Confessions from Red Country

Last week, I sat down with a group of economic developers from different parts of the country. The presidential election of Donald Trump was fresh on their minds and they wondered aloud how the country would fare.

Several confided to me, sometimes rather sheepishly when we were alone, that they had voted for Trump.

They said they didn’t particularly like Trump, indeed found much of what he said during the campaign offensive, but they voted for him because they could not bring themselves to do the same for Hillary Clinton.

“It’s Ok,” I said, as if taking my cue in a confessional. “You’re not a bad person.” (I did not direct anyone to say 10 Hail Marys, take three aspirin and call me in the morning.)

Consultant Connect, a very good organization that brings economic developers and site selection consultants together, had their road show to Dallas last week, which is why I spoke to the assembled economic developers in a panel discussion and then met with them individually.

Pertaining to the election, we now know that Hillary Clinton won almost 90 percent of urban cores, while Trump won between 75 and 90 percent of suburbs, small cities and rural areas.

As I believe our political views are more often than not shaped by where we live and the company that we keep, I couldn’t help but that think most of the economic developers were mirroring the majority in their communities. And they all came from red states.

Memorable Moments

I was sitting in a restaurant in a small town in southwest Virginia in late July. A waitress, a middle aged woman, told me with chin slightly raised that she was for Trump because “he’s one of us.” I looked around the café, and knew immediately that I was the only outsider there.

A few weeks later, I was on the pilot deck of a barge on the Ohio River. The pilot, a native of Kentucky, told me he was voting for Trump because “my family are coal people.” I nodded as if I fully understood, not wanting to get thrown overboard.

A month later, I am out in the middle of nowhere, somewhere near the border of western Nebraska and Colorado, and I see this Trump sign that is the size of a school bus. Somebody was sending a message.

Of course, I knew I was in red country in all these places, and I knew that stark political divisions in our country existed long before this latest president campaign. Some of these schisms date back to the Civil War.

Most noticeable is between New England, where I spent two weeks on vacation last month, and the South, where I have spent most of my life, often in rural settings. This divide is also evident between the coasts and the interior.

Red, Blue and Gray

The divisions are today exemplified by red and blue, whereas in the past, it was the blue and the gray. Back then, they were killing each other with a fury that they would leave such lasting marks that they still remain today.

In William Faulkner’s native Mississippi, “The past is never dead. It’s not even past.” The Mississippi flag is the only U.S. state flag to include the Confederate battle flag’s saltire.

Red America today is overwhelmingly rural America, comprised mostly of white working-class people of limited financial means but not poor. Listening to them, as I have always made a point to do as I, too, grew up in small towns in “flyover country,”it is clear that their anger and bitterness is directed at a Washington that has not listened to their concerns.

And so they chose to ignore Mr. Trump’s transgressions, believing that he would be best suited to go to Washington to figuratively “drain the swamp.” And so they turned out to the polls in droves for him.

The Big Sort

In 2004, journalist Bill Bishop wrote a series of articles showing how Americans have been sorting themselves into alarmingly homogeneous communities — not by region or by state, but by city and even neighborhood. He would later write a book called, “The Big Sort: Why the Clustering of Like-Minded America is Tearing Us Apart.”

Bishop’s premise, which I agree with, is that people are choosing where they live, and what news programs they watch, based on their particular beliefs and values. And because they seek out like-minded people, they become more closed to other ways of thinking. In short, they become self- radicalized.

I am trying my best to avoid Facebook these days, where there is a chorus of hysteria coming from many of my friends, most of whom are musicians, who contend that anyone who voted for Trump is a racist or at the very least guilty of aiding and abetting.

Progressive on issues of discrimination against the obvious victims of racism and sexism, they are blind to their own class privilege and intolerant of others who may hold opposing viewpoints.

Mind you, I am very concerned about Mr. Trump’s apparent lack of understanding of the basic underpinnings of our Constitution, such as free expression, racial and religious equality, and limited presidential power.

But I accept that he won an election. My advice: Stay calm and let democracy work. The Republic will survive.

No Clean Hands

In an opinion piece for The New York Times, Rabbi Michael Lerner of Beyt Tikkun Synagogue in Berkeley, Calif., writes that neither the left or the right has clean hands when it comes to the deep divisions that have afflicted this country.

Lerner says the right has been all too successful at scapegoating others to explain the pain of working class white people, be they African-Americans, immigrants, Muslims, Jews, liberals, progressives, whoever.

But the left only furthers fans the flames by blaming “white people as a whole for slavery, genocide of the Native Americans and a host of other sins, as though whiteness itself was something about which people ought to be ashamed. The rage many white working-class people feel in response is rooted in the sense that once again, as has happened to them throughout their lives, they are being misunderstood.”

Trump, ever the provocateur, sensationalist, opportunist and marketer, plays to this feeling of alienation, waged a campaign speaking to “the forgotten man and the forgotten women.” And there is a kernel of truth there, even if my liberal friends refuse to recognize it.

“The left needs to stop ignoring people’s inner pain and fear. The racism, sexism and xenophobia used by Mr. Trump to advance his candidacy does not reveal an inherent malice in the majority of Americans,” Lerner wrote.

“If the left could abandon all this shaming, it could rebuild its political base by helping Americans see that much of people’s suffering is rooted in the hidden injuries of class and in the spiritual crisis that the global competitive marketplace generates.”

What Will Trump Do?

As this blog has been and will continue to be a business blog, concerned with affairs of commerce and economic development, I will take a stab at making some predictions about a Trump presidency.

First, I don’t believe this man is an ideologue. (Keep in mind that he was a self-described Democrat until about two years ago.} His convictions are all self-centered, about winning on his terms.

And he will seek out others accomplish that, meaning he will be ever watchful for deal-making opportunities.

Second, this man is a builder, a developer at heart, and build, baby, build is what he knows best and what he wants to do. Forget the wall, that won’t happen, but it is noteworthy that Sen. Chuck Schumer, D-NY, the Senate minority leader, and House Minority Leader Nancy Pelosi, two Democrats that he knows, have already sent word to Trump that they are all too willing to work with him in crafting massive and far-reaching infrastructure spending bills.

I can picture Trump and certain key Democrats having late night meetings at the While House. He will offer a carrot — you don’t fight me in repealing and replacing Obamacare (he is already saying the pre-existing conditions will be protected), and I’ll help you with spending on roads, bridges, airports in your district, creating thousands of new construction jobs for years to come.

The key is that Trump will want the credit. It is what he yearns for. If there is to be a fight, it will be with deficit hawks from his own party.

Of course, I’m no insider to the workings of Washington, but it would not surprise me if Trump sets the gears of the federal government into motion, through his willingness to make deals to make things happen. He wants to make big things happen, and again he wants the credit.

With Malice Toward None

As much of his past rhetoric has been hateful and alarming, I can only hope that the weight and responsibility of the office of the presidency will bring a certain reflective calm and soberness to Mr. Trump. Our country, coming off the most bitter presidential campaign that I have ever seen, does not need a divider in chief.

He may want to read the parting words of President Abraham Lincoln’s second inaugural address.

“With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation’s wounds, to care for him who shall have borne the battle and for his widow and his orphan, to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations.”

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. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.

A Comeback in the Making

I have to think that the best sales people are optimists. They believe they will ultimately win out in convincing others to buy because they are offering a superior product or service and have the message to go with it.

Now they may be deluding themselves. Their product or service may not actually be all that good, but if they convince themselves that it is so, they come off as credible and authentic.

People like authentic, even from eccentrics and misguided kooks.

Economic developers, those charged with selling states, regions and communities, are generally an optimistic lot. And some are truly driven to doing good for a constituency. Few are kooks.

If and when economic developers do come to visit me in Dallas, I am interested in hearing from them on how they go about selling their communities. What are your target industries and why? What workforce training programs do you have in place? What is your inventory of buildings and sites?

It’s also good to put a name and face with a particular place for future reference.

In recent weeks, I have met in Dallas (or rather Plano) with economic developers from New Mexico, Louisiana, Arkansas and Michigan. I spent an entire morning, as part of a panel discussion attended by other consultants, at a downtown Dallas hotel with a gaggle of economic developers from Michigan.

That state in particular has captured my imagination by the sheer breadth of change in a relatively short period of time.

Michigan’s Turnaround Story

People love a story with drama, and I am no different. Michigan and its largest city Detroit were once on top, then hit bottom, and are now in the midst of a comeback. It’s an almost hymnal story of what once was lost but now that is found.

Now the cynics among us, and I plead guilty, would argue that Michigan’s turnaround was inevitable because of an improving national economy and an auto industry rebounding. That certainly helped.

But I also believe the state’s bookish and pragmatic governor, Rick Snyder, deserves more than a little credit in changing a culture of economic development in that state.

His leadership and vision has turned a losing ball club into a winning ball club. Economic developers in Michigan are now true believers or at least the ones I have met.

They are convinced they have a better product to sell, with lower taxes, improved worker training programs, and now they have right-to-work status to hang their hat on. (That was a shocker.)

And like their governor, they have not written off Detroit, but rather want to see it succeed and regain the status of a city with a future.

Saving Detroit

Gov. Snyder did not shy away from the mess that was Detroit. Decades of decline, exacerbated by a city government characterized by incompetence and corruption, was fast turning one of America’s greatest cities, a cradle of the nation’s manufacturing might, into a nightmarish hellhole.

In March 2013, the same month that Michigan became a right to work state, Snyder appointed Kevyn Orr, a Washington bankruptcy lawyer, to become Detroit’s emergency manager.

Orr had a daunting task. He took over a city with $18 billion in debt, where half the street lights were out and residents complained of having to wait nearly an hour for police to arrive after dialing 911.

Detroit subsequently filed for Chapter 9 bankruptcy on July 18, 2013, which was (and remains) the largest municipal bankruptcy filing in U.S. history by debt, exceeding Jefferson County, Alabama’s $4 billion filing in 2011

Two Big Announcements

There were two big announcements in Detroit last week. The one garnering widespread national news coverage was that Detroit had emerged from bankruptcy after just 20 months. The bankruptcy closeout was hailed by Gov. Snyder and city officials as an opportunity to begin anew.

Also last week, Little Caesars Pizza announced that it would build a new eight-story, 205,000-square-foot headquarters building in downtown Detroit, the first such project in a decade. Construction will begin in the spring and be complete by the end of 2016.

The headquarters expansion will happen on a vacant lot next to its current headquarters inside the Fox Theatre. An additional 600 jobs to the downtown are expected.

The Little Caesars building is part of a sprawling 45-block downtown “District Detroit” renovation effort unveiled over the summer. It includes a $450 million hockey arena for the Detroit Red Wings, construction of which began in September.

The Heavy Lifting Begins

So it’s very clear that good things are happening in Detroit, and the bankruptcy has certainly not deterred capital investment from happening in the downtown. If anything, Detroit’s emergence from bankruptcy sends a signal to the business community that the city is slowly but surely getting its act together.

But now the heavy lifting begins, as the city faces pressure to control spending while tackling problems that arose during the decades of urban decay.That was not lost on Mayor Mike Duggan.

“We still have enormous challenges delivering the services in the city every day, but at least now we are no longer a city that’s in bankruptcy,” Duggan said. “So we’re going to start fresh tomorrow.”

A Tough Call

Duggan said that the reorganization plan, which allows Detroit to shed $7 billion of its debts and to spend about $1.7 billion to remake its dismal city services over the next 10 years, “gives us the tools to have a chance to succeed.”

The restructuring plan also calls for the pensions of non-uniformed public employees to be cut by 4.5 percent, with cost-of-living increases eliminated. Police and firefighters will see cuts in their cost-of-living increases.

For Snyder, Detroit was a problem that simply had to be addressed, for the good of the city and the state.

“It was a tough call to decide to go into bankruptcy, but again, we set an aggressive timetable. And the good part is, it turned out very well. It was a difficult situation,” Snyder said in an interview with Time magazine.

“And I always want to recognize that there are retirees making sacrifices, other people making sacrifices. But for the circumstances we were in, this is a very constructive, positive outcome that really positions the city to start a new chapter and grow.”

Only Minutes Apart

Not long after Detroit filed for bankruptcy back in 2013, I walked in one of its blighted neighborhoods. I guess it was a neighborhood. Maybe I should call it a former neighborhood. For it was there where I flushed a wild pheasant from what was essentially a wild grass pasture where houses once stood.

It was a very odd sensation. Here I was in the city limits, but it felt like a no man’s land, where a great battle had had been waged and the people had fled the horror, with only a few straggling back.

But not far away, really only a few miles, I witnessed a very different Detroit, where growth and energy was quite evident. This is what I saw in downtown Detroit, especially along a seven-mile spine of Woodward Avenue, the haunt of young professionals.

And this is where Little Caesars will build its new headquarters building. Judging from the vitality that I saw, I am not surprised.

Michigan’s economy will add more than 132,000 jobs in 2015 and 2016, according to the latest predictions by University of Michigan economists. That would mean that by the end of 2016, the state would have added nearly 463,000 jobs since the summer of 2009.

A Novel Idea

As governor, Snyder sees himself as the problem solver in chief. His philosophy is one of “relentless positive action” and relying on good will to gain trust of others that results in a team effort. Partisanship politics should take a back seat.

“There’s too much ‘R’ and ‘D,’ there’s too much ‘liberal’ and ‘conservative,” Snyder told Time. “We need people to recognize that we’re all Michiganders, and in the country that we’re all Americans, and we should be focused on problem solving.

“What would Washington be like if everyone agreed not to fight or blame one another,” he added. “There’d be a whole lot of time to get work done.”

Now that’s a novel idea. Are you listening Washington?

I plan to be back in Michigan next month for the Detroit Auto Show, where I hope to learn more about Detroit and a resurgent auto industry. 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.

Beyond the Call of Duty

SYLVANIA, Ga. — I submit that there are certain things in life that you can teach and thereby learn, and certain things that you can’t. You either have it or you don’t.

Now let me tell you a true story. It happened to me this past week.

So I was sitting on an airplane at the Charlotte airport, awaiting take off. It was about 5:30 pm on Sunday, Jan. 5, when the pilot announced over the intercom that our U.S. Airways flight to Savannah, Ga., was cancelled due to heavy fog there in Charlotte.

I immediately called Jason Hamman, my partner on an economic development consulting project that was to ultimately take us to Sylvania, the county seat of Screven County in South Georgia. Jason, with Ohio-based Hamman Consulting Group, had also just arrived in Charlotte and was in the same terminal when I reached him.

He said his U.S. Airways flight to Savannah was to leave at 6:30 pm. So I raced to his gate to see if I might be able to get on the same flight. But the airline was none too helpful in providing us with any useful information, until it became clear that Jason’s flight was also cancelled.

So We Decide to Drive

With no hopes of getting to Savannah by air that night (we learned from Jason’s aunt, a travel agent, that all flights were booked solid the next day) and knowing that we had a bunch of scheduled meetings on Monday, we decided to drive the four hours to Savannah and then onto Sylvania, our final destination.

U.S. Airways did make one thing clear. We would be leaving without our luggage. Our bags were somewhere there at the Charlotte airport, but we could not get them. They would be delivered to Savannah, but when they could not say.

Armed with this discouraging information, we called our soon-to-be host, Dorie Bacon, of Screven County Development Authority, to report our travails. Dorie’s board had recently hired us to provide the county with a strategic/action plan as a guide for their future industrial recruitment and this trip was to be our first on-the-ground investigative venture.

When we told Dorie of our intentions of making the drive to Screven County that night, she asked for our sizes. I didn’t give much thought to it, as I was thinking about getting into a rental car as soon as possible.

A Rental Car from Hell

Seeing red meat, Dollar jumped at the opportunity to gouge us to the tune of $317 for making the four-hour drive. When we dropped their car off in Savannah shortly before midnight on Sunday, I was feeling sort of violated by the whole thing.

But it would only get worse. On Thursday, four days later, I received my first automated telephone call from the security department of Dollar telling me that they would report the rental car stolen if I did not return it right away. I immediately called them back to report that they had their car, that it was turned in late Sunday night.

But they must not have believed me, because I kept getting the same threatening automated telephone calls — “to avoid legal action against you” — on Friday and Saturday. And I kept calling them back to repeat that the car had been turned in at the Savannah airport on Sunday night.

But forget them. Truly, I am done with that incompetent bunch. And probably U.S. Airways as well, as we got more useful information from Jason’s aunt on the phone in Ohio than we did from the airline representatives standing in front of us.

But It Got Better

We arrived at Kinchley Place, our bed and breakfast in Sylvania, at about 1:30 am Monday via another rental car. Jason and I were exhausted and feeling a bit deflated from our run of bad luck.

But here is where it got better. There sitting on a table in a large open room off from our respective bedrooms were new clothes – two white shirts, two pair of slacks, packages of t-shirts and underwear, socks, toothbrush and toothpaste and assorted toiletries.

Dorie had come to the rescue. She had provided.

I turned the light off at 2 a.m., not knowing how well I would perform at our initiation meeting at 8 a.m. with the community, but knowing that our host was thinking of us. And that made me feel better.

The next morning, we were introduced to a roomful of maybe 30 people or so, many of them local public officials. Jason and I had to get up and explain ourselves and our mission, which turned out to be easier than expected. I thanked Dorie publicly, saying that she had provided me with my preferred brand of underwear and that I was feeling very good about the whole situation now.

The Point of This Story

What Dorie did for us was both thoughtful and exceptional. It’s not something she learned as an economic developer in an IEDC classroom, but rather it’s something she inherently knew would be the right thing to do. Staring down at the new clothes on the table, all with the correct sizes, Jason and I knew we were dealing with a special person.

We would subsequently get our missing luggage on Monday night. Jason left Screven County on Wednesday afternoon and I left on Friday morning after engaging in more than 20 interviews with a variety of stakeholders.

But before I left, Dorie joined me for breakfast at Kinchley Place, which I can recommend as a fine B&B. (Proprietor Bob Owers, who gave me a useful walking tour of Sylvania’s historic downtown one night, makes a mean breakfast.)

It was there at breakfast Thursday morning that I violated the terms of my agreement. You see these interviews, foundational to a SWOT analysis that is a part of our report, were to be completely confidential. I had no intention of telling Dorie what I had been picking up, but rather incorporate my findings in our report which would follow. But I felt compelled to spill the beans to some degree.

“Dorie, I don’t know what exactly you are doing, but even among people who fundamentally disagree on certain issues regarding the county, they pretty much all agree that you are doing a great job. I just thought you should know that.”

Points on the Board

I suspect it is not a great coincidence that Screven County won its first sizeable industrial project since the 1970s with Dorie Bacon at the helm. She joined the Development Authority in May 2011.

Shrivallabh Pittie Group, an Indian textile manufacturer, announced this past October that it will invest $70 million to build its first U.S.-based manufacturing facility at the Screven County Industrial Park. The plant will employ about 250 people and manufacture cotton yarn. Production should begin by January 2016.

Latasha N. Roberts, executive director of the Screven County Chamber of Commerce, said this soon after the announcement.

“Today belongs to Dorie Bacon, one of the greats and the very definition of a woman on the move.  Her devotion to this county, the many projects she’s fought for on behalf of the Screven County people, the endless site visitations, last minute request for information reports, and the sheer joy she takes in her work have made Tuesday’s announcement meaningful in so many ways.”

Actually, there were two announced wins for Screven County in 2013. Omega Piezo Technologies, Inc. announced in April that it would open a manufacturing plant in a building in Sylvania that many thought should be razed.

But that rehabbed building looks pretty good today and Omega Piezo is going forward with plans to make high quality piezoelectric and alumina products used in alarm systems and medical devices. The plant will create about 20-25 jobs over a two-year period.

“Dorie and the Screven County Development Authority did an outstanding job putting together a great incentive package that was tailored to suit all of our needs,” said Dr. David Pickrell, President of Omega Piezo Technologies, Inc. “They made our decision to come to Screven County an easy one.”

I usually don’t brag on people unless they go above and beyond the call of duty. Dorie did for us and apparently does for others as well. And now it’s our turn to reciprocate and do for Dorie and Screven County.

Postscript

It is Sunday afternoon, Jan. 12, and I just got my third automated telephone call of the day from the security department from Dollar. Stupid is as stupid does.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Walking the Walk: How Vo-Tech Ed Saved a Town

GADSDEN, Ala. — Not long ago, an industrial “prospect” walked into the Alabama Technology Network Center on the campus at Gadsden State Community College.

This community in northeast Alabama had made the short list of finalist communities for a site search, but the manufacturing executive was still not so sure if his company’s workforce needs could be met here.

Upon entering the building, he immediately saw students programming robots through large windows at the first room to his right, “Hmmm, now that’s interesting,” he said.

At the very next room, still in the entrance foyer, the industry exec peered into another window to see a process control lab. He did a double take and walked inside. “These are the very same process controls that we use in our plants,” he said.

Bingo.

“All of a sudden, he wasn’t concerned any more as to our ability to meet his workforce needs,” said Mike McCain, executive director of the Gadsden-Etowah County Industrial Development Authority.

And this all took place just moments before the industry exec was to go into a meeting with local educators who had wanted to prove to him that the human resources were hand. At that point, he had all the proof he needed.

A Pipeline to Success

I do like the rather old-fashioned phrase of “human resources.” Some people may find the term a bit sterile, but I think it is aptly descriptive. And that is because people are a great resource for just about any business enterprise in any industry, especially so in today’s globalized, competitive environment.

In short, people can be your ace. In terms of site selection and/or location analysis, my primary consulting service to corporate clients, I not only look for an existing talent base – people who are more than capable of doing the work — but also a pipeline for future talent to sustain business operations.

I witnessed that future pipeline at work just across town from Gadsden State at the Etowah County Career Technical Center. There, more than 400 high school students from the county school system are enrolled to learn practical, technical, and useful skills  for when they are in the job market.

“My job is to provide opportunities,” said Mark Stancil, director of the center.

These Kids Are BEST

And let me tell you, I saw a motivated bunch of very bright kids, which gave me hope as to the future of our country.

In one classroom, I met a group of boys and girls who had built a six-axis robot in 42 days so that they could compete in a national competition. It was their first stab at entering the contest, sponsored by BEST Robotics Inc., a nonprofit organization with a mission of exciting students about engineering, science and technology.

Each fall, more than 850 middle and high schools and more than 18,000 students participate in the BEST competition. On a hallway wall facing the robotics classroom door is the proof in the pudding – eight plaques proclaiming “Best Rookie Team,” “First Place, Most Robust Robot,” “First Place, Team Exhibit, Design, and Construction Award,” “Second Place, Most Elegant Robot,” and on and on.

Inside the electronics technology classroom, I met equally motivated teachers and volunteers, industry people who wanted to give their time to these young people to show them the way.

Elbert Engle, the retired president of XYZ Control Inc., a company that specializes in automotive assembly design, spends much of his time at the center as a volunteer mentoring the students on technology.

“I love working with these young people,” he said. “We just hired a young draftsmen out of here and he has been with us for three or four weeks now and he’s about as good as anybody I have ever had.”

You’re Asking Them to What?

Apparently, they start them young here. Gadsden City Schools’ System has an Enrichment Program in which it holds a yearly “Invention Convention” in which it challenges, get this, third, fourth and fifth graders to invent and build some new device and then apply for a patent for their creations. Yes, you read that right.

Their work is then subsequently judged by members of The Chamber of Gadsden and Etowah County.  This coming spring will be the third year of the program, said Chamber President Heather New.

I don’t know about you, but when I was that age, about the only thing I could create, certainly no novel invention, was a somewhat effective spit-ball blowgun. Mind you, it was strictly used in self-defense.

Walking the Walk

But back to Gadsden and Etowah County. What I found most heartening here was just how closely the city and county school systems were working in close harmony with Gadsden State in being responsive to private sector employers. Both systems have private sector advisory boards comprised of local employers.

Most places talk the talk about such matters. But here I was seeing real evidence that they were walking the walk.

Gadsden, with its long tradition of precision metals manufacturing, has a history of pushing the envelope (and its students in the process) on how to better meet industry needs.

The city school system recently initiated a program that will allow certain high school students to take college-level engineering courses at Gadsden State. The dual-enrollment permits select high school students to take an introductory engineering course and a computer-assisted drafting course.

“It really sets those students up well to migrate easily into a lot of technical programs over there at Gadsden State as well as if they decide to go to a four year institution,” said David Asbury, director of technology with the city school system.

He Gets It

I had the pleasure of having lunch at Gadsden State with President William Blow; Tim Green, Dean of Technical Programs; and Gregg Bennett, director of the Alabama Technology Network Center on the GSCC campus.

I met them in the same room at ATN where our aforementioned manufacturing executive was supposed to get his convincing lesson. Also, by the time I met with these gentlemen, I didn’t need a whole lot of convincing by what I had seen already.

“There is an unusual level of cooperation between the city and the county and the college, which make the work here not so hard to do” said Dr. Blow.

“We profess to be a community college as we want to connect and be a part of the community. I think it is safe to say that we are as comprehensive in our offerings in tech ed as any community college in Alabama.

“We want to do everything we can to promote economic development in our community. … I never like to promise more than we can deliver because you have to live with that, but I can promise this – we can deliver a whole lot. If an industry tells us what it needs, we will do our dead level best to deliver. ”

Ladies and gentlemen, this is music to my ears — an academician who gets it.

The Origins and the Challenge

I was in Gadsden last week to consult with the Etowah County Commission regarding my site certification work. But I had been there many times before. When I first visited Gadsden in the late 1980s, I was a business reporter for The Birmingham News, and two of the city’s biggest employers – Goodyear and Gulf States Steel – were making noise of closing. Gadsden was at the brink.

Today, Goodyear remains and is expanding while Gulf States is gone. But the community, which could have gone in a very bad direction, is doing very well in terms of its manufacturing base. Many companies have come here since those dark days.

I believe the primary reason for Gadsden being “saved” was the development of what was called the Bevill Center for Advanced Manufacturing, subsequently to become the ATN center.

The genesis of that was in 1984 when then GSCC President Robert Howard came up with the idea of starting a center that would staffed by industrial technologists with factory experience as well as strong academic credentials.

The mission would be to provide applied engineering assistance and training in advanced manufacturing technologies to local existing industries and facilitate in the attraction of new industries. Howard’s concept was that this needed to be a joint venture between Gadsden State Community College, the city of Gadsden, and the University of Alabama.

Mike McCain was the assistant director and chief of staff at the Alabama Development Office in 1984. And the mayor of Gadsden sent him a copy of the proposal and asked, “What do you think about this?”

“I spent all night long reading it and said, ‘You got to do this. This is going to save Gadsden,’” said McCain.

The very next year, 1985, McCain would be recruited to Gadsden to start the Gadsden-Etowah Industrial Development Authority.

The Bevill Center at GCSS would start operations in 1987 and would subsequently become one of five centers in Alabama with the inauguration of a Centers of Technical Excellence program in 1993.

Its namesake, the late Tom Bevill, a Democratic 15-term U.S. congressman from Alabama, told the Gadsden Times this at the time:

“We’re not gambling here, we know it works, we know it can be done.”

And so it was, to the benefit of students and industry alike. And it’s clear that this legacy of vocational education and technical training remains in force today in this community where manufacturing remains king.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Waiting for the Rising Tide

About five years ago, I was visiting a small, rather isolated town in the Deep South, and was somewhat surprised to learn that one of their primary goals was to land a fast food restaurant.

Never mind that such an enterprise would be paying close to minimum wage. This was something that was desired because it would generate at least a modicum of commerce (and sales tax) in a community that was pretty dead.

A few years prior to that, I remember being in a major city in the Deep South that was providing property tax abatements to fast food franchises that would build and open at new locations. Leave it to say, I thought that was a rather curious move.

As a former economic developer and now a consultant focusing on corporate site selection and ED work, I hearken to a quote from President John F. Kennedy.

“No American is ever made better off by pulling a fellow American down, and every American is made better off whenever any one of us is made better off. A rising tide raises all boats.”

To me, that notion of a rising tide raising all boats is the perfect metaphor for economic development. And yet so often, I find that economic developers will stress the lower-wage aspect of their communities. But is that really your best measure for how you want to compete for capital investment?

The Good and the Bad

Make no mistake about it, the U.S. job market is improving. We added 203,000 jobs in November, and the unemployment rate fell to a five year low. That’s the good news. But I would be remiss if I did not tell you the bad news, which has been the real mega-trend. And that is that much of America’s middle-class jobs have been replaced by low-wage jobs coming out of this Great Recession.

Economists have been debating why this is so. Some argue that technological innovations are making easily automated jobs less common. These jobs tend to be low to medium-skill, high-paying occupations, such as working on a factory assembly line.  (I have been speaking on this subject for some time now in a presentation that I call “Machines Rising.”)

The result has been growth in occupations that are hard to automate — either menial and low-paying or high-skilled and high-paying. It is the middle then that gets hollowed out, while both the low and top ends grow.

Mid-wage occupations, paying between $13.83 and $21.13 per hour, made up about 60 percent of the job losses during the recession, but only 27 percent of the jobs gained during the recovery. By contrast, low-wage occupations paying less than $13.83 per hour have dominated the recovery, with 58 percent of the job gains since 2010.

A Resurgent Labor Movement?

With this backdrop in mind, it is not surprising that we are seeing a resurgent labor movement, maybe still in its infancy, for a living wage for America’s fast-food and retail workers, who are fed up with poverty wages and lack of basic benefits.

Currently, the average line worker in a fast-food restaurant makes $8.94 an hour, which is more than the federal minimum wage of $7.25 an hour, but not enough to live on, especially given that few of these workers are able to get full-time hours.

On average, workers claim, a fast food employee brings home $10,000 a year, well below the poverty threshold of $11,484. About 26 percent of the people who work in fast food restaurants are parents with children. So they are not the stereotypical high school students flipping burgers any more.

Bloomberg did an interesting story last year in which it reported that a long-time worker at a McDonald’s in Chicago would need about a million hours of work — or more than a century on the clock — to earn the $8.75 million that the company CEO had made in a single year.

So if you are an economic developer, hoping to help your existing industry base expand or recruit new companies to your community, why should this issue of the working poor be a concern to you?

Aside from the moral argument, there is some evidence that a low minimum wage depresses salaries overall and actually makes a local economy more sluggish. What’s more, low-wage fast food workers are far more likely to need help from government programs like food stamps and subsidized housing.

Low wages at the nation’s 10 largest fast-food companies cost taxpayers $3.8 billion per year, because workers have to rely on government assistance to get by, according to a recent study by the National Employment Law Project.

The Walmart Effect

Now let’s talk about Walmart. I shop at Walmart. Please know that I do not hate Walmart, but neither do I see the company as a panacea for prosperity. But I have known of communities that have bent over backwards to get a Walmart.

Walmart’s 2.1 million workers make it the world’s largest private employer, with 1.4 million workers in the U.S. alone, more than the population of Maine. Walmart bested Exxon Mobil as the company with the greatest revenues last year at $443.9 billion worldwide, more than the GDP of Austria. 

But does this a goliath of a company necessarily have a beneficial effect on a community? Or is it like a bombshell going off?

A 2008 study published in the Journal of Economics looked at 3,000 Walmart store openings nationally. The study found, on average, that a store opening resulted in a county-level net decline of 150 jobs, as it forced other businesses to downsize or shutter.

The average Walmart associate earns $8.87 an hour, according to the employment survey site Glassdoor, while the average hourly wage for a retail sales worker in the U.S. in 2010 was $10.09, reports the Bureau of Labor Statistics.

Like their counterparts in the fast food industry, many Walmart workers receive government assistance, like Medicaid and food stamps. A May report from the staff of congressional Democrats found that a single 300-person Walmart store in Wisconsin likely costs taxpayers more than $900,000 a year, or more than $3,000 per employee, and could cost up to $1.7 million a year. Last month, Walmart drew criticism when one of its Ohio stores set up a Thanksgiving food drive for its own workers. 

Clearly, no politician wants to ever utter the “R” word — “redistribution” as it conjures up images of worthy “makers” handing over hard-earned income to undeserving “takers.” Never mind that as low-wage work proliferates, these so-called takers are working as hard if not harder than anyone else.

This is a tough, tough issue and the solutions are far more difficult than the identifying of the problem. But I submit this growing divide that we are seeing among the haves and have nots in this country (The amount of income going to the top 10 percent is the highest in about 100 years and the top 1 percent of U.S. earners collected nearly 20 percent of household income last year.) can pose a threat not only to future economic growth but to our foundational democratic institutions as well.

Pretty serious stuff.

The Pope is No Dope

I’m not a Catholic, but I like this new pope. Pope Francis appears to be quite comfortable in his own skin by saying things that make other people rather uncomfortable.

“Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills,” the 76-year-old pontiff recently wrote.

I don’t think the pope is condemning wealth per se. Rather, I do think he is condemning the idolatry of wealth and the indifference that it can lead toward the plight of the poor.

“In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Pope Francis wrote.

“This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”

You have got to hand it to him, the man is not shy about calling it like he sees it.

Win Some, Lose Some

Finally, we are going to end this blog on a different note because of what I wrote in my last blog and breaking news. In my last blog, I talked about how announced projects can take a nosedive. It happened again this past week in Louisiana.

Royal Dutch Shell has abandoned plans to build a massive $12.5 billion plant in Ascension Parish, near Baton Rouge. The decision comes just two months after Shell selected a site for the plant, which would have would have turned natural gas into liquid fuels and created 740 jobs..

The company said the cost of the plant and the expected profit it could generate made the plant “not a viable option.” Now you would have thought they would have known that back in September when they announced the project to great fanfare.

This is further proof that even some of the biggest companies don’t always think things through, and that the best laid plans of mice and men often go awry.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Lost But Not Forgotten: A State Strikes Back

Any adult with walking around sense knows it true – that the best laid plans of mice and men often go awry.

I am paraphrasing, because the original prose comes from a Robert Burns’ poem  “To a Mouse,” which read: “The best laid schemes o’ mice an’ men / Gang aft agley.” Translation: We will mess up.

In virtually every state in this country, elected officials have stood at podiums to announce wonderful economic development projects that would never subsequently happen. In their defense, they believed what they said to be true and accurate, even if their news conferences were hastily convened.

But projects blow up for a variety of reasons. Sometimes both sides – the company considering the community for the future investment and sometimes the community itself – have not thought things clear out. And when there is a  lack of due diligence and study, plans do go awry.

That Which Never Came

Sometimes my gut, based on my experiences, immediately tells me these are shaky propositions at best. I recall the Sprinter project some years ago being announced in Georgia when then Daimler Chrysler remained ominously quiet. Then there was that vaunted Chinese MG car project in Oklahoma. I seem to remember a bio-based jet fuels project that was supposed to happen in Natchez, Miss.

This past summer, I saw the remnants of a failed and highly publicized project in Moberly, Mo. A Chinese-owned company had actually started construction on what was to be an artificial sweetener factory. State and local officials had provided bond financing and incentives worth $17.6 million. But the company defaulted on its bond payments, and an unfinished shell is all that remains.

I have lost track on the number of announced solar projects that started with a bang and only to end with non-start fizzle. Mississippi and Tennessee had their share of those.

In virtually all these projects, there was a degree of confidence that these projects would happen, which is why they were announced (or leaked to the press) in the first place. But in many cases, the professional economic developers knew the announcements to be premature.

Politicians Do What They Do

But anxious elected officials all too often want to pull that cake out of the oven before it is done. They love to take to a stage to announce projects, especially when significant job creation is involved. For many politicians, project announcements represent their own job security, a reason for the voters to keep them in office.

In short, they hope to take credit, because that is who they are. It’s part of their DNA. More often than not, when these announcements do take place, the economic developers who worked the project, stand off to the side and politely clap. It comes with the territory.

Egg Splattered Faces

Our mentioned examples are not intended to embarrass, merely point out. Again, there is plenty of scorched earth all over this land due to announced projects that went sour. Most of us have had egg on our face at one time or the other. I know I have.

A certain Canadian Tier Two automotive supplier prominently comes to mind. While their manufacturing operations did come to fruition, they did not last long, less than a year. That’s not because of any failings of the community, but rather because of gross mismanagement on the part of the company, which was eventually dissolved. Still, I feel partly to blame.

In the world of mice and men, stuff happens.

An Indictment in Alabama

But usually criminal charges do not result from such botched affairs. That is a rarity. However, it happened this past week in Alabama, where a grand jury indicted the CEO of the Canadian firm National Steel Car on securities fraud charges involving a project that never came to be.

Now I cannot recall of a single case of criminal charges being filed because a company did not do what it said it was going to do stemming from an industrial recruitment project. If my readers know of anything approaching this in similarity, please let me know. But first read on.

The 10-count indictment accuses National Steel Car CEO Gregory James Aziz and his brother, Warren, of lying about the cost to build a railcar manufacturing facility in Colbert County, knowing full well that the true cost would far exceed the $350 million loan that Retirement Systems of Alabama provided for construction.

A revised agreement was worked out in which RSA agreed to up the loan amount to $625 million to complete the plant in northwest Alabama. At some point in 2009, RSA must have figured that it was being played, because it ended its relationship with National Steel Car and began steps to take over the incomplete building.

The 2.2-million-square-foot facility in the Barton Riverfront Industrial Park, 12 miles west of Tuscumbia, was eventually built, but the announced 1,800 jobs never happened. Subsequently, the Alabama Securities Commission investigated and a grand jury indictment in Colbert County resulted earlier this month.

The indictment says that Aziz, who is now free on a $1 million bond, “repeatedly falsely represented to the governor of Alabama that the project was on time and on budget.”  I found a photograph online of then Gov. Bob Riley standing onstage with Aziz during the initial announcement back in 2007. Both men were smiling as if they were lottery winners.

In 2011, Navistar leased the facility from RSA, and FreightCar America has leased a quarter of the plant and began producing coal railcars in July with a workforce of about 70. FreightCar says it may hire up to 500 employees as production ramps up in the next few years, according to press reports.

The Nuclear Option

Now I have a lot of friends in Alabama, a place that I will always view as a second home. I spent more than 20 years there in my professional life, first as a journalist and later as an economic developer and then consultant. (A downward spiral if I have ever seen one.)

One of my friends, an economic developer who I greatly respect, suggested that this National Steel Car story was not a “simple matter of an economic development project gone sour. This is an indictment of securities fraud, and I think it’s probably a lot more complicated than a company not living up to its commitments.”

My friend is absolutely right that this is more than a project gone wrong. It’s now a criminal matter, because somebody in Alabama officialdom chose to make it so. Why this particular case is thought to go beyond the pale of civil litigation, I do not know. But it happens at a time when JP Morgan Chase this past week paid a record $13 billion settlement to settle federal and state civil claims by various entities related to the mortgage securities.

But for whatever reason or reasons, Alabama went for the nuclear option with National Steel Car by going the criminal route, which I find more than a little noteworthy. Apparently, they want more than just money from Aziz. No, they must want him to face jail time. Vengeance is mine, sayeth the RSA.

Keep in mind that RSA is one of the 20 largest pension funds in the world, managing assets worth more than $32 billion, including the Robert Trent Jones Golf Trail in Alabama. David Bronner, the CEO of RSA, is a very smart and shrewd investor, and he has a more than capable staff. He is also a bit of a warlord in Montgomery, and I get the impression that he has probably told more than one governor to go take a hike.

The fact that RSA got burned with National Steel Car surprises me, as I would have thought they would have found some tale-tell signs that this investment strategy was not a good deal worth entering. They must have eventually come to that conclusion back in 2009, but by then they were hip deep in it.

In business as in life, risk is always something to be weighed. And even RSA and JP Morgan Chase are capable messing up, although they hate to admit it as stakeholders can be an irksome bunch. But I go back to the mice and men analogy — sometimes things just don’t play out the way the way they were supposed to. And that holds true even for the big money boys, who play with others people’s money.

An Unintentional Message?

Most savvy business leaders know how plans can and do unravel, and are hesitant to point all the blame at others when they too may share a good part of it. Of course, when they do blame others, they usually do so in the form of civil lawsuits, seeking compensatory and punitive monetary damages.

Criminal cases assign blame in a most extreme fashion, as those charged can face prison time. While I do believe those adjudicated guilty should pay, and that bad apples should be rooted out, I cannot help but wonder if this nuclear option is a message that Alabama wants to send out to the corporate world. I’m just saying.

Of course, I’m still trying to figure out why no Wall Street investment bankers, practicing dubious methods that resulted in the loss of trillions of dollars and brought the economy to its knees, ever faced criminal charges. The ramifications of their fraudulent practices are still with us and yet nary a one of them has faced jail time.

Go figure.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Speed Dating in the High Desert

TUCSON, Ariz. – Be advised that I am now the Tarantula King.

Mind you, I do not have a deep-seated fear of snakes. I will give poisonous ones a wide berth, but have no problem with picking up and handling the non-venomous varieties. Big hairy spiders, now that is a different story. A phobia does dwell within me concerning the arachnid line of critters.

So for me to even suggest that our jeep-driving desert tour guide place “Rosie” – his seven-year-old pet Tarantula — on my shoulder, well, that represented a huge breakthrough for me. For some peculiar reason, I just wanted a picture of Rosie perched on my person. 

I suspect that the Mexican beer, which we stopped for in order to be well-provisioned for our expedition, provided me with the required courage.

The jeep tour in the Sonoran Desert was my only play time last week during my four days at Industry Week’s Roundtable in the High Desert. I think the good folks at Industry Week, and they are good folks (thank you Adrienne, Jessica, Lauren and Michael for your good work), should consider renaming it “speed dating in the high desert.”

That is because in between presentations from the featured site selection consultants, of which I was one, we had these mini-meetings of 15 minutes in which the economic developers had one-on-one discussions to tell us about their communities. Basically, it was an opportunity for them to give more than an elevator speech. I dutifully took notes and nodded respectfully, and even occasionally asked a question.

By my count, I had seven such meetings on Tuesday morning; 21 meetings on Wednesday; and then another seven on Thursday morning, for a total of 35 meetings over a three-day span. Now if I told you that I remembered everything said in those 35 meetings, I am sure you would believe me, right? Notice that I have not made that claim.

But actually these meetings did serve a worthy purpose. I got to see and spend time with old friends and then make new friends, and there is always a value to that. Ultimately, business is built around people interacting with each other. Establishing relationships greases the wheel and makes that all the more easier.

That does not mean that friends get preferential treatment in a  site selection process. But it does mean that I can place a face with a name and know who to turn to if and when the time comes that a project comes knocking. 

So again, I met with economic developers representing 35 different organizations. The first night was Arizona night, as was appropriate. The consultants – which included long-time friends David Dodd, Alison Benton and Brent Pollina – were extolled the virtues and advantages of Arizona. And it was at that dinner at a Japanese restaurant where I learned that Gilbert, Arizona, was the center of the universe. I did not know this.

Apples Don’t Lie

The apple said it was so. In the goodie bag delivered to my room, there was an apple with a sticker attached to it. The sticker said this: “Need more than an apple a day? Gilbert has over 2 million-square-feet of hospital and clinical research space and world class facilities in stem cell, cardiovascular and oncology sciences, regenerative medicine, medical device equipment and pharmaceuticals.”

So Gilbert wanted me to know that it is a preferred location for science, technology, engineering and math (STEM) related industry growth. I got that, as any place that makes algae for commercial use has to be innovative.

You see, Heliae Development LLC recently began producing nutraceutical and personal care products that uses algae. The company plans to expand production on its 22-acre campus in Gilbert in 2014 to include therapeutics and agriscience products and has partnered with Triton Health and Nutrition, a division of San Diego-based Triton Algae Innovations, to do it.

My new friend, Kelly Patton with the Office of Economic Development with the City of Gilbert, touts her city as the “Algae Capital of the World,” which is hard to forget. But it’s here where the utter wisdom of David Dodd shines through, proving that he is the penultimate consultant. For it was David who suggested that Gilbert bill itself as “Scum of the Earth.” Brilliant.

Certainly all the representatives of all the communities with whom I met have attributes worth considering should the right circumstances dictate. And it is by those circumstances that communities are included or eliminated in a site search based on geography. Sometimes Arizona will work, by virtue of where it sits, and sometimes it will won’t based on a whole lot of factors that include location of customers, suppliers, existing corporate assets and even competitors. And you can say that about every place.

Opening the Ball with Jolt

I gave the first presentation of the conference. Rather than repeating drivel that millions of new manufacturing jobs are in our future, I told the truth, which was no doubt a tough pill to swallow. And the truth is that as we are only in the early stages of a new digital age of technology and continue to become more productive in our manufacturing processes, legions of people will be left out in the cold simply because they will not be needed.

This a mega-trend that’s not just happening in the United States but throughout the developed world. And believe it or not, it’s even happening in China.

To lend balance, I did present the converse side to my argument. As productivity increases, the savings created are passed along to the consumer. If those savings are spent on other stuff, then job creation occurs. Still, I do not believe those job-creating savings derived from greater productivity are supplanting the jobs being destroyed in this digital machine age.

Certainly new technology does create new jobs. Software engineers should be in the catbird seat. But it is currently those lower-skilled jobs that demand essentially robotic, repetitive motion action which are being replaced by automation. It’s happening now and it will only continue to happen more in the future.

The challenge for the economic developers is to build upon an environment where technical knowhow can in essence be manufactured. If you cannot establish a technical brainline baseline from which to operate, then you will not be in a competitive position to win the manufacturing plant of the future. And that plant by its very nature will employ fewer people. But those people are critical as they must be more than technologically adroit, but capable of sophisticated problem solving.

We Do Have an Ace

The good news is that the United States does have some great advantages when compared to the rest of the world. Our demographics are superior to that that of Europe, where fertility rates have plummeted and where an actual shrinking of the marketplace is evolving.

A shale gas revolution pioneered in the U.S. is turning the world on its head and stands to make our country energy independent in just a few years. We are currently the largest energy producing country in the world and will soon begin exporting liquid natural gas.

Our lower energy costs in comparison to the rest of the world (U.S. natural gas prices are $4 per million British thermal units compared to $14 in Britain and almost $17 in Asia.) makes us ripe for direct foreign investment, particularly in manufacturing sectors that use lots of energy such as petrochemical and steel. And no doubt, we will see companies from around the world establishing manufacturing operations here as a result of the energy cost advantages.

The National Association of Manufacturers says the shale boom could add 1 million manufacturing jobs in the country by 2025 if natural gas price increases remain moderate and industry regulation is favorable.

I believe that is a reasonable estimate, but always keep in mind that we lost 6 million manufacturing jobs in the first decade of the 21^st century. Between 2000 and 2011, on average, 17 manufacturers closed up shop every day across the country, according to research from the Information Technology and Innovation Foundation. We got creamed.

Those companies that toughed it through the Great Recession simply learned to survive and compete by using fewer people. That overriding trend will only continue as technology advances with continued productivity strides.

Right now, 9 percent of our nation’s workforce is employed in manufacturing, and not 12 percent as reported by another speaker at the Roundtable conference. If that number were to climb by a single point, I would be most surprised as it would go against the long-term grain of history.

But that didn’t stop our speaker from predicting that millions of manufacturing jobs would be created as a result of our energy boom and that the manufacturing sector would rise to an astonishing 15 percent of our entire workforce. It was a fantastic claim to be sure.

While it is becoming more apparent as to advantages of manufacturing in the U.S. for reasons of energy costs and the desire to shorten supply lines and reduce inventory by making products closer to where they are sold, there are also other reasons. A surge in Chinese wages, higher shipping costs, and a desire to protect intellectual property means that U.S. companies now take a more analytical approach to Asian production.

But know this, of the 550,000 manufacturing jobs created since 2010, a tidy gain to be sure, it represents a fraction of what was lost. Of the jobs gained, only about 50,000 can be attributed to reshoring and that number comes from an advocacy group called the Reshoring Initiative.

I’m not so sure that all the offshoring of work has really made a difference in the large scheme of things. If certain manufacturing jobs hadn’t gone offshore then the same if not greater  number of jobs would have been lost to labor-saving technology instead.

The truth is that we are never going to have the mass employment in manufacturing in this country that we once had, because of the march of machines and the tide of history will not allow it. That is not to say that manufacturing is not of incredible importance to our future as a world power. Manufacturing is actually key to our future and makes for a wonderful career for a young person starting out. You will, in short, be part of an elite group with technical knowledge.

Will more reshoring happen and will an energy boon create new manufacturing jobs?  Yes, absolutely. For economic developers, there will be opportunities. Will there be a tidal wave of millions of new manufacturing jobs to come as a result? Only in your dreams.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

 

 

 

 

 

 

 

 

 

 

 

 

 

Grow the Island

Last week, I attempted to provide some context as to why the House of Detroit had fallen onto hard times, resulting in the largest municipal filing for bankruptcy in U.S. history.

I went through a litany of principle causes — an overdependence on the automotive industry, which has had its own trials and tribulations, population loss thereby resulting in tax base loss, racial tensions and overtones, political corruption and malfeasance. All of these factors are intertwined, are decades in the making, and represent pretty complicated stuff.

So it would take a lot of cojones (a Tejano term which rightly applies to many Texans) for me to pronounce that I have the answers and solutions. No, it is doubtful that anything I have said or will say about Detroit is altogether new.

Still, I am gratified to report that the Detroit Regional Chamber has taken me up on my offer to provide 20 hours of free consulting time. More on that later.

I am emotionally drawn to Detroit, hence my offer. Maybe it’s because of what the city once was that has captured my imagination. There was a time, not too long ago, when Detroit was ground central to our manufacturing might. It was the “arsenal of democracy” during World War II and the fourth largest city in America.

Today, it is the poster child of urban decay and the pain, having shrunk from 2 million souls in 1950 to about 700,000 today.

Now we can study the what-the-hell-happened until we are blue in the face (and I think already have) or we can lean forward with what we have learned and forge a new Detroit that represents opportunity. Actually, that Detroit, or at least a small segment of it, already exists. You are just not hearing about it much.

And Now the Rest of the Story

I did not tell the whole story last week. (Nor could I.) I only scratched the surface, and to some extent, was just piling on. But the good news is that there are market forces currently in place that could transform Detroit into a much better place. This is not the same old top down renaissance hype, a path that we’ve all been lead down before. 

No, this is real and it is actually happening. There is a bona fide story here about a surge of private and civic investment and business and residential growth that is taking place in a seven-square-mile downtown and midtown core, which admittedly represents only a small fraction of Detroit’s nearly 140-square miles.

But within this relatively small island in the city, there are roughly 5,400 businesses, employing more than 135,000 people. And there are also 29,000 students there from Wayne State University.

Dan Gilbert, the founder of mortgage provider Quicken Loans, recognized the opportunities on this downtown/midtown island. In 2007, he moved his company’s headquarters from suburban Farmington Hills to downtown Detroit.

Gilbert and his firm Rock Ventures now own or control more than 30 properties downtown, totaling 7.5 million square feet. That’s a huge bet by anyone’s measure.

Enlarge the Beachhead

So that’s what you build on. That downtown/midtown area is your beachhead to be enlarged. In my capacity as an economic development consultant (I also do corporate site selection consulting), I tell communities to leverage their strengths and work on their weaknesses. That might sound obvious or even trite, but it’s foundational to making positive things happen.

So if you build on success, you follow in the footsteps of success. In that regard, you listen carefully to those who are risking capital on this island. It’s hard for me to think anything that would be better for Detroit than other business people following Daniel Gilbert’s lead by investing entrepreneurial capital into the city. Of course, it’s got to be a good bet. 

Gilbert’s purchases and building plans are all part of his Detroit 2.0 revival vision, “a lively live-work-play district in the heart of the city based around entrepreneurial companies in the digital economy.”

That type of economy will attract a young, upwardly mobile group people, and we are seeing young entrepreneurs and creative people moving in the downtown and midtown as a result. Rundown buildings are now being converted into loft apartments, hotels, restaurants, and offices.

Freshmen to the Rescue

Now you could argue this young creative class is acting rash and foolish by choosing to essentially live on an island surrounded by a sea of economic despair.  But sometimes ignorance is bliss.

Many of these young creative entrepreneurs simply don’t follow the same rules, largely because they don’t know the rules. In a sense, they have not been conditioned to know what doesn’t work, and that can be a good thing. However, they do recognize opportunity, often in the form of cheap real estate, when they see it. Detroit offers that many times over.

I am reminded of the American doughboys of World War I. They didn’t know that they couldn’t storm German trenches, so they actually went ahead and did it, to the disbelieving awe of the war-weary French and British.

These freshmen don’t know what they don’t know, but in a perverse sense, it actually gives them an advantage. Certainly they will experience failure, which I believe is a prerequisite of success, but they will not be put off by talk of what cannot be done.  If any of us listened to such defeatist language, none of us would be in business today. Rather, we would all run for city council.

Roadblocks to be Breached

Speaking of city council, it is clear to me that a dysfunctional city government in Detroit has come into being, because it is largely run by people who have not a clue as to why private investment happens. Their lack of knowledge is not helpful.

Bankruptcy can provide for a platform for growth, but only if and when a dominant political class that has run things is essentially replaced wholesale.

So I am hopeful that executives who have a track record of fixing things will step forward. Almost by definition, these people will come from the private sector, men and women who have developed almost instinctual knowledge as to why and when and how private investment takes place. In short, the future leaders of Detroit will come from the ranks of the risk takers.

But it will not be easy. There are long-term historical roadblocks to be breached with racial divisions and suspicions at their root. Justin Fox, the executive editor of the Harvard Business Review Group, put it aptly when he wrote:

“To an extent unparalleled in any other major American metropolis, private economic activity in metro Detroit came to almost completely bypass the actual city. This was very much a racial divide; whites avoided the city, while blacks gravitated toward the government jobs that were the best things on offer within the city limits. The result was a city governing class clueless about and to a certain extent disdainful of economic reality and a regional economic elite with few ties and little loyalty to the region’s main city.”

This divide, this gulf, has to be repaired, and I am confident that it can be with a younger generation taking the lead.

No Choice But One

While not addressing this aspect specifically, Gilbert said bankruptcy  represents a “first step toward a better and brighter tomorrow” for Detroit.

“Bankruptcy will be painful for many individuals and organizations but together we will get through it and come out stronger on the other side. We simply do not have a choice,” he said in a prepared statement.

Gilbert is right. What other choice is there? Next month, I will be in Detroit for a few days, talking with business leaders who have made their choice. I want to know why they have drawn a line in the sand and have essentially said, we choose to stand and build here.

I want to know what they see and how they think their city can be transformed. I am looking forward to this trip, and I want to thank again the Detroit Regional Chamber for extending the invitation to me.  I have pledged to give the Chamber 20 hours of free consulting time.

Maybe my best advice before arriving will be the same after leaving — leverage your strengths. Enlarge your beachhead, grow your island, build upon the gains that already have been made by reducing capital investment risk whenever possible. I’ll grant you that it’s not especially brainy advice, but in my world of corporate site selection consulting, risk management takes center stage.

I will be piggybacking my visit to Detroit with the Pure Michigan Test Drive, an event that will allow me to visit with companies and communities in Michigan as well as attend the NASCAR Sprint Series’ Pure Michigan 400, which is always fun. I already know that Michigan has done much to improve its business climate and have to believe the Gov. Rick Snyder has been largely responsible. He is a fix-it kind of guy.

On the day that the city filed for bankruptcy, Dan Gilbert published a prepared statement, a portion of which I quoted here. He went on to say that “we are all in.”

That’s key. For Detroit to have a future, private investors have to be all in and vote with their money in the sincere belief that their investments are safe and sound for the long term. From where I sit, I can see that is already happening, despite the horror stories.

I’ll see you down the road.

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

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

A Time of Reckoning

So on Tuesday, I got this email from a young and no doubt industrious economic developer from the Detroit Regional Chamber touting her region’s aerospace and defense cluster.

Then on Wednesday, she sent me another email, informing me of how important the automotive industry is to the local economy.

At that point, I could not resist. I playfully responded, saying that I had no idea that the automotive industry was so important to Detroit. Then I told her that I had met with Michael Finney, president and CEO of the Michigan Economic Development Corp. when he and members of his team had visited Dallas not long ago.

“I am glad to see the industry make such a good comeback and Michigan’s effort to be more business friendly and competitive,” I wrote. I told her that I had written about Michigan in this blog. (See “Blessed Are the Peacemakers” and “The Wave Will Spread.”)

She wrote back asking that “Maybe Detroit can get a shout out” in a future blog.

The next day (Thursday), Detroit filed for the largest municipal bankruptcy in U.S. history. So the remainder of this blog is my shout out to Detroit.

Berlin, 1945

The last time I was in Detroit was a couple of years ago and I remember driving through certain areas and thinking, “This looks like Berlin 1945.”

For youngsters who do not know their history, Berlin was a bombed out shell by then, Germany’s Third Reich having fallen short of its intended 1,000-year reign. Many of the B-24 Liberator bombers that rained hell on the German city during World War II were made in Detroit.

But here I was looking at sections of Detroit that looked like it had been laid to waste. Had Canada, our stalwart neighbor to the North, launched an attack? It was obvious that something very wrong had happened here. I was literally looking at ruins.

A Cornerstone of Industrial Might

How could this happen? Detroit, once the nation’s fourth largest city, was the cornerstone of our industrial might. This was ground central for the American Dream.

Southerners, black and white, flocked here to get good paying jobs in the automotive plants. Home ownership was not only possible but expected. Detroit became our Mecca for the middle class.

But things started to unravel, and many chose not to notice. Those who did were voices in the wilderness.

The automotive industry, the King Cotton to our nation’s industrial heartland, started showing signs of vulnerability. There were the Japanese with their toy cars, not real cars, mind you. But people are starting to buy them. Can you believe it? And what the hell is this Volkswagen Beetle thing? Didn’t we just beat the Germans and the Japanese in a war?

Why wouldn’t someone buy a Packard, an Edsel, a Pontiac or an Oldsmobile? Now those are real cars.

So Detroit was centered on an arrogant industry that proved to be none too brainy about being competitive. Witness the market share declines of the Big Three and the eventual bankruptcy filings of General Motors and Chrysler. It was only because of federal intervention that they remain today.

There is prophetic statement that comes to mind when it comes to any community too dependent on a single industry: “You live by the sword, you die by the sword.”

Five Days in July

Then there is this matter of race, which is inexorably linked to how things evolved in Detroit. In the early morning heat of July 23, 1967, a police raid on an after-hours bar popular with blacks touched off one of the deadliest and most destructive riots in U.S. history. It lasted five days and required military intervention.

The riots became a watershed moment, accelerating a massive white flight to the suburbs that began in the 1950s. In 1950, when Detroit’s population had swelled to 1.85 million, about 82 percent of the population was white. Today, the city’s population has dwindled to 700,000, and about 82 percent of those who remain (black middle class families left, too) are black.

Upon leaving office in 1994, long-time Mayor Coleman Young, the city’s first black mayor, wrote this in his memoir:

“The riot put Detroit on the fast track to economic desolation, mugging the city and making off with incalculable value in jobs, earnings taxes, corporate taxes, retail dollars, sales taxes, mortgages, interest, property taxes, development dollars, investment dollars, tourism dollars, and plain damn money.”

Plain damn money is right. Most Detroiters don’t have any or at least not enough, with a median household income of $28,000 a year. That compares to about $46,000 for Michigan as a whole. The city’s unemployment rate stands at 16 percent and is probably well higher than that.

Dysfunction and Corruption

A loss of population has hampered Detroit’s efforts expand its tax base, much less manage the city government’s health care and pension costs. Annual deficits in the city’s operating budget have been climbing since 2008, and city services crippled by an aged computer system, poor record-keeping and widespread dysfunction have declined dramatically.

A culture and history of embezzlement and malfeasance in office has been sadly evident. Mayor Kwame Kilpatrick resigned in 2008 after pleading guilty to obstruction of justice. Earlier this year, Kilpatrick was convicted of running a racket while in office to enrich himself, friends, and family by shaking down city contractors.

Today, nearly 80,000 buildings are abandoned or seriously blighted and 40 percent of the street lights don’t work and 66 percent of ambulances are out of service. The average age of a fire station in Detroit is 80 years, which means most modern fire trucks could never fit inside.

The average police call response time in Detroit is 58 minutes, compared to the national average of 11 minutes. Keep in mind that Detroit historically has had among the highest homicides rates in America. So there will be blood.

And let me tell you that matters of quality of life, such as crime, and the proficiency of local government, such as garbage pickup and fire response time, do factor in corporate site selection. Government services are simply expected.

Kicking the Can Down the Road

Detroit is not unique in the sense that other cities have grappled with loss of industry, declining populations and mismanaged government finances. New York City in the 1970s came close to filing for bankruptcy.

But leadership matters. In Detroit, a political class arose that refused to see the writing on the wall and take their medicine by cutting costs. They kept spending, borrowing, making promises and kicking the can down the road, hoping the debt problem would somehow solve itself.

The result – obligations of between $18 billion and $20 billion among 100,000 creditors, according to the Chapter 9 bankruptcy filing on Thursday.

Pension debt makes up half of the shortfall, so it doesn’t take a great mind to realize that retirees on a fixed income will be taking a haircut. That may not be fair, but it’s going to happen. Just you wait.

A Time of Reckoning

But I believe this historic filing for bankruptcy should be viewed as an opportunity, but only if the city follows through. With the permission and guidance from the court, Detroit can take its medicine and then build upon a doable future. So this is a time of reckoning.

In the end, the city must reinvent itself. Pittsburgh might be worth studying. Leveraging its universities, Pittsburgh transformed itself as a biotech/health sciences hub after its steel industry collapsed.

I am not saying that biotech is the answer for Detroit. It probably is not. What I am suggesting is that there are likely existing ingredients present for a reinvention to be acted upon. This will be a long if not painful journey. Certainly, it was for Pittsburgh.

And because I want to see Detroit stop this downward slide into oblivion, I will pledge 20 hours of my consulting time gratis – no charge – to the proper economic development authorities. You should know how to reach me if so interested.

Positive Signs

But we are seeing some positive signs. While I have seen no definitive numbers, I hear that young people are moving to Detroit, largely because of cheap real estate.

 Dan Gilbert, chairman and founder of Quicken Loans Inc., has been steadily buying up downtown buildings and making large investments in mixed use development and quality of life improvements for the nearly 10,000 people employed by his portfolio of companies who live and work downtown.

So there is hope and proof that Detroit can work. But first this debt issue has to be resolved, a repayment plan has to be negotiated and enacted, and city government has to prove itself as viable and responsible.

Leaders Must Lead

Mayor Dave Bing, Gov. Rick Snyder and Detroit’s emergency manager, Kevyn Orr are intelligent men. But now they have got to come together and lead because those before them simply refused to make the needed tough decisions.

Gov. Snyder in particular impresses me as a man who wants to get stuff done. It may cost him his job (Snyder has an approval rating of less than 40 percent) should he seek re-election, but I believe he is trying to do what is right by his state and by Detroit.

Detroit remains the elephant in the room. You cannot divorce Michigan’s future prosperity from that of its largest city. Trying to do so would be a big mistake.

I have noticed that a culture of economic development really starts at the top. If a governor has a keen interest in economic development, a positive, can-do attitude is typically displayed, one that is infectious within the ranks of state and local economic organizations.

When a governor doesn’t show much interest in economic development, well, that too usually becomes quite evident and I’ve seen morale actually suffer within economic development communities.

I sense positive vibes coming from Michigan, now a right-to-work state. I cannot say with certainty that these positive vibes are because of Gov. Snyder, but he has not been shy about making changes.

Detroit cannot be shy about making changes either. This bankruptcy filing can be the beginning of a long journey, no doubt a tough one, in which the city can be reinvented and renewed.

Again, if I can help, well, I am here to help.

I’ll see you down the road.

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

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

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

 

Have Product, Will Travel

As anyone who reads this blog probably knows, I have no desire to write like an academician or a typical business consultant, if there is such a person. That is simply not my voice.

Please plant a firm kick to my shins should you ever hear me lapse into that stilted and yet purposely vague “consultantese,” an abhorrent language designed to impress rather than inform. I much prefer a fine and wonderful language called English.

I am not so gifted as to be a natural storyteller, although I have met some who clearly are.  Story telling is a wonderful American tradition that goes far back into our history.

The mountain men, those who ventured into the wild recesses of the Rocky Mountains during the 1830s to trap beaver, were none too shy about inventing tall tales to entertain themselves and each during annual rendezvous, hell raising affairs to be sure.

As one historian put it, “To be a liar was as much a part of mountain honor as hard drinking or straight shooting. Embroider your adventures, convert to use any handy odyssey, and spin it all out in the firelight. The only sin is the sin of being dull.”

Business is War

That sin of being dull has largely been embraced in today’s civilized world, and is most notably evident with most business literature. And yet it doesn’t have to be that way. Business is war, as the Japanese say, and by its very nature, war is far from being dull.

As a former business journalist, I considered myself a war reporter of sorts. While I was never in harm’s way, I certainly wasn’t bored and I hope that was reflected in my published work at the time. Being a reporter gave me the opportunity to see things and tell it like I saw it.

I had a grand old time of it. And today, as a consultant, I am having fun as it offers me a certain degree of freedom. Like reporting, consulting affords me to opportunity to tell it like I see it. Sometimes clients don’t want to hear it, but if they are paying me, I figure I owe it to them. It is my responsibility to them, which I take quite seriously.

A Skeptical Community

This past week, I got a request from an economic developer in the Midwest to write down my views about a certain community that I had visited recently for the benefit of certain stakeholders. There is apparently some hesitancy within this community about making certain investments and probably a skepticism about this whole notion of economic development.

Now I can actually appreciate that. There is a degree of voodoo economics to economic development. There are few if any guarantees that if you do this or that, such and such will result. Of course, that is true of private enterprise in general. In short, we are not living in a chemistry lab.

(I recently saw a spec building that has sat unoccupied for 18 years proving that point. Judging by its architecture and location, it may sit another 18 years without a tenant.)

Also, I can understand the city fathers having this overarching desire to be prudent and judicious in the spending of public tax dollars. They have a fiduciary responsibility that must be taken seriously. I applaud them for recognizing that and having a fiscal conservative nature.

An Offered Truism

But I am going to flip the coin as there is an old adage in business which I think is true: You have to spend money to make money. In short, a community has to invest in itself if it is to have any chance at having an outside source, a company for example, invest in it.

Now that community investment can take many shapes and forms. It can be education and  workforce development. It can be infrastructure. It can be aspects of quality of life, parks for instance, or it can be real estate for commercial or industrial use.

As a site selection consultant, I will tell you that I am partial to publicly-owned industrial parks or parcels. Much of the time, although not always, a majority of the infrastructure is in place and there is no profit motive to overcome. Rather, the community (if it is smart) will empower a local economic developer to do a deal with job creation as the motive.

I know many places where, given a certain project of a certain size, if the ROI or cost-benefit analysis formula works, that community would give free land to a prospective industrial user as an incentive. I’ve yet to meet any private developers or owners willing to do that. Nor should they.

You Must Have Product

But the bottom line is a community has to have suitable product in terms of buildings and/or sites. And that is because there is and always will be a real estate aspect to site selection, although a proper site selection process will always transcend real estate matters alone. That last point is something many real estate brokers do not understand, as they are consumed with the transaction, which is understandable as that is how they get paid.

Of course, I could argue that is just but one reason which sets my consultancy apart. I will never attempt to place a corporate client on a piece of property where I will make more money, which is why I work on a flat fee basis. No real estate commissions here.

Enough on that. This blog is not meant to be an overt advertisement for my services. Notice I said overt.

But going back to my two bigger points, which are this: A community has to have product and it has to be continuously investing in itself if it is to successfully compete for jobs and private capital investment.  Those will be the only places that I will travel to as finalist communities in a site selection project. That’s just the way it is.

With the Best of the Best

I wish I could have reported that the Fourth of July was completely restful for me, but my wife, aka “the little general”, would not have it. A former Army paratrooper, she had me participate with about 100 others in a 10-mile hike through mostly shadeless terrain in searing temperatures.

But it was for a good cause. The North Texas Military Association is an organization formed to help military veterans and it is quite evident that the organization is doing great service to assist those who have served our great country.

So essentially I was hiking with soldiers, marines, sailors and airmen, many of whom were still in active service and some of whom were humping a 60-pound rucksack wearing fatigues and desert boots. 

I can tell you they are the best of the best, these veterans. They give so much for love of country. It was an honor to walk with them.

I’ll see you down the road.

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

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

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