsSan Antonio Express-News and Austin American-Statesman opposing the legislation which the company says discriminates against transgender Texans.

“As one of the largest technology employers in Texas, IBM firmly opposes any measure that would harm the state’s LGBT+ community and make it difficult for businesses to attract and retain talented Texans,” reads the IBM ads. “We urge Gov. [Greg] Abbott and the state legislature to abandon any discriminatory legislation during this special session and ensure Texas remains a welcoming place to live and work.

“No one should face discrimination for being who they are.”

Tech Companies Take a Stand

IBM is not alone in its opposition. In May, other top leaders in tech companies with a presence in Texas sent a letter to Gov. Greg Abbott urging him not to pass discriminatory legislation.

In addition to IBM Chairman Ginni Rometty, the letter was signed by Facebook founder Mark Zuckerberg, Apple CEO Tim Cook, Amazon CEO Jeff Wilke, Microsoft Corp. President Brad Smith and Google CEO Sundar Pichai. The leaders of Dell Technologies, Hewlett Packard Enterprise, Cisco, Silicon Labs, Celanese Corp., GSD&M, Salesforce and Gearbox Software also signed the letter.

“As large employers in the state, we are gravely concerned that any such legislation would deeply tarnish Texas’ reputation as open and friendly to businesses and families,” the CEOs wrote in a letter dated May 27.

The Fallout Has Already Begun

A recently released report by Texas Competes, a coalition of nearly 1,300 employers and chambers of commerce, shows the “bathroom bill” debate generated $216 million in negative publicity for Texas from Jan. 10, 2016, through May 22, 2017.

“HR executives and business leaders voice concern to us when headlines about discrimination dominate the news about Texas,” said Jessica Shortall, managing director of the organization, in a statement. “We cannot maintain the pipeline of talent needed to fuel this state’s economy in the face of national coverage that tells young workers that Texas is in the business of discrimination.”

No Events For You

Both the NFL and NBA have put Texas on notice that the state will be overlooked for future big events if lawmakers pass the bathroom bill.

The American Association of Law Libraries said it can no longer host events in Texas, “due to recent moves by the Legislature to discriminate against LGBTQ people.” The event, which draws 3,000 attendees, has been held in San Antonio twice and is being held in Austin this week.

In a letter last week to Austin Mayor Steve Adler and Tom Noonan, president and CEO of the Austin Convention and Visitors Bureau, AALL President Ronald E. Wheeler Jr. wrote, “We cannot stand by as Texas enacts legislation that discriminates against this vulnerable community.”

The Chamber Speaks Up

Also last week, the Dallas Regional Chamber sent a letter to Abbott and Lt. Gov. Dan Patrick a letter expressing opposition to the legislation. Business leaders from North Texas plan to rally against the bathroom bill at the Capitol when the special session convenes.

“When the Texas Legislature reconvenes in Austin next week, we will continue to stand firm against any discriminatory legislation during this special session — and beyond — that could seriously hinder our ability to attract more companies, jobs, and talent to the Dallas Region,” stated the letter from Chamber President and CEO Dale Petroskey and board chairwoman Hilda Galvan.

Some of Texas’ biggest cities, including Dallas and Austin, have anti-discrimination ordinances that extend protections to transgender people in public spaces.

Billions at Stake

If the Texas bathroom bill became law, the reductions in travel and tourism activity would cost the state almost $3.3 billion per year as well as the loss of over 35,600 full-time jobs, according to the Perryman Group, an economic and financial analysis firm based in Waco.

In an April 24 report to the San Antonio Area Tourism Council, the Perryman Group also estimated annual losses of $176.4 million in state revenue and $84.3 million in local fiscal resources. Eventually, those numbers would grow, to $5.5 billion in gross product per year, almost 59,600 jobs, $295.2 million in annual lost state revenue and $141.1 million in foregone local fiscal resources.

A Pile of Manure

House Speaker Joe Straus, often credited with keeping the bill from becoming law in the last regular session, took a hard swipe last week at his fellow Republican leaders, comparing Gov. Abbott’s special-session agenda to a “pile of manure.”

Straus says Texas is sending the wrong message about its priorities with proposals such as the bathroom bill championed by Lt. Gov. Dan Patrick.

The World According to Patrick

Heavy on hot-button issues which appeal to his evangelical and tea party base, Patrick rejects any and all warnings about the potential cost to businesses, the economy and the Texas brand.

Last year, Patrick said he would not shop at Target after the retailer announced a policy to let customers use the bathroom that corresponds with their gender identity. Patrick criticized those boycotting North Carolina after it adopted a bathroom bill, writing in a Facebook post on April 24, 2016.

“I’m totally disgusted with the threats from sports teams, entertainers, and some major corporations who want to punish cities and states who want to keep men out of ladies rooms,” Patrick wrote. “The world has gone mad, and we must stand and fight.”

Straus is Disgusted

While Patrick is clearly an ideologue, House Speaker Straus is a traditional Texas Republican in that he is moderate and business-oriented. He has openly criticized fellow Republicans for focusing on a bathroom bill instead of putting more than a billion dollars into public schools.

Not only does Straus believe the bathroom bill is bad for business in Texas, but he also has moral objections.

Author Lawrence Wright wrote in The New Yorker that Straus told him about a senator coming to his office with a proposed compromise just before the bathroom bill collapsed in May.

“I’m not a lawyer, but I am a Texan,” said Straus, according to the magazine. “I’m disgusted by all this. Tell the lieutenant governor I don’t want the suicide of a single Texan on my hands.”

And Now My Take

Texas holds a special place in my heart. The Lone Star State means freedom, unending opportunity, personal liberty and a people who value hard work and enterprise.

Taking away freedom and liberty goes against the very promise of Texas, which is precisely why I choose to live here. As Sam Houston said long ago, “Texas has yet to learn submission to any oppression, come from what source it may.”

I think an editorial from the Houston Chronicle said it best, “No one should mess with Texas. Most especially, its politicians.”

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

A Calm, Stable, Predictable World of Work is Not Happening

In Corporate Site Selection and Economic Development on July 9, 2017 at 2:29 pm

A world in flux, of great uncertainties, characterized by deep tectonic shifts in advanced economies, affecting the future of work. This is the world that we are living in.

We know that automation, robotics and artificial intelligence offer higher productivity, increased efficiencies, safety, convenience, and economic growth. But these digital technologies raise questions about how people will come out on the other end. Everyone will not go home with a prize.

Technology has been reshaping the workplace since the Industrial Revolution. In 1900, 41 percent of American workers were employed in agriculture, but by 2000, automated machinery had brought that number down to just 2 percent.

The difference today is the speed by which digital technologies are developing, which can disrupt jobs, skills, wages, and the nature and future of work. We might prefer a world of work that is calm, stable, and predictable but the reality is far from that, leaving many angry, confused and depressed.

I watched the angst play out this past week on television, images of mostly young protesters, identified as “anarchists” by some, battling it out with police at the G-20 Summit in Hamburg, Germany.

Without being there and wading into the crowd of an estimated 100,000 protesters to ask questions, I can only surmise that most blame governments, global institutions, corporations, and establishment “elites” around the world for causing or allowing their limited income-earning opportunities.

The very thought of having the G20, a small group meeting behind closed doors, making decisions that affect the entire world, provides plenty of fodder for the protesters. Many see capitalism itself as the main culprit.

And to some degree, I actually get that. Keep in mind that household incomes in advanced economies have been stagnating worldwide for decades, and there are increasing skill gaps among workers.

In the United States and the 15 core European Union countries (EU-15), there are 285 million adults who are not in the labor force—and at least 100 million of them would like to work more.

Collapse of the White, High-School-Educated Working Class

In this country, we are seeing a dramatic rise in “deaths of despair” from drugs, alcohol-related liver diseases and suicide among middle-aged, less educated whites who face tepid demand for their limited skills and stagnant wages.

I spoke last week to an economic developer, a friend, from Ohio whose community has been wracked by hundreds of opioid overdose deaths.

“This is real and we need to get a handle on this. We cannot ignore it,” he said.

A recent analysis by Princeton economists Anne Case and Angus Deaton paints a portrait of a gradual “collapse of the white, high-school-educated working class after its heyday in the early 1970s,” whose health, mental well-being, and attachment to the labor force have become successively worse for people born after 1945, they said.

In 2015, the two researchers discovered that death rates had been rising dramatically since 1999 among middle-aged, less educated white Americans, reversing decades of longer life expectancy.

By contrast, they found that the mortality rate has continued to decline for whites with college degrees, but also for blacks and Hispanics, who face many of the same income struggles as less educated whites.

So why a rising mortality of working-class white adults? It appears to be rooted both in worse job opportunities and increasing social dysfunction, following generations of relatively stable lives that involved job advancement and an expectation of living better than one’s parents, the researchers said.

“It seems to be about accumulating despair,” Ms. Case told the Wall Street Journal in March.

Wages aren’t rising with age now as much as they once did for high-school-educated white men, and the jobs available to them have changed with little upward mobility.

“The company man job has gone away for working-class people,” Mr. Deaton said.

A Corrosive Impact

Now, I realize that linking protesters at the G20 in Hamburg with decreased mortality among the high-school educated whites in America may be a stretch for many of you. It’s a bit of stretch for me as well.

But still I believe it so. A 2016 McKinsey Global Institute report, Poorer than their parents? Flat or falling incomes in advanced economies, finds that between 2005 and 2014, real incomes in 25 advanced economies were flat or fell for 65 to 70 percent of households, or more than 540 million people.

To suggest that the economic and social impact of that is corrosive is an understatement. We are seeing the ramifications play out in Hamburg and in Appalachia and virtually all points in between.

This is especially true in rural America, where opportunities are limited and where an embitterment has taken root against the federal government on the widespread belief that Washington has forgotten them. (I’ve seen this in countless communities and have written about it in past blogs.)

Yes, globalization has brought numerous benefits, including lifting millions of people in emerging economies into the consuming class (China in particular). But it also has eliminated millions of good-paying manufacturing jobs in this country, and make no mistake, we’re still reeling from it.

Men Not At Work

Curiously, many men have taken themselves out of the workforce, essentially given up on looking for work. Despite the low unemployment rates across much of the country, one in seven, (or 15 percent) of American men between the ages of 25 and 54 currently aren’t working—and this number has been on the rise for decades.

In a 2016 report, President Obama’s Council of Economic Advisers examined the declining labor-force participation rate and suggested that a drop-off in good jobs for low-skilled men was part of the explanation. The theory goes that these typically less educated men don’t find it worth their while to seek out bad jobs.

Employers Want Skills

What is clear is that having strong back and a good attitude is no longer enough. Employers want people with skills. A man with only a high school diploma is twice as likely to be out of work as a man who has a four-year college degree.

That is not to say that all young people should go to college and get a bachelor’s degree. People can get the needed skills through vocational training for a rewarding career, but only if it is offered, which is a sticking point in many, particularly rural places.

The lack of vocational training in many places only exacerbates the problem of men dropping out of the workforce. As I mentioned in my last blog, It’s Time to Appreciate Apprenticeships, I have been to community colleges in small towns where the only vocational classes being offered were in cosmetology.

Many experts disagree on what automation, artificial intelligence and machine learning will mean for the workforce, the economy and our quality of life. This much we do know, that for the first time, digital technologies could affect prospects for everyone in every demographic and skill level.

It will change how we work. The most pressing question is whether people will have the needed skills to perform the jobs that do remain.

Big Questions, Few Answers

Few “futurists” imagine a future with large, dependable employers that can help American workers secure income, health care, and retirement. That does not seem to be in the cards, which means the central role of employers needs a re-examination.

If large employers are no longer islands of security and stability (and they are not), what will replace them? Do we owe each other a pathway for a meaningful life of work?

These are big questions for society to grapple with that only now we are beginning to face. I am not certain what the world of work is going to look like in the future. (I have some ideas, as I believe the future of work will shape cities and regions.)

Predictions about the future of work is a fool’s game. We should remember John Kenneth Galbraith’s reminder that, “We have two classes of forecasters: Those who don’t know — and those who don’t know they don’t know.”

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

It’s Time to Appreciate Apprenticeships

In Corporate Site Selection and Economic Development on June 25, 2017 at 7:44 pm

A few years ago, I attended an event in which a high ranking officer of the National Association of Manufacturers was giving a speech about the dire need for skilled workers in the United States.

Afterward, I approached the speech giver and asked why there was little impetus for apprenticeship programs in the U.S., as there was in Germany.

“We’re not Germany,” the NAM officer said and left it at that. Nothing else.

To say that answer was unfulfilling is an understatement. My first urge was to reply, “No sh*t, Sherlock,” but I did not.

A Great Insufficiency

I understand that education and training systems evolve from every nation’s unique social, cultural and political climate. I get that. But it’s also painfully clear to me of our nation’s insufficient education and training system.

In my role as a consultant, I’ve been to too many communities where vocational training is paltry to say the least, where economic developers and community college presidents have no working relationships, and where industry and local educators are not talking.

I can think of three rural communities that I visited recently where there were community colleges, but the only vocational classes being offered were in cosmetology. Really?

If there is one single aspect that can really give a community, big or small, a competitive advantage in terms of business attraction, but also in retention and expansion, it is vocational training. And yet, too many times, I just don’t see it. Mind you, I look for it, but it’s just not happening in many places.

We’re All Guilty

I believe the largely lackluster state of vocational education in this country is the single biggest failing of economic development. But please understand that I am not blaming economic developers. Parents, educators, industry, heck, we are all guilty here.

We tell young people to go to college and get your bachelor’s degree. Never mind that less than half of those who enroll in college will actually get one. Those who do get their four-year degree come out of school with crushing levels of debt.

Now marry this with the fact that the U.S. is not producing sufficient numbers of skilled workers to meet employer demand. There were 6 million job openings in April, a record high, at a time when 6.9 million are unemployed.

About 95 percent of employers say they’re having difficulty finding skilled and available workers, according to a recent survey by Business Roundtable.

President Trump Weighs In

Earlier this month, President Trump announced plans for advancing apprenticeships and work-based learning as central strategies for addressing the skills gap and preparing the U.S. work force for the jobs of the future.

On the face of it, this sounds like a very good thing. It well might deepen collaboration among community colleges, employers, labor, work force boards and other partners in developing high-quality work-based training programs. Community colleges in particular could play a vital role in apprenticeships, providing the classroom instruction that complements on-the-job training.

A Bipartisan Goal

I say “might” and “could” largely because of the weak or sometimes nonexistent impacts of many federal training programs. White House officials say the current setup for job training programs — there are 31 different job training programs across 14 government agencies — doesn’t make sense.

Still, the idea of apprenticeships has become a bipartisan goal. (And you don’t see too many of those emanating from Washington these days.) Bipartisan bills in Congress call for providing tax credits to companies that offer apprenticeships.

Some states, Michigan and South Carolina come to my immediate mind, are taking steps aimed at expanding apprenticeships. Janet Yellen, the chair of the Federal Reserve board, has praised South Carolina’s Apprenticeship Carolina.

Earn While They Learn   

An apprenticeship is a combination of on-the-job training and related classroom instruction under the supervision of a journey-level craft person or trade professional in which workers learn the practical and theoretical aspects of a highly skilled occupation.

The best part is that apprenticeships allow people to develop needed skills while they earn money. For their part, employers gain a pipeline of skilled workers who have been shown to increase productivity and boost the bottom line.

“Apprenticeships place students into great jobs, without the crippling debt of traditional four-year college degrees. Instead apprentices earn, while they learn,” President Trump said in signing an executive order that would roughly double to $200 million the taxpayer money spent on learn-to-earn programs.

The president’s executive order for the “Apprenticeship and Workforce of Tomorrow” program includes a call for expanding apprenticeships in high schools, Job Corps, community colleges and four-year colleges. It gives access to the formerly incarcerated, members of the armed forces and veterans.

It mandates that the secretaries of commerce and labor encourage business leaders to use apprenticeships in such key sectors as manufacturing, infrastructure, cybersecurity and healthcare.

According to Labor Secretary Alexander Acosta, registered apprenticeship programs have resulted in jobs paying an average of $60,000 per year. About 87 percent of apprentices in the U.S. are employed after completing their training programs.

Minuscule in Comparison

The number of apprentices in the U.S. fell from 488,000 in 2003 to 285,000 in 2012. But that number rose back up to 450,000 by last year, in part due to the bipartisan Workforce Innovation and Opportunity Act.

With a projected shortage of 5 million skilled workers by 2020, an expanded apprenticeship system would clearly go a long way toward filling the gap. But the number of apprenticeships in the U.S. is minuscule for the size of the economy, and in comparison to other industrialized western countries.

That’s due in large part because both employers and employees in the U.S. have little understanding about what apprenticeships are and the value that they provide.

This basic misunderstanding means that U.S. companies are less willing to pay for apprenticeships.

The German Model

It’s markedly different in Germany, where apprenticeship programs date back to the Middle Ages and continue in large part because of the country’s robust manufacturing sector.

German apprentices spend between three and four days a week training at a company and then one or two days at a public vocational school. The company pays wages and tuition.

After three years, apprentices take exams to receive nationally recognized certificates in their occupation. Many continue working full time at the company.

Thanks in large part to its apprenticeship programs, unemployment for German youth is one of the lowest in any of the world’s advanced economies: 6.5 percent as of January 2017, compared to an estimated 11.5 percent in the U.S.

The appeal of vocational training in Germany, which has adapted apprenticeship training to many middle-skills positions, from nurses’ aides and mechanics to bookkeepers and child-care workers, is that employment after graduation is almost practically guaranteed.

That virtual promise of employment is why about half of German high school graduates go into vocational programs.

Not For the Dumb Kids

Not so in the U.S., where four-year university degrees are seen as a panacea to good-paying jobs. The Bureau of Labor Statistics said two-thirds of high school graduates who enrolled in college in 2015 opted for four-year degrees.

And let’s face it, there remains in this country a stigma about vocational training, which perplexes me to no end. It’s for the dumb kids, when it is not and should never have been viewed as such.

In recent years, there’s been a greater push for the U.S. to adopt apprenticeship training programs and President Trump’s executive order exemplifies that. I only hope it gains momentum and becomes a real force in the private sector.

No, we’re not Germany. And Germany is not us. But that is not to say that we cannot learn, adapt and modify and make it our own.

We can come to appreciate apprenticeships and better vocational training if we only just do it. Frankly, I think we have no choice if we’re going to remain a competitive nation.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Idiots Abroad: My Entirely Too Long European Vacation with A Few Business Meetings Thrown In

In Corporate Site Selection and Economic Development on June 18, 2017 at 3:16 pm

A lot can happen in three weeks. And a lot did happen in the three weeks that my wife and I were rumbling, bumbling and stumbling through Europe.

President Donald Trump announced the U.S. would withdraw from the Paris Climate Accord when we were in Paris. In more Trump news, the president announced travel and business restrictions toward Cuba, while fired FBI Director James Comey accused the Trump administration of telling “lies” in testimony before the Senate Intelligence Committee.

A gunman fired at Republican members of Congress as they held a baseball practice, wounding House Majority Whip Steve Scalise and four others. General Electric announced that CEO Jeff Immelt would step down after nearly 16 years on the job, and Amazon said that it would be buying Whole Foods.

Meanwhile, I was getting telephone calls and emails relating to my business/economic development consultancy back home. While I had others working on my behalf while I was gone, I still felt untethered and isolated.

Lucky For Me

Amplifying this feeling was the fact that doing relatively simple things, like driving, buying gas, parking, really making any sort of purchase, could be challenging if not completely perplexing in the countries that we were visiting. Indeed, there were times when I felt like a complete idiot, which lucky for me is “idiot” in French, “idiota” in Spanish, Portuguese and Italian.

Mind you, I have been to Europe many times on business trips. However, those trips were mostly in places where English is more widely spoken, and where there was a buttoned-down itinerary that never left me truly out of my element.

This trip was different. Most of it, not all, was in southern Europe where outside of the confines of our hotel, “bonjour” or “buenos dias” or “bom dia’ or “buongiorno,” followed by “do you understand the words coming out of my mouth?” were met mostly with quizzical looks. (I think one fellow thought I was asking him where I could buy a giraffe.)

We in turn responded with our own dog-like quizzical looks when people would speak to us in French, Spanish, Portuguese and Italian.

Playing the Part

But the language barrier, while real, is really not so bad and could be viewed as a plus. Being an idiot abroad should, if you have any smarts about you, cut down your ego, which in turn should make you more humble and polite. Being a polite if not somewhat clueless tourist can have its perks if you play your cards right.

We played the part of touristes to the hilt in Versailles and Paris and Geneva; turistas in Barcelona and Lisbon (Lisboa); and turisti in Milan (Milano), Florence (Firenze), Venice (Venezia) and Rome (Roma), and were treated quite nicely in all these great cities.

Most if not all date back to the days of the Roman Empire, and all exemplify incredibly beautiful art and architecture, good food, and the wealth and power of the Catholic Church.

I Shall Dream of It

I cannot tell you with certainty how many grand cathedrals I entered (probably a dozen), or how many grandiose paintings and sculptures that I saw of figures from the Bible, saints, popes and martys, sometimes naked or nearly naked, sometimes not.

The one that left the biggest impression on me was St. Bartholomew Flayed (1562) in the Milan Cathedral. It is a gruesomely realistic, sculptured figure of a stoic, skinless young man.

During a tour of the Milan Cathedral in 1867, Mark Twain found the statue by Marco d’Agrate repulsive. “I am very sorry I saw it, because I shall always see it now. I shall dream of it sometimes.”

My Consternation

Also in Milan, I got to see one of the world’s most famous paintings, The Last Supper by Leonardo da Vinci. It sits inside the Convent of Santa Maria delle Grazie. The painting depicts the consternation that occurred among the Twelve Disciples when Jesus announced that one of them would betray him.

After viewing the painting, I experienced a bit of my own consternation when I entered the restroom at the convent. Rather than a toilet, there was a hole in the tiled floor with designated places to put your feet before essentially squatting. I chose not to.

Among the Herd

In Vatican City, which is a separate country within the confines of Rome, we were able to see the Sistine Chapel ceiling, painted by Michelangelo, a cornerstone work of High Renaissance art.

Central to the ceiling painting are nine scenes from the Book of Genesis, which I did not get to fully fathom, because I was stuck in the midst of a tightly bunched, moving herd of tourists that was being shunted in and out of the chapel.

Indeed, in many of the places that we visited, there were entirely too many tourists present. American journalist Russell Baker said, “The worst thing about being a tourist is having other tourists recognize you as a tourist.”

As I did not wear a ball cap, or shorts, or athletic shoes in my travels, I tried not to look the part of a tourist, although I am sure that I mostly failed in that regard.

At times we were able to successfully bust out of the herd, only to be caught up in it again. It was frustrating.

Looking the Part

Businessmen truly look the part in northern Italy, particularly in Milan. They invariably wore wonderfully tailored suits and almost all carried fine leather briefcases.

I had several productive business meetings, and while I was always treated with great reverence and respect, I left the meetings feeling that I was under dressed. I won’t make that mistake again, even if I am on vacation.

One meeting in particular reminded me of the importance of establishing trust and relationships in business and this holds particularly true for European, family-owned companies.

Phase Zero

When I was an economic developer some years back, I noticed that few of my colleagues would help foreign companies set up meetings in the United States. I did just the opposite. I actively set up meetings for them, knowing full well that I could win their favor by doing so and thereby win their business.

Phase Zero is how a knowledgeable businessman in Milan explained it to me. The idea is to be willing to work on behalf of these mostly family-owned companies at no cost before a project even becomes a project.

In short, they are cautious and want to put a toe in the water to see if the U.S. makes sense for them. If you can assist in that process by setting up meetings for them, you will be remembered and stand a better chance of being hired or rewarded in some capacity.

I assured my contact in Milan that I was perfectly comfortable doing Phase Zero work with Italian companies. Indeed, that I had a history of doing such work (within reason) to prove myself to be loyal, competent and trustworthy.

Down Went Barber

I’m convinced that Europe has it all over the U.S. when it comes to healthcare. I speak from experience, as I took a face dive in the lobby of the Hilton Hotel in Paris. I busted a big gash over my right eyebrow, and found myself bleeding like a stuck pig.

The hotel manager was Johnny on the Spot and paramedics were called. They put me in an ambulance and hauled me to a hospital where they sewed me up. I got three stitches and a bill. Total cost, including the ambulance: 90 Euros, about $100.

Had that have happened to me in the U.S., the ambulance ride alone would have been $500. Total cost would likely have been more than a $1,000, maybe $2,000.

I believe healthcare in America remains one of our biggest problems and will remain so as long as the insurance and pharmaceutical industries essentially dictate terms. We could use another Teddy Roosevelt about now.

From Lion to Lamb

With stitches over my eye and a bruised cheek, I arrived in Barcelona looking like I had been in a bar fight, which was fine by me. Better to look like a lion than a lamb.

My brave exterior would soon fall away when my wife rented a scooter for us to travel about the city. Please understand that I have driven thousands upon thousands of miles on motorcycle in the United States, from coast to coast.

But put me on a scooter in five lanes of traffic in a roundabout in Barcelona (actually there were no discernible lanes or rules to go by), which is exactly what happened more times than I would like to remember, and you might have heard me cry out like a little lamb.

But somehow, someway, we survived our three weeks in Europe relatively unscathed. Well, I have one scar. We got home to Dallas late, about midnight. I was out the moment my head hit the pillow and I slept about 10 hours.

The next morning, I couldn’t help but notice that the coffee I was drinking tasted really bad. But it was good to be home.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Manufacturing is Common Sense

In Corporate Site Selection and Economic Development on May 21, 2017 at 7:42 pm

Our ability to perceive, understand, and judge things that are common to most of us, well, that is common sense. It is central to civilization and probably why we’re still around as a species.

Remember that Common Sense, a pamphlet written by Thomas Paine in 1775–76 advocating independence from Great Britain to people in the Thirteen Colonies, forged a nation and that which became a world superpower.

As Americans, we hold common sense to be a great attribute, that is until we elect a person to public office. Then something very strange happens. That person, who previously exhibited a great abundance of common sense, becomes a politician.

As a result, common sense becomes a casualty, and our trust in our institutions erode. Notwithstanding this erosion of faith, I truly believe in the common sense of the common man. He may not understand immediately, but he eventually discerns the truth. He will get it.

Critical to Our Nation’s Future

Which is why I am heartened by a recent survey that show that an overwhelming majority of Americans see manufacturing as critical to our nation’s future prosperity.

It is only common sense to believe this. But now it is up to our elected officials to shirk off the D or the R from their shirtsleeves, and come together to enact common sense policies to grow manufacturing in this country.

I will offer up some ideas on that front, but first let’s take a look at that recent U.S. public opinion survey by Deloitte and The Manufacturing Institute. Among the findings:

  • 83 percent believe U.S. manufacturing is critical to economic prosperity
  • 81 percent feel it is important to maintaining their standard of living.
  • 81 percent believe trade and export of U.S. manufactured goods benefits the economy
  • 76 percent believe the U.S. needs a more strategic approach to developing its manufacturing base
  • 76 percent believe the U.S. should further invest in the manufacturing industry.
  • 71 percent believe the U.S. should ensure long-term, stable funding for programs that spur innovation and advanced manufacturing.
  •  88 percent expect future manufacturing jobs will require a higher level of technical skill

They Get It

In a nutshell, this survey confirms that most Americans correctly view manufacturing as vital to America’s livelihood and that we as a country should invest more in manufacturing.

They understand that manufacturing jobs will be more high-skill and less manual labor, and they know that manufacturing fuels job creation in this country. (Something that economic developers on the state and local level have long appreciated.)

Having grown up in a manufacturing family (my father was the president of a foundry) and having worked on factory floors, I have special affinity for manufacturing. Most of the companies that I have helped as a corporate site selection consultant have been manufacturers.

They like the fact that I am true believer in manufacturing and that the location of a future plant, to which I will help in finding, is critical to its long-term operational success. Factoring costs, which includes the good, the bad and the ugly, is the essence of corporate site selection process.

The Smart Factory Needs Smart People

One critical factor in finding that optimal location for a future plant, which should not be shock to anyone, especially economic developers, is the technical talent within an existing local (commuting distance) labor pool.

As I have written many times, we are in but the early stages of a digital industrial revolution. The “smart factory” of the future, employing digital technologies such as the internet-of-things, big data analytics, artificial intelligence and advanced robotics, will require smart people.

By the end of 2022, manufacturers expect that 21 percent of their plants will be smart factories, according to a new report by Capgemini’s Digital Transformation Institute. Sectors, such as aerospace and defense, industrial manufacturing and automotive, where people are working alongside intelligent machines, are expected to be the leaders of this transition.

To suggest that the shift to smart factories will transform the labor market in this country is an understatement. Companies see automation as a means to remove inefficiencies and low-skill jobs. In short, those manning the smart factory of the future must have digital skills.

Conversely, it also means that there will be more employment opportunities for highly skilled workers in automation, analytics and cybersecurity.

Some Companies Step Up

U.S. manufacturing job openings are quickly outpacing qualified candidates, resulting in a widening skills gap across the industry. Between 2015 and 2016 an average of two unemployed manufacturing workers existed for each open position, according to the U.S. Labor Department.

Some companies, seeing a way to lower costs and accelerate innovation, are stepping up to the plate by training their existing employees to use cutting-edge digital technologies. Capgemini found in its study that more than half (54 percent) of respondents are providing digital skills training to their employees and 44 percent are investing in digital talent acquisition to bridge the skill gap.

GE, which invests more than $1 billion in employee development each year, announced in March a “Brilliant Learning” curriculum that will include immersion boot camps on advanced manufacturing, additive and other digital technologies.

“Today, manufacturing is driven by productivity – and when combined with the merging of hardware and software, the need for a highly skilled labor force is becoming integral to the success and modernization of our industry,” said Philippe Cochet, GE’s Chief Productivity Officer in a prepared statement.

“At a time when the creation and retention of U.S. jobs in America’s manufacturing cities is more important than ever, GE is helping to secure these jobs through the execution of ‘Brilliant Learning,’ and we hope it becomes a model for the industry.”

Meeting the Needs of People and Companies

A 2016 Pew Research Center survey, “The State of American Jobs,” found that 87 percent of workers believe it will be essential for them to get training and develop new job skills throughout their work life in order to keep up with changes in the workplace. Again, the common man showing a lot of common sense.

A central question about the future is whether formal and informal learning structures will evolve to meet the needs of people who want to work and “stay current” and companies who want skilled workers.

Pew Research Center and Elon’s Imagining the Internet Center surveyed technologists, scholars, practitioners, strategic thinkers and education leaders in the summer of 2016 on the future of workplace training.

Seventy percent of the 1,408 respondents said successful programs would emerge to teach new skills at the scale that is necessary to help workers keep abreast of tech changes. But 30 percent said “no,” that they do not believe adaptation in teaching environments will be sufficient to teach new skills at the scale needed to keep up with changes in technology.

Some Communities Will, Others Won’t

As one who does economic development consulting for communities in addition to corporate site selection, I see a spotty record. Some communities will make a valiant effort to offer and keep up with what is essentially vocational training that begins in elementary schools and lasts a lifetime.

It is these communities that are preparing for a smart factory future by preparing their people with needed digital skills.

Sadly, I come across some communities that are not even thinking about this, much less doing anything about it. Now guess which communities are going to do well in the future with manufacturing and which ones aren’t.

It’s only common sense. I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

A Ho-Hum Opinion of Cars May Be Part of the Problem

In Corporate Site Selection and Economic Development on May 14, 2017 at 9:59 am

If you were to believe much of what you hear and read about this seemingly monolithic group called millennials, you might wonder if they are not an alien bunch from outer space.

Indeed, marketers and consultants have determined there is much money to be made if they can convince us that millennials have special wants and needs and cracking the code is critical if we are going to reach them

While I acknowledge there are some generational differences in how we all see the world, I suspect that much of what we are being told about millennials, which is shorthand for young Americans, is a crock.

Never mind there is no consensus on what a millennial is. Some say millennials are anyone born between 1980 and 1995 while others say it is between 1982 and 2000.

Don’t Put Them in Box

More to the point, we seem obsessed with generational labels and stereotypes.

“There’s about 80 million millennials right now and some of those millennials are CEOs in Silicon Valley, and some of them are illegal immigrants in the Midwest who are waitressing somewhere,” said Jessica Kriegel, author of Unfairly Labeled: How Your Workplace Can Benefit from Ditching Generational Stereotypes in an interview with USA Today.

“You really can’t put them all in a box. And what we do is, we put them all in a box, and that box is really based on a middle-income, white, American person and then we just say that’s the only kind of millennial that exists right now.”

We have been told ad nauseam that millennials would prefer not to own and will thereby drastically shape our future consumer society. And while there may be a kernel of truth to that, the bigger aspect is that digital technologies are changing how and what we buy via online transactions, and tech savviness has much more to do with socio-economic status than age.

They Actually Do Own

Fifty-three percent of millennials actually do own homes and overall, 88 percent of millennials who don’t hope to one day, according to a survey conducted by Qualtrics, a Provo, Utah-based survey software firm, and venture capital firm Accel Partners (a Qualtrics investor).

Nearly 80 percent of millennials own cars and 75 percent of millennials who don’t own a car aspire to own one, the Accel + Qualtrics Millennial Study 2017 found.

In last week’s blog, A Rocky Road Ahead for the Auto Industry, I wrote about how some industry analysts believe auto sales have peaked and are set to trend downward. Without trying to put them into a box, young people’s attitudes toward cars might be partly responsible.

A Softening of Drivers Licenses

One major truth facing the industry is the fact that a lower proportion of young people have drivers licenses today compared to their counterparts in the 1980s.

In a 2016 report examining changes in driver licensure in the U.S. from 1983 to 2014, researchers at the University of Michigan found a continuous decrease in the percentage of those under age 45 with a license.

About 87 percent of 19-year-olds in 1983 had their licenses, but more than 30 years later, that percentage had dropped to 69 percent. Even the proportion of Americans ages 45-69 with driver’s licenses have declined overall since 2008, following a 25-year rise.

Delayed Buyers

One could surmise from this study that millennials could bring about a historic collapse in auto sales because they will reject vehicle ownership entirely in favor of car-sharing, on-demand services and, in a few years, shared autonomous vehicles.

In fact, the share of the new-car market jumped to 28 percent for those between 21 and 38 percent in 2015, according to the J.D. Power Information Network, which defines millennials as those between 21 and 38.

That’s a big improvement from 2010, when millennials — who make up around 30 percent of the population — bought just 17 percent of new cars. That had auto executives wondering aloud if the trend would be permanent.

Still, it is probably true that many millennials simply cannot afford to buy a new car, because they are under employed and/or saddled with tons of college debt. They will either resort to buying a used car or hold off on car ownership entirely.

This is particularly true in large cities where housing prices are high, public transportation and Uber or Lyft are available and where just parking a car can be a major expense.

Even if and when these young, carless urbanites become middle-aged and move to the suburbs, thereby requiring their need for a car, the fact that they have postponed buying a car poses a problem for the auto industry. It likely means they will buy fewer cars during their lifetime.

The Utilitarian Aspect

I grew up in the generation of the “muscle car,” exclusively Detroit-powered V-8s known for creating a little havoc on the streets. The closest I got to one was a 1968 Pontiac Firebird 328. It was red with a white convertible top.

My next vehicle would be a 1969 Volkswagen bus. Even though they were vastly different vehicles, both the Firebird and the VW bus represented freedom of sorts for a dumb kid venturing out into the world.

Many of today’s young people view cars less as a status symbol and more like a utilitarian thing, like a pipe wrench. A survey last year by NerdWallet reported that while 75 percent of millennials who own a car plan to buy another within the next five years, 43 percent said owning a car is a hassle.

In short, car ownership appears not have the appeal or fascination with many young people today as it did with my generation. In a recent trip to Austin, I was struck by how many bicycles were parked outside of neighborhood bars and restaurants.  Made total sense to me now.

But again, it is lazy thinking to lump all young people into the millennial box with the belief that they think one way. A young man growing up in rural Oklahoma will likely see the world somewhat differently from a kid growing up in Boston.

For the kid in Oklahoma, that first set of wheels may indeed represent freedom, whereas the kid in Boston or Austin may be thinking, “I’ll get one if and when I have to.”

Carless in Seattle

Census data show that from 2010 to 2015, the percentage of Seattle households that own a vehicle declined, according to a report last week by The Seattle Times.

During that five-year span, car ownership among the city’s young , those younger than 35, had declined by about 3 percentage points. The data suggests that young newcomers to the city are, more often than not, choosing to forgo owning a car.

It’s a combination of economics and priorities.  As Seattle housing costs rise, cars are one expense that many young city dwellers are willing to sacrifice, Mark Hallenbeck, director of the Washington State Transportation Center at the University of Washington, told the newspaper.

“If you get away from the high set of fixed expenses that go with owning a car — monthly payments, parking, insurance — you can pay for the apartment … ,” he said. “You can go out to bars to meet your friends, and you can get around everywhere you need to go.”

Aside from the fact that many young people, particularly those living in large cities, have a rather ho-hum opinion of cars, there are likely other factors contributing to a cooling of car sales.

Too Many Cars on the Road

Deutsche Bank said in a recent report that the combination of rising interest rates and a slide in used-vehicle prices, make for a potentially not-so-good scenario for the auto industry.

Today’s cars are much more durable than in the past and fewer are being taken off the road. Scrappage has declined to about 11 million a year from about 13 million to 14 million a decade ago. Total vehicles in the U.S. have increased to 270 million, from 249 million at the end of 2012.

“This has led us to question whether the U.S. is broadly oversupplied, and whether trend demand in the 17 million range is fundamentally supported,” the Deutsche Bank analysts wrote. “If it is not, the oversupply should be self-correcting — the U.S. market will experience declining used-vehicle prices, pressuring new vehicle sales.”

Faced with the shifting consumer tastes of some (not all) millennials, an oversupply of cars on the road, and declining used-car prices, it would appear the auto industry faces some major headwinds that could result in softening sales and industry layoffs.

But this has long been a cyclical industry, with ups and downs. It should weather the storm much better than it did during the Great Recession.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

A Rocky Road Ahead for the Auto Industry

In Corporate Site Selection and Economic Development on May 7, 2017 at 10:12 am

Spring has sprung and ostensibly, things are looking not so bad for the U.S. economy.

The Labor Department on Friday said employers added 211,000 jobs in April, the 79th straight month of job gains, and the unemployment rate is down to 4.4 percent, its lowest since May 2007.

Wages are up (the average hourly earnings rose by 2.5 percent from the previous year to $26.19), and we are enjoying low inflation, low interest rates and low fuel prices at the pump.

With all these things going for it, why would the automotive industry be nervous? After all, U.S. consumers bought a record number of new cars and trucks in 2016. While a repeat performance in 2017 might be a tall order, there’s no reason to be overly concerned, right?

Well, maybe there is. After seven years of steady growth — including three consecutive years of record sales — some industry observers believe auto sales have peaked and are set to trend downward.

Sales Are Off

In April, sales of cars and light trucks were off 4.7 percent from the year before, a decline of 70,000 vehicles. That marks the fourth straight month, every month this calendar year, in which sales have declined on a year-over-year basis.

It is the longest stretch of declines since 2009, when the industry was embroiled in bankruptcies. So far in 2017, sales are off 2.4 percent, or by 133,000 vehicles, with the top six automakers in the U.S. market all reporting declines from their April sales a year ago.

Ford car and light truck deliveries fell 7.1 percent last month, while GM’s dropped 5.8 percent and Toyota’s decreased 4.4 percent. All three companies reported slumping sales for passenger cars including the Ford Fusion, Chevrolet Malibu and Toyota Prius sedans.

Most analysts have predicted that auto sales will suffer a small decline this year — to about 17.2 million vehicles from the record of 17.5 million sold last year.  Mark Wakefield, managing director and head of the automotive practice at AlixPartners, is forecasting auto sales to decline to 16.6 million vehicles in 2018, and 15.2 million in 2019.

“People are starting to see that this is not necessarily a plateau,” Wakefield told Bloomberg. “It’s a meaningful reduction, and they’re starting to make plans around that.”

Layoffs Have Begun

In response to softening sales, Ford Motor Co. announced last week that it would cut production of its medium-duty F-650 and F-750 model trucks, and temporarily lay off 130 workers at the Ohio Assembly Plant in Avon, Ohio.

According to The Wall Street Journal, the layoffs will likely last until Ford launches the latest version of its F-Series in September.

Ford temporarily shut down five plants in late 2016, and Chief Financial Officer Bob Shanks told automotive analysts in March during a conference call “Don’t be surprised” to see further temporary reductions in the months ahead.

Also, last week, General Motors Co. said it would shut down its Lordstown, Ohio, plant in July for two weeks, on top of a two-week shutdown previously announced for June.

GM will lay off as many as 1,100 workers at its Lansing Delta Township Assembly plant in Michigan when it cuts the plant’s third shift this month. About 700 of the workers are expected to be rehired by the end of the year. Three other G.M. plants are eliminating shifts, moves that will idle more than 3,000 other workers.

Said GM Chief Financial Officer Chuck Stevens in a conference call last week: “We are very focused on acting like we are in a downturn.”

Fiat Chrysler is laying off 3,200 employees at its Toledo Assembly Complex in Ohio, as it shifts Jeep Cherokee production to a plant in Illinois and prepares the Toledo plant make an all-new Jeep Wrangler. The laid off workers are expected to return, but the callbacks will not begin until the year’s fourth quarter. Another 550 jobs are being permanently eliminated from suppliers.

Bloating Inventories

When sales don’t materialize as expected, however, inventory can and usually will pile up. At the end of April, GM reported that it had 935,758 vehicles in inventory—which is 100 days’ worth of selling activity at the current rate. A year ago, the company had 618,000 vehicles in inventory, representing only 71 days of selling activity.

Ford had about 72 days’ worth of selling activity in inventory in April (about the same as it did in April 2016). The industry considers 60 days ideal.

When inventory builds up when sales are declining, dealers and automakers will often resort to cutting prices, providing more incentives, pushing credit on easier terms. Such short-term measures to boost sales will dampen profits.

Of course, any cuts in auto production in the U.S. are counter to the wishes of President Trump, who has been pushing carmakers to make more cars here and import fewer from other countries.

The Big Kahuna

U.S. manufacturing and auto manufacturing jobs have yet to reach their pre-recession levels, but the auto industry has seen steady improvement. Since 2009, when it bottomed out at just over 600,000 jobs, the auto sector has been above 900,000 jobs for the past two years and at 946,300 in April, according to Labor Department.

In short, the auto industry is still a very big deal to this country, and particularly to certain communities where it is the source of better paying jobs. When I was an economic developer in Alabama and Indiana, the automotive industry was the Big Kahuna in my book and I studied it relentlessly.

There is an old saying in the industry that when the economy catches a cold, the auto industry gets pneumonia. That is particularly true for communities where the automotive industry is a big employer.

Michigan’s Remarkable Turnaround

You would think, and you would be partly correct, that Michigan would be particularly vulnerable. Back in 2009, the unemployment rate rose to 14 percent. (It was 5.1 percent in March.) But the recovery in manufacturing jobs from 2009 to 2016 has been nothing short of remarkable.

From 2009 to 2016, manufacturing jobs in Michigan rose by nearly 32 percent compared with just over 4 percent nationally. Nearly one of every three new jobs in the state during that eight-year span was in manufacturing.

Now I know what you are thinking. You’re thinking that so goes the auto industry, so goes Michigan. And while there is some truth to that, what I find most compelling is the fact that most of the new manufacturing jobs were NOT in the auto sector.

Remember that I said that manufacturing jobs accounted for about 32 percent of the total jobs growth in Michigan from 2009 to 2016, compared to 4 percent nationally. Incredibly, non-transportation manufacturing jobs added 18.5 percent.

What this suggests is that when there is another downturn in the economy, and there always another downturn on the horizon, Michigan may fare somewhat better than it has in the past. Mind you, automotive remains hugely important, but there are a host of manufacturers there making non-automotive products in medical device, aerospace, and others.

In neighboring Indiana, the automotive manufacturing sector is a $15.8 billion industry that employs more than 100,000 people. Automotive manufacturing is the second-largest manufacturing sector in Indiana, behind only chemical production. Automotive jobs have seen a 40 percent increase since 2009.

Some Parting Thoughts

As a site selection consultant for companies and an economic development consultant for communities, one of the things I like most about the multi-state Great Lakes Region is its deep bench in manufacturing talent, at least in comparison to much of the country.

That does not mean there are not shortages of talent. The tool & die industry, making the molds for which auto components are made, is facing an acute shortage of experienced and qualified workers, according to a recent recent report by the Center of Automotive Research.

That is but one headwind facing the automotive industry. There are others, which I hope to further touch on in next week’s blog.

In the meantime, I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com