Dean Barber

Archive for the ‘Places’ Category

A Place of Promise

In Places on August 4, 2013 at 6:42 am

JACKSON, Tenn. — So here I stood at the very spot, marked by a plaque on the lawn of the Madison County Courthouse, where an angry Davy Crockett, having just lost his bid for re-election to Congress in 1835, announced his future intentions.

“You can go to hell, but I am going to Texas.”

Texas did not work out so well for Davy. He and his Tennessee Mounted Volunteers arrived at a crumbling mission called the Alamo at San Antonio de Béxar in early February 1836 in the midst of a war with Mexico. They would not ride out.

The Alamo would be avenged. Sam Houston and his motley rebel army would defeat the Mexican army of General Antonio López de Santa Anna at the Battle of San Jacinto on April 21, 1836. Five months later, Houston, a former governor of Tennessee, was elected the first president of the Republic of Texas.

The Link of History

So Texas and Tennessee are inextricably linked by their history. This past week, I had the pleasure of having dinner with a group of economic developers that included three natives of Alamo, Tenn., the county seat of, you guessed it, Crockett County.

I was in West Tennessee at the invitation of the Jackson Regional Partnership, which represents a nine-county region, which includes Crockett County. The other counties are Madison, Henderson, Carroll, Gibson, Haywood, Hardeman, Chester and McNairy.

At the bequest of my host, I gave a speech/presentation at the Jackson Chamber – A Consultant’s View: How Communities Compete in a Site Selection Project – with a degree of gusto that left no one asleep in my audience. (The juggling of cats always helps.)

But I also stayed an extra day and a half to tour the region, as I can learn only so much about a place by staring at a computer screen. Whenever possible, I like to put my boots on the ground to get a better understanding.  Familiarization tours generally are a good thing.

A Losing Proposition

Even if I am not charged with wowing an audience, I do require compensation for my time. While I was in Tennessee, I received a curious email from an economic development organization representing a major market that has professional sports teams. They offered me all of a $500 stipend to come for a familiarization tour.

Now that amount would probably not cover my air fare, much less hotel accommodations, meals, and compensate me for three days out of my schedule. Indeed, I would lose money if I accepted that offer.

Of course, I am not in business to lose money, even if I do offer my consulting services gratis on occasion. So I wrote back to this big city economic development group. I thanked them for the invitation, and explained why I could not accept their terms. I have yet to receive a reply. Maybe they will come to their senses.

Analysis Matters

Now I will admit to having a certain fondness for Tennessee. My mother’s side of my family is from there, and I spent some childhood years in Chattanooga. But in my role as a site selection consultant, my personal feelings do not much matter.

To serve a corporate client well, I cannot allow for personal biases, either pro or con, to enter the picture as millions of dollars are at stake. No, serious qualitative and quantitative analysis is what is needed for what will constitute a phased culling process. At least, that is how site selection process should work.

Based on what I saw and heard during my visit to Jackson and the surrounding region, I do have some initial impressions on strengths and weaknesses. Mind you, they are not as deep or sticking as they would be if I were engaged to do an in-depth analysis. Still, my trip to West Tennessee gave me a better idea of what this place is about, which is what both my hosts and I wanted.

Welcoming Wellness

In a land where fried food and sweet tea is served with a loving touch – I indulged in barbecue at lunch and fried catfish that evening – it was a welcomed surprise to learn that the Jackson Chamber was taking this concept of wellness seriously.

It only makes sense as healthier employees make for lower costs, so there is a bottom line aspect here for business. (More and more, watch for companies to not hire smokers.)

Chamber President Kyle Spurgeon understood that the area’s health conditions could be directly tied in to its economic competitiveness when he saw the 2010 County Health Rankings.

“When a company is evaluating Jackson as a prospective location, they look at key location criteria — and wellness outcomes are part of that location criteria search. All other things being equal, a healthier community stands a better shot at getting a project than one that’s unhealthy.”

So I was most impressed with West Tennessee Healthcare Sportsplex with its 17 baseball and softball fields sitting on a 126-acre tract that includes retail. At times, 100 teams are onsite and they come from around the nation, giving local tourism a boost. The Sportsplex sits adjacent to the Ballpark at Jackson where I watched the Jackson Generals prevail over the Huntsville Stars.

The next morning, I toured the LIFT (Living in a Fit Tennessee) Wellness Center, a newly-built, LEED-certified, 84,000-square-foot medical fitness center in downtown Jackson. The LIFT features just about everything you can imagine in turning your moonpie body into something relatively healthy and fit.

The LIFT, which offers an on-site primary care clinic, is the brainchild of the West Tennessee Healthcare, the 10th largest non-profit healthcare system in the United States. Trust me, this is not your daddy’s gym.

The LIFT also serves as the centerpiece to the 17-acre Jackson Walk healthy community, a new development that includes single-family homes, 150 apartments, retail and borders the West Tennessee Farmers’ Market.

All this is happening downtown, which should be transformational in turning the downtown into a more vibrant place. Jackson’s downtown, like most downtowns, is too quiet and too empty at night and on weekends. But Jackson Walk should change that as it has a cool factor written all over it.

James Ross started his healthcare career as an EMT riding in the back of an ambulance. Today, he is the vice president and chief operating officer of West Tennessee Healthcare. I liken that to a private rising through the ranks to become a general.

Mr. Ross gave me a most excellent tour Jackson-Madison County General Hospital, and I can tell you that if I were sick, I would not hesitate going there. This hospital, which turns away no one, prides itself on keeping costs low and bills affordable. Texas hospitals could learn a thing or two from West Tennessee Healthcare.

Das Bunker

Should there ever be a zombie outbreak, this is where I would want to hole up.

Owned and operated by the Jackson Energy Authority, “the bunker” is built into a hillside with three feet of dirt on its roof. It came to be in response to a 1999 tornado and was completed and in use when an F-4 tornado devastated downtown Jackson in May 2003, killing eight people. This is a high-tech command and control center for all JEA utility infrastructure, which includes electric, natural gas, water, waste water and telecommunications.

The degree of utility robust and redundancy as offered by JEA was impressive, particularly in the area of broadband. JEA offers a 100 percent fiber optic network providing high-speed internet, cable television, and local and long distance telephone services

“While we have not done a good job of promoting our system’s value and strengths outside Jackson, we have the same system and capabilities of the system in Chattanooga which promotes itself as ‘gig city’ and having ‘the fastest system in the country’,” said John Nanney, JEA’s vice president of economic and industrial development. “In fact, Chattanooga visited Jackson and modeled their system after ours.”

Turkey Trot

Jackson should be on a good footing to compete for a data center, as the community is one of the 20 designated data center sites in the seven-state service territory of the Tennessee Valley Authority. I will remember the 423-acre Tiger Jones Technology Park, and not only because I watched a flock of turkeys remain on the roadway and run at least 100 yards ahead of our slowly moving vehicle.

Again 100 percent fiber optic gigabit ethernet is available with a bandwidth capacity of up to 500 Mbps to a single customer. The site is remote and private, good for purposes of security and is serviced by underground power lines and a substation capacity of 50,000 kVA. This has data center written all over it.

Space does not permit me to go into much more detail about my visit. I found it intriguing to say the least that Bethel University in Carroll County would actually offer scholarships in bass fishing. I am not making this up. You know, if I could’ve, maybe I would’ve.

Like all places, challenges exist. Public education is not where it should be in Jackson and much of the region, although the communities are now making positive strides. I heard this firsthand behind closed doors from HR managers representing local manufacturers. They are, in fact, pleased with the direction that things are going.

Dr. Verna Ruffin, newly hired to be the superintendent of the Jackson-Madison County School System, approached me after my speech to ask about how to make better inroads in communicating with local manufacturers and employers. Now that is promising.

Promising is how I would describe Jackson and West Tennessee. Manufacturing, with 10 automotive suppliers, is strong here for good reason as building blocks are in place. And I met a group of young Turk entrepreneurs, mostly IT types, who march to a different beat. They portend the future for Jackson and I am glad they are there.

Kyle Spurgeon summed up important aspects as to what I am looking for on any given project – “location, workforce and the ability to close the deal.”

I could see having future dealings here given the needs of a client. A promising place indeed.

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 due to expansion or consolidation, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

Telephone: 972-767-9518. Email: dbarber@barberadvisors.com Visit our website at http://www.barberadvisors.com

© 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

In Economic Development, Places on July 28, 2013 at 8:14 am

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

In Economic Development, Places on July 21, 2013 at 6:48 am

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.

 

A Defining Combination in Mexico

In Manufacturing, Places on July 14, 2013 at 6:45 am

Maybe you have heard me say it before, but it bears repeating: I’ve never met a state that I didn’t like.

Of course, I’m playing on a quote by Will Rogers, who said he never met a man that he didn’t like. Well, I wish I could be so generous, but some folks just don’t sit right with me.

I was a northern state not long ago, a fine place indeed, good people. But this one fellow, an economic developer, said the damndest thing that really stuck in my craw. He said that people working in automotive plants in the South were, and this was his words, mostly “barefoot hillbillies.” I swear I am not making this up.

I think my jaw may have actually dropped. And for just a moment, the Scots-Irish rebel in me emerged as I had this sudden urge to slap his jowls, call him a scoundrel and challenge him to a duel.  But this was a dinner party, and Cracker Dean didn’t need make an unpleasant scene.

But I could not let his snide slur about my people go unchallenged, as I consider myself a hybrid son of the South. (My mother was from Chattanooga, Tenn., and my father from Pittsburgh, and I grew up in both the South and the Midwest).

“Well, if what you say is true, and let me assure you that it is most certainly not, then you are essentially asserting that Mercedes-Benz, BMW, Volkswagen, Toyota, Honda, Nissan, Hyundai, and Kia were all wrong for having built assembly plants in the South. Let me get this straight, is that what you are saying?”

He looked at me in a dazed manner as if I had planted a two-by-four between his eyes. I don’t recall him saying much to me the rest of the night, which was fine by me. But despite his ignorance (talk about the pot calling the kettle black), I would never hold that against his state or region in a site selection project. There are people who say dumbass things everywhere.

No doubt, I have written a few in this blog. So I forgive Mr. Yankee Dumbass and will ask for your forgiveness as well.

The Big Fish Swam Away

Earlier this year, I was sitting in the office of an economic developer in the South who spent most of his career in the automotive industry. He had worked in senior management positions for both domestic and foreign automakers. Leave it to say, he has a deep understanding of the industry.

We were talking about Audi’s decision to build a $1.3 billion assembly plant in Mexico.  My host was genuinely perplexed. “I don’t understand that decision,” he said.

Keep in mind that economic developers in Tennessee, Georgia and Alabama were biting at the bit over the prospect of getting this Audi plant. They knew it was coming, and they knew they were in a very good position to get it.  It all made a great deal of sense.

Any future Audi plant could use many of the same suppliers now in place for parent company Volkswagen, which had completed an assembly plant in Chattanooga and began turning out Passat sedans in 2011. There were also a host of other nearby German tier one and tier two suppliers serving Mercedes-Benz in Tuscaloosa, Ala., and BMW in upstate South Carolina.

In short, economic developers in the South just knew they had another big fish circling their bait. But then the big fish unexpectedly swam away.

To many, Audi went off script by choosing Central Mexico for its first assembly plant in the Americas, although VW has a plant in nearby in Puebla City and an engine plant in Silao. But the more you look at it, the more it makes sense.

A Dream Moment?

Audi Chairman Rupert Stadler said something quite revealing at May 4 ceremony to lay  the foundation stone for the future plant, which will build 150,000 of the Q5 sport-utility vehicle annually starting in 2016,

“Mexico was chosen very deliberately,” Stadler told more than 500 industry and government officials gathered outside the town of San Jose Chiapa. “It is situated between North and South America, making it a linchpin between the two regions.”  Mexico was, according to Stadler, an “ideal export base.”

Audi executives touted Mexico’s good infrastructure, competitive costs and existing free-trade agreements in picking the site, which will cover an area the size of 400 soccer fields. They called the Mexican plant a “dream moment,” a bit uncharacteristic for Germans. But maybe the beer and tequila, not an especially good combination, were flowing by then.

Being on the doorstep of the United States certainly doesn’t hurt. But it’s worth noting that Mexico has 12 free trade agreements with 44 countries, while the U.S. has 14 trade deals covering only 20 countries.

Also, Mexico’s total compensation per worker was $3.94 an hour in 2010, only slightly above that of China, where wages are rising and transportation costs are greater because of the distances involved. Compare that with $34.59 in the United States and $52.60 in Germany.

“Mexican auto factories and Mexican manufacturing offer First World productivity and quality at Third World wages,” said Harley Shaiken, a professor of education and geography at the University of California at Berkeley in an interview with The Washington Post. “That is an unusual combination, and right now it is a defining combination.”

That defining combination is attracting billions of dollars of new automotive investment every year.

But Wait, There’s More

Just this past week, Denso, a tier one Japanese automotive supplier, said it would spend $51.4 million to expand operations at its production facility in Silao. The expansion involves adding a new product line to build alternators beginning in October 2014 for North American customers including Ford and Toyota.

Also last week, Nissan said it had signed a deal with real estate developer firm Vesta for the construction of an industrial park near its assembly plant now being built in the central state of Aguascalientes. Nissan expects that the proximity of the park to its manufacturing facility will allow for certain advantageous production flow processes.

Nissan will begin phase one operations at the $2 billion plant later this year. The Japanese automaker currently exports to 115 countries from Mexico.

Last month, General Motors, which employs 15,000 people in Mexico, said it would invest $691 million to expand its Mexican operations. About $211 million will be spent on expanding its Toluca plant, where GM builds V8 and four-cylinder engines.

The company will spend $349 million for a new transmission plant in Silao that will build 8-speed transmissions, and $131 million to expand the next-generation transmission plant in San Luis Potosi. 

The U.S. automaker, which has operated in Mexico for 78 years, builds the Chevrolet Silverado and GMC Sierra pickup trucks in Silao; Chevy Sonic and Captiva, and Cadillac SRX vehicles in Ramos Arizpe; and the Chevy Aveo, Trax and Tracker vehicles in San Luis Potosi.

Only a few days following the Audi ceremony, Honda announced that it would build a $470 million transmission plant in the central state of Guanajuato, not far from an $800 million assembly plant now under construction and expected to begin operations in early 2014.

Mazda’s new $650 million plant at Salamanca is scheduled to start operations in March 2014. Already the company has announced plans to raise production by 90,000 units to a total of 230,000 units within two years. The plant will eventually employ 4,500 people, and marks the return of Mazda manufacturing to North America after Mazda6 production was moved back to Japan last year.

Mexico’s Gain Not a U.S. Loss

Last year, Mexico attracted $3.7 billion in announced investments by automakers alone, matching the U.S. total, according to the Center for Automotive Research in Ann Arbor, Michigan. IHS Automotive estimated that investments by automakers in Mexico over the next few years could total $3 billion annually.

But Mexico’s gain does not mean a U.S. loss. Automotive jobs will grow on both sides of the border, making the broader North American economy more competitive against Asia and Europe.

“Mexico is not siphoning off jobs from the U.S.,” George Magliano, senior economist at IHS Automotive, an industry research firm, told The Washington Post. “North America is becoming a new hub for export production, and the bulk of it is occurring in Mexico,” he said. “But some of it is happening in the U.S.”

Of the more than 15.5 million vehicles estimated to be built in North American auto plants last year, more than 10 million were built in the U.S., while Mexico produced about 3 million and Canada 2.5 million. By 2020, IHS projects the industry will make 11.7 million in the United States, 4.1 million in Mexico and 1.9 million in Canada.

That is what I would call a good deal, both for the U.S. and Mexico. Canada, not so much, which I am sorry to say.

Now I could show my chauvinistic ignorance and lament why all these automotive companies are making such horrific blunders by building new plants in Mexico and employing people who don’t really know much of anything. But then again, I don’t believe that. I don’t think these big investments are blunders at all.

No, I think these companies have found something good down there in Central Mexico, which is removed from the drug cartel violence at the border. Matter of fact, I’m sure of it or they wouldn’t be lining up to spend billions down there.

They’re speaking with their actions and that tells me something. I hope to learn more about it and if I do, well, I’ll be sure to let you know. In the meantime, hasta la vista or … 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

And They Will Prevail

In Places on June 23, 2013 at 7:59 am

RATTLESNAKE ISLAND, LAKE ERIE – Whether we like it or not, too often perception becomes reality. That’s just the way it is.

So to change reality, you work on perception. This is a marketing guidepost in selling just about anything from corn flakes to Cadillacs. If you are an economic development organization, your product is the state, region, county, city or town that you represent.

Naturally, most economic developers would want me and other site selection consultants to view their product with favor. When I was an economic developer, I was constantly thinking of ways to establish relationships and influence site selection consultants and corporate decision makers. But there were times when I felt akin to a used car salesman.

“I’m telling you, this building is a real creampuff. Just look at those dock doors and cranes. Pretty sweet, huh?”

So it was smart, really smart, when the economic developers essentially got out of the way to let the business people do the talking for Northwest Ohio. At that point, I felt I wasn’t so much being sold as being informed. And being informed always helps me overcome pre-conceived notions.

(Yes, it’s true. Even all-knowing “objective” site selection gurus can have their biases.)

From the Horse’s Mouth

So the Toledo-based Regional Growth Partnership, a regional group representing 17 counties, worked up an itinerary in which eight other consultants and me heard from the horse’s mouth so to speak. (We would later frequent a bar called Mr. Ed’s at Put-in-Bay, but we’ll touch on that later.)

We heard from executives from three Fortune 500 companies — Owens Corning; Owens Illinois, Marathon Petroleum Company – all of which have corporate headquarters in the region. We also heard from execs at First Solar Corporation; North Star Bluescope Steel Corporation; Sauder Woodworking and PRO-TEC.

From our Toledo-based companies, we learned that this was a small-town/big city with everything within a 20-minute drive. Inching along in congested traffic simply does not happen. But on a more telling note, we learned that Marathon Petroleum had an epiphany as a result of a devastating flood in 2007 in Findlay, 50 miles to the south of Toledo.

In the aftermath, the company could have chosen fight or flight. It chose to fight and remain a committed partner to the community. Bill Conlisk, manager of administrative sevices at the company, said the people made the difference.

“Bottom line, we are in Findlay because we like the workforce and the work ethic. The flood reaffirmed our faith in Northwest Ohio,” Conlisk said.

The Biggest Elephant

As a site selection consultant, I have learned that every community everywhere has a motivated workforce. I have also learned that from Maine to California, from Canada to Mexico, that everyone has a “central location.” The economic developers have told me so.

But when I hear major employers talk of a skilled workforce, of a loyal workforce, well, I am going to sit up and listen. I was also hearing, surprise, surprise, that they were operating non-union.

For me, it was the biggest elephant in the room — that union legacy of Toledo.  Yes, unions did at one time hold court here and could make life quite miserable for a company not willing to cooperate. And by cooperating, I meant companies where management was unwilling to essentially roll over and give the unions what they demanded.

But those times are gone. Today, most unions understand that they must cooperate with management if a company is to compete, much less survive. Even more galling for union leadership, many workers, especially younger workers, today are skeptical that unions provide any meaningful value at all.

Union influence has been on the wane for decades now in this country as union membership has dropped to a record low. In the private sector, it’s now down to 6.6 percent. And in the Toledo MSA, it’s at 6.9 percent.

The truth is that if a company pays a competitive wage and communicates with its workers, the chance of it getting a union today is quite remote. That’s just the way it is.

It’s true in Toledo and Northwest Ohio, and in neighboring Indiana and Michigan, states that have been historically the cornerstone to our nation’s industrial might. But the times, they are a changing.

Indiana stunned many observers in January 2012 by becoming the first Midwestern manufacturing bastion to become a right to work state. Even more shocking, Michigan, the virtual birthplace of industrial unions in the U.S., followed suit earlier this year.

More Perception than Reality

That now puts the onus on Ohio, which has privatized its state and regional economic initiatives under a Jobs Ohio banner, funded by liquor sales. Economic developers cannot help but look at their neighbors and wonder how many more looks they might get if only. For Northwest Ohio, that is especially true as the region borders both Michigan and Indiana.

For the record, I believe this right-to-work advantage is more perception than reality, but here again perception becomes a reality.  I will advise a corporate client that the advantages to a right-to-work state are rather miniscule.

Sometimes they listen and sometimes they do not. If they insist that the search area be limited to only right-to-work states, well, they are paying the freight.

For the uninitiated, in a right to work state, if a majority of those of working on a shop floor vote in favor of creating a union, you as an individual working there are not forced to join it. You can, essentially, opt out if you so choose.

Prediction: If Ohio Gov. John Kasich, who over-reached early in his first term back in 2011 and got his ears boxed when he tried to restrict collective bargaining rights of Ohio’s 350,000 public employees, gets a second term, he will push for right-to-work status.

Will it happen? I hope so, for no other reason than perception. In the end, this is a marketing ploy, to keep up with the neighbors pure and simple. The reality would probably be more looks by expanding companies.

No Palate for Unions

But if you take all the right to work stuff off the table, time and again I heard from manufacturers, courtesy of the RGP, that it was quite possible to operate non-union in Northwest Ohio. Heck, two steelmakers – North Star Bluescope Steel and PRO-TEC. – are doing it.

“If you treat people with respect, you get it back,” said Brian Vaughn, president of PRO-TEC, based in Leipsic. The company recently hired 80 workers for a new $400 million, state-of-the-art continuous annealing line for processed steel used primarily by the automotive industry.

Vaughn said workers at the plant are disinterested on the prospect of unionization.

“They certainly don’t seem to have a palate for it at all,” he said.

The same goes at North Star Bluescope Steel, a mini-mill in Delta, Ohio, turning out flat-roll products. 

“We are very beyond the issue of union and non-union,” said Rich Menzel, vice president of human resources at North Star. “We are at a point where our employees would never sign a card. We are thinking of being a world-class workforce.”

NorthStar has gone 4 ½ years without loss time due to an injury, and has a better attendance record than anyone in its industry.

“We believe we have the best possible workforce anywhere,” Menzel said.

On a site selection project, companies, particularly a manufacturers, will often have some general ideas on where they need to be based the location of customers and suppliers. My job is to hone the search down to those probably places where success can be optimized.

A Deep Bench

The human resources factor is critical. And if I am representing a manufacturer, I’m looking at communities where there has been a tradition of manufacturing, where there is a deep bench of talent and where there is a pipeline for future talent.

Just as most communities tout their workforce as being smart and motivated, they also point to their community colleges as the principle trainers for a future workforce.

The key, of course, is how linked in that community college really is to the needs of local industry. Are the educators and business people in fact talking and are they speaking the same language?

There are 22 community colleges in Ohio, four in the northwest region. I get the sense, and this would be something that I would want to further investigate, that these schools are in fact reaching out to local companies to meet their training needs.

Most of the liaisons and trainers at these community colleges have industry backgrounds and understand the language of manufacturing. They are not faculty-lounge types with no real-world experience.

“Academics bog things down,” said Jim Drewes, director of Custom Training Solutions at Northwest State Community College based in Archbold. “We are here to help.”

Satan’s Workshop

I wrote most of this blog while staying on Rattlesnake Island in Lake Erie, a beautiful if myth-shrouded place that served as a haunt for rum-runners during Prohibition. (They would smuggle the hooch down from Canada via boats.)

The place still retains this aura of secrecy and you can imagine that mobsters used it as a place to get away and relax. It’s the perfect spot to quietly reflect upon the gangland hit that you ordered or participated in.

I do know that the 85-acre very private Rattlesnake Island stands in stark contrast to another island, Put-In Bay, only a 20-minute boat ride away. Put-In Bay is the Key West of the Midwest, party down central, where rock and roll pulsates from the many nightclubs near a central park lining the marina.

At one point, we – the staff of the RGP and the consultants – having become consummate drinking buddies, ventured to a pool area behind Mr. Ed’s. As one of our more adroit hosts correctly put it, we were “at the epicenter of Satan’s workshop.” Shocked and appalled by the promiscuous behavior of the young people there, we only stayed a few hours, all the while contributing to Jobs Ohio funding.

Brave Words for a Brave People

Around these islands, emblazoned on flags and T-shirts, you will see the words, “Don’t Give Up the Ship.” Those same words were on the battle flag of the USS Niagara in 1813, when it was part of a nine-ship fleet that engaged six British warships. The 2 ½ hour battle would have been visible, at least initially, from Rattlesnake Island.

Ironically, American Commodore Oliver Hazard Perry had given up his ship, the USS Lawrence, which had become a hulking wreck as a result British gunfire. He transferred his surviving crew to the undamaged Niagara. The American fleet prevailed, which probably means that Toledo and Cleveland are not part of Canada today.

And while Ohio, with its manufacturing tradition, did take the full brunt of the Great Recession, it is clear that no one here gave up the ship. The fight continues for better jobs and a better future for future generations. And they will prevail.

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 He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be 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.

 

 

 

 

 

I Got Showed

In Places on June 16, 2013 at 5:39 am

One of the simple things that I enjoy in life is a drive out in the country. While I have become attuned to living in a large metro area, I have always been drawn to rural places.

This is where my gaze shifts to the lay of the land and I begin to marvel at the beauty of it all. Out in the country, my body seems to slow down and I find myself listening, smelling and seeing. I am calmed.

For a time when I was a boy, my family lived on the outskirts of Springfield, Mo. It was then and there where I became the great explorer. I was always traipsing through woods and fields and developed certain skills as a result. For example, I soon learned to recognize game trails where animals traveled.

Still, I could not have been all that observant. I remember walking head-on into a low-hanging hornet’s nest (the inhabitants got their revenge) and nearly stepping on a coiled rattlesnake. But I lived to survive and I soon knew that I wanted to be outside exploring with my trusty BB gun in hand in the mold of Lewis and Clark or Fremont.

Fifty years later, I still like to be outside and away from commercial glut, breathing better air and gazing on pastoral, rolling landscapes interspersed with woods. This past week, I traversed such ground in Missouri, and it only confirmed what I knew from my childhood, that this was and is a beautiful place.

Is that It?

“Pretty country” is how I described my first impressions to economic developers who gathered at a resort Lake of the Ozarks for an event billed as “Lakeside with the Locators.”  I’m sure they wanted something a little more in-depth from me, one of eight site selection consultants who were invited to attend the event.

At the very least, my audience wanted me to recognize that Missouri is a low-cost, pro-business place in comparison to much of the country and offering certain transportation amenities that are lacking elsewhere. And I believe that. I really do.

But I must have dashed their hopes by offering up that they lived in “pretty country.” I mean, come on, Dean, you’re not a tourist here.

Actually, that’s not all I said. During break-out sessions, I spoke about how I approached the site selection process and gave my views on trends in the automotive and food processing industry sectors.

I was also a co-speaker, with Chicago-based Sarah Raehl, of Deloitte Consulting, at the opening session of the Missouri Economic Development Council’s annual meeting. I think I told them that the robots were plotting our demise in this new digital machine age that we are entering. So I hope I provided some nugget of information that the economic developers could take home with them.

But I know that I kept looking out the window, wanting to be outside in that pretty country.

Cruising with Flat Harry

So they took me out on a boat at dusk. And it was a heck of boat, with I think three bedrooms, and three or four bathrooms. Out on the boat, I had good conversations with Chris Chung with the Missouri Partnership, who earlier in that morning explained the competitive advantages of Missouri.

Out on the boat, I stared at shorelines crammed with multi-million-dollar second homes, no doubt mostly from the well heeled of St. Louis and Kansas City.

But probably the biggest thing for me during the evening yacht cruise was meeting Flat Harry. I had my picture taken with him.  Wearing a Hawaiian shirt, red shorts, blue shoes and a yellow hat, the 33rd president of the United States from Independence, Mo., was the life of the party. He didn’t say a word, almost unheard of for any politician, but there he was  – pasted on a six-inch stick, smiling and making us all feel  good.

If you want to see a picture of Flat Harry, posing with site selectors Minah Hall, of Chicago-based True Partners, and Tim Feemster, of Dallas-based Foremost Quality Logistics, and me, go to this link: https://www.facebook.com/flatharry123  Thank you, Jodi Krantz of Independence Economic Development, for introducing us to him.

Many thanks to the sponsors of Lakeside with the Locators — Cuba Development Group; Economic Development Center of St. Charles County; Missouri Partnership; Springfield Regional Economic Partnership and the St. Louis Regional Chamber. Kudos to Lori Becklenberg of the St. Louis Regional Chamber for her work in making the event a success.

My Stump Speeches

But my trip to Missouri would only get more interesting as I left Lake of the Ozarks to head 125 miles north into the four-county region as represented by the Moberly Area Economic Development Corporation. This was country for working people in the very heart of the nation. It smacked of Norman Rockwell, and as I would learn “the place to be.”

There I gave a series of three PowerPoint presentations to stakeholders within the region — one at breakfast in Booneville, one at lunch in Monroe City and one at a dinner in Moberly before the MAEDC board. My presentation was called “A Consultant’s View: How Communities Compete in a Site Selection Process.”

I think my talks were received reasonably well as not a single roll was hurled in my direction. Besides outlining some of the main factors considered during the site selection process, I emphasized how a regional approach to economic development served communities best. My message on that point was illustrated by a slide featuring a photograph of stacked boxes of boneless pork rectums. Well, I guess you had to be there.

I also hit home on the point that if a community or region should always engage in a program of business retention and expansion (BR&E), as most jobs are created by existing industry and not through the industry recruitment. Still, recruitment is important and if communities are to compete, they must have product, be that buildings and/or sites.

In Between Stuffings

In between my presentations and meal stuffings –folks in Missouri are hearty eaters and their roasted pork steaks are incredible — my hosts, MAEDC President Corey Mehaffy and David Gaines, vice president, spent an entire day showing me buildings and sites in Randolph, Cooper, Monroe and Howard counties.

Some of these available buildings and sites virtually fronted Interstate 70, the first interstate highway project in the United States. Whereas others were more isolated, a good deal more than 10 miles away from the interstate or U.S. 63, which served as a de facto interstate in the region as it was a divided, four-lane highway offering good trucking time running north into Iowa.

A few more words on I-70. This interstate, the fifth longest in the country, approximately traces the path of U.S. Route 40 (and also the old National Road) east of the Rocky Mountains, linking Baltimore to Denver. It ends or starts depending on your point of view in Utah. Sections of I-70 in Missouri claim to be the first interstate in the country.

The four-county region also is also served by three Class I railroads, Norfolk Southern, BNSF and UP, offering direct rail links to river ports on both the Missouri and Mississippi rivers. Both the St. Louis and Kansas City international airports are about a two-hour drive away.

Star Wars on the Highways

This is work country, where county commissioners are excused from meetings because they are “out in the fields.” I for one cannot think of a better reason to miss a meeting.

During my travels throughout these rural counties, I came up on farm equipment motoring along the highways that resembled something out of Star Wars. Even my hosts were perplexed by some of the strange machines that we encountered.

But it was also apparent that the Great Recession had left its mark, as there were places within the region where people were under pressure. The mayor of Monroe City lamented how much middle-class wealth in his community had evaporated over the years since he had been a boy growing up there. He told about how his town lost two major employers within months after first taking office. Talk about a trial by fire.

In Fayette, I saw a spec building, albeit built with low ceilings, that had never been occupied in its 17 or 18 years. In Paris, which had a beautiful historic courthouse, I learned of a population decline of 22 percent.

Still, I was encouraged and impressed when I learned from a city official that Paris was “the center of the universe.” I did not know this, but I do now.

Indeed, I was encouraged and impressed throughout my visit. Missouri is a hybrid. It’s on the doorstep of both the Midwest and the South, showing cultural aspects of both. Although I lived in Missouri only a short time, I believe that I reflect Missouri to the degree that I am also a hybrid, half Southern and half Midwestern.

Missouri is the Show-Me State and let me tell you, I got showed, from cruising on a boat with Flat Harry to shaking calloused hands that had come from the fields.

The night before I was to begin my community tour of the MAEDC’s region, I discovered that I had left the power cord to my laptop at home. David Gaines asked if he could take my laptop to see if he could get a chord for it.

I gave it to him thinking “lots of luck” but within an hour he was back at my door with laptop and cord in hand. That can-do spirit is alive and well in Missouri.

Did I tell you that it was pretty country?

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 He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be 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.

 

 

 

 

 

 

 

Where the Four R’s Meet

In Places on June 9, 2013 at 6:51 am

When I first heard the words “location, location, location,” coming from a real estate broker, it was maybe 30 years ago and I thought, “Now how clever is that? He about sums it up.”

But that catchy phrase doesn’t sum it. The truth is that you may have the best strategic location for a given project, but if the pieces of the puzzle don’t come together, then you are not the right choice after all.

If a manufacturing client for example wants an existing 100,000-square-foot building with 32-footing ceilings and you don’t have anything close to it, then you are not in the running. Or let’s say we are looking for a 50-acre certified site where all the proper due diligence has been performed so that we can hit the ground running on a fast-track basis. If you don’t have it, we’re looking elsewhere.

Then again, you may have a great building or a site that fits the bill completely, but there is that one factor which you have no control over, which invariably gets you scratched. It’s a cruel world.

As a location investigator, which is what I ultimately am, I can tell you that the site selection process transcends location alone. So many factors are at work, which is why companies should not try this on their own. A mistake can be costly, even put a company in peril.

Last week, I wrote about how infrastructure was a basic building to commerce and an essential ingredient to site selection. I lamented how infrastructure in this country is getting old and rickety and how we need to invest in ourselves if we are to remain a competitive force.

A Place of the Four “R’s”

I just came from Memphis this past week. Here I found a lot of the basic building blocks in place – an air cargo hub ranked second in the world, five Class I railroads and three intermodal hubs, a convergence of highways, and a major port along the Mississippi River.

This is a place of four “r’s” —  runway, river, rail, and road.  Some professor somewhere, probably a fellow with a lot of time on his hands, called Memphis “America’s Aerotropolis.”

I do like the sound of that. I think I need to make me up some nifty words.

While I was in Memphis as the guest of the Greater Memphis Chamber this past week, I also found Graceland, the National Civil Rights Museum, and the Stax Records museum.

Yes, Memphis was fun and educational. I got my fill on blues, barbecue, baseball, Beale Street, Ghost River beer and was even regaled with tales of a bizarre barefooted provocateur by the name of Prince Mongo from the Planet Zambodia.

It seems he was a perennial mayoral candidate with his real estate parcels around town decorated with coffins, toilet bowls, mannequins, and beach umbrellas. He is now in Florida, causing a quite a ruckus down there from what I understand.

Move the Pipe

But I was more impressed with the real mayor, actually I should say mayors. AC Wharton is the mayor of Memphis, whereas Mark Luttrell is the mayor of Shelby County. I got to hear both of them speak, and they did a fine job. But I was taken more by Mayor Wharton’s deeds than his words. Here is the gist of the story as I remember it.

Mitsubishi Electric Power products will begin production next month in its newly constructed $200 million plant in Rivergate Industrial Park in Southwest Memphis.

The plant, which I had the opportunity to tour, will employ 300 people and it will be Mitsubishi’s first North American facility to manufacture the large power transformers that are sold to utility companies. Mitsubishi liked the site but there was a problem. A sewage pipe eight feet in diameter was buried 40 feet deep through the middle of the 100 acres.

If Memphis was to win the project, the city would have to spend $9 million to relocate the pipe. The decision rested with Mayor Wharton. His verdict: “Move the pipe.”

And the rest as they say is history. But the truth is that in many places in our great country, that pipe would not have been moved and those 300 jobs would have gone elsewhere, proving it’s not just location but sweat equity, too.

Controlled Chaos

They call it the Matrix and I think it rivals the movie in terms of confusion to the untrained eye. This is a place of controlled chaos. This is FedEx Corp.’s Memphis hub at midnight and for the next few hours, the Memphis International Airport is the busiest airport in the world. I was there. I saw it, and I was amazed.

The Hub covers 862.8 acres, contains 42 miles of conveyor belts and on an average night, the facility handles 150 airplanes and 1.5 million shipments. About 7,000 Memphians descend upon the Hub every night. Watching packages flow over a myriad of connecting conveyers is a jaw dropping experience.

I got back to the Peabody Hotel at 2:30 a.m. after my FedEx tour. I wondered if I might dream of being smothered in an avalanche of boxes and envelopes. Thankfully no such nightmare.

FedEx is Memphis’ largest private employer with 30,000 workers. The Hub pumps more than $27 billion a year into the area economy, helping support more than 200,000 jobs.

Medical Device Mecca

Medical device and other life science companies in particular have found that just a few hours advantage over the competition with deliveries can make a huge difference. With an extended business day via later pick-up times because of the FedEx Hub, Memphis, now the country’s second largest orthopedic device center, is home to major operations for Medtronic, Smith & Nephew, Wright Medical, Symmetry Medical, and NuVasive.

More than 70,000 Memphians are employed in the city’s broad-based collection of bioscience industries. Memphis biomedical device industry employment has grown 50 percent since 1999 – more than four times the national rate of growth. St. Jude Children’s Research Hospital, the University of Tennessee Health Science Center (UTHSC) and medical school, InMotion Musculoskeletal Institute, the Medical Education & Research Institute are among the major employers in the life sciences.

Tennessee’s Department of Economic and Community Development has identified medical device manufacturers as among the state’s most important exports, with U.S. Census data showing its $2.1 billion in 2012 ranks at the top of all state exports by dollar value.

Made in Memphis

During a luncheon, I listened to John Moore, president of the Greater Memphis Chamber,  tout a “Made in Memphis” report on the manufacturing sector showing that “miscellaneous” industries were the top category with 6,170 jobs, according to U.S. Bureau of Labor statistics.

“It means we are diversified,” he said.

U.S. Bureau of Labor Statistics figures show that there are 34,272 manufacturing jobs in the Memphis economy, led by paper manufacturing with 4,870 jobs followed by machinery, chemical, fabricated metal and food. Each of those four categories shows 3,412 to 3,843 jobs each.

The 2012 Made in Memphis report indicates that Memphis manufacturers will hire more than 4,000 employees through 2016 at an average annual pay of $32,180 with a direct wage impact of $128.7 million on the local economy.

“This trend diversifies the Memphis economy that has historically been dominated by logistics and distribution, healthcare and tourism,” according to the executive summary of the report. “The rapid growth presents an opportunity and a challenge to provide a skilled manufacturing workforce.”

Providing a skilled manufacturing workforce is an old tune now heard throughout much of this country. The report was quite pointed in its finding that, “Few employers reported working with educational institutions to recruit employees.”

While that is not good, it is sadly the norm in probably most places. Educators and manufacturers are two different tribes that often will not speak the same language.

Big Tracts in the Offing

But that doesn’t stop the economic developers from wanting to expand the real estate product that could be available to manufacturers. The Memphis-Shelby County Economic Development Growth Engine and the International Port of Memphis have plans to expand Presidents Island by 1,000 acres.

The city would look to leverage private investment at the 960-acre industrial park into what could be a $60 million project which would involve backfilling dirt into floodplain land and could be bordered by a planned Canadian National Railway rail line. At least that is the plan. Its fate now rest with the approval of a key federal grant.

Much farther along in reality is the 3,840 acre Memphis Regional Megasite, a property suitable for a major automotive manufacturing facility. The site, which is owned by state, is just north of Interstate 40 and 20 minutes east of the Memphis suburbs. It is adjacent to U.S. Highway 70/79 and the CSX Railroad on the north.

The Jackson Regional Partnership, an extension of the Jackson Chamber, is working with the Greater Memphis Chamber, Tennessee Department of Economic and Community Development, HTL Advantage, and Tennessee Valley Authority to market the site. The JRP is led by Kyle Spurgeon and a member advisory council from nine counties of Carroll, Chester, Crockett, Gibson, Hardeman, Haywood, Henderson, Madison and McNairy. 

Folks, this is how regionalism is supposed to work. It’s only a matter of time when something big happens here. Stay tuned.

I was one of a group of site selectors invited to Memphis this past week. We all learned so much, much more than from a website and had some fun to boot. A foundation for growth exists here, albeit Memphis has certain big city problems that most big cities will have. But the fundamentals are too strong for things not to happen here. You can’t ignore those four “r’s.”

I only wish I could name everyone who assisted me in gaining a better understanding of the Bluff City. If I started, I would certainly fail by leaving someone out.

But I do want to publicly thank “The Godfather.” Clifford Stockton, 80, was the first African-American managerial employee at the Memphis Chamber, hired on Jan. 20, 1969 in response to Dr. King’s assassination. He is a most modest man, but I sense that he was and continues to be a great healing agent for the city that he loves. 

Mr. Stockton, more than anyone else, has the institutional knowledge about Memphis and how it works. If I had a project where Memphis could be a possible fit, he would be the first man that I would want to talk to.

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 He can be reached at 972-767-9518 or atdbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be 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.

No Place for the Faint of Heart

In Places on May 26, 2013 at 8:53 am

As a site selection consultant, I like to think that I have a practiced if not discerning eye.

I am not RoboCop. I will not pick up everything about my surroundings, but I generally get a good idea about a place after I have been there for a few days.

But I find Alaska somewhat confounding. It pushes and pulls me in opposite directions at the same time. It’s an incredibly interesting place, and I am attracted to it for a variety of reasons. But it’s a tough nut to crack.

Now there are some obvious things that stick out in my mind. This is an economy built largely around extraction – pulling oil and gas and minerals out of the ground, pulling fish out of the sea, pulling tourist dollars out of purses and wallet.

It’s an isolated place, and when Alaskans proclaim that they inhabit the “last frontier,” well, they are not kidding.  A frontier grit is alive and well here where 82 percent of the communities are accessible only by air.

The Alaskan Railroad Corporation, owned by the state, operates a rail system that is totally self-contained within state borders. No track connects with a Canadian railroad, and therefore there is no rail linkage between Alaska and the lower 48.

What’s more there is only one road, you read that right, just one road constructed during World War II, linking what would become our 49th state to its brethren states below.

It took me awhile to figure this out, but I soon concluded that Alaska really is an island because of this lack of land-based connectivity. And that factors strongly in it being a high-cost place to live and do business. Virtually everything – foodstuffs, cars and consumer goods — is imported, 80 percent of it through the port of Anchorage.

Wages are higher but so too is the cost of housing. Even a dumpy one-bedroom apartment in Anchorage will go for $900 or more. Houses will typically sale for more than $300,000.

If there is anything low here in terms of costs, it is taxes. Alaska has no sales tax, no inventory tax, no gross receipts tax and no personal income tax. Anchorage has no sales tax, which I noticed when I bought my obligatory T-shirt at the Glacier BrewHouse after stuffing myself with grilled King Salmon and drinking the local suds on my first night on the ground.

It was Tuesday night, May 14, and I immediately knew that I liked this place.

Four Days Later (A Journal Entry)

It is supposed to be springtime here in Alaska, and we are supposed to be going to a farmer’s market this morning. This is our last day here, our “fun day” to do touristy stuff. But from my window on the 16th floor of Hotel Captain Cook, I see snow on the city streets below.

I didn’t bring a warm coat, didn’t think I needed one. It’s Saturday morning, May 18, and even the hardiest Alaskans are displeased with the unseasonably cold weather.  I am reminded by what Bill Popp, president and CEO of the Anchorage Economic Development Corporation (AEDC), said at a dinner the other night, half in jest but half not.

“This place is not for the faint of heart. At least once a year, Mother Nature will try to kill you.”

It could be black ice on a highway or thin ice on a river. Or it could be a mother moose or mother bear with young nearby, and you just so happen to be in the wrong place at the wrong time. Let’s just say you got to be aware of your surroundings here and act accordingly.

I got a better idea of Alaska living and the sheer scope of things the day before while touring the Matanuska-Susitna Valley (known locally as the Mat-Su or The Valley), an area spanning 25,000 square miles (about the size of West Virginia).

The Valley starts only about 35 miles north of Anchorage. If there is going to be any significant manufacturing in Alaska, it will likely take place here because Anchorage has essentially run out of viable sites.

Port MacKenzie, a deep water port designed for export of natural resource commodities, which will soon get rail, and a 160-acre industrial park should prove advantageous for future development. A proposed bridge across the inlet linking the Valley to Anchorage, new natural gas pipeline, and a new hydro-electric dam are all being discussed or in the planning stages, representing billions of dollars of infrastructure investment.

The dam and the pipeline projects have greater local support, the bridge less so. Whatever projects are built, big changes are coming to the Mat-Su Valley. This should be the focal point for future growth.

If I Were a Young Man

As a young man, I may have thrived here. I could have gone traipsing out in the woods in September with rifle in hand to get my moose. I could have been mushing across the countryside with a team of dogs in January, or racing snowmobiles with friends at 80 mph across frozen flats in February.

I am sure that I would have dip-net fished for late-run sockeye salmon on the Kenai River in July. I would have ventured deep into Denali’s trail-less wilderness in August, all the while wearing “bear bells” on my backpack and person so as to not walk up on and surprise any grizzly bears lurking nearby.

(Those experienced in the Alaskan backcountry recognize the difference between black bear and grizzly bear scat. Black bear droppings are smaller and often contain berries and leaves, whereas grizzly droppings will often contain small bells.)

Yes, if I were a young man in Alaska, I might have tried my hand at “living off the grid,” at least for a while, subsisting on what I harvested from nature’s abound all the while disdaining the creature comforts of civilization. Heck, I might have even knocked out a great Alaskan novel, ala Jack London, or panned for gold.

But as that old Texas gambling song goes, “the river ain’t whiskey, and I ain’t no duck, so I’ll play Jack O’Diamonds and rely on my luck.” The fact is that I’m an old man now, a mere visitor to this strange land.

No, I don’t believe I could hack it here, not now.  Would not be a good bet at this point in my life. If I tried my luck at this late stage, they would probably find me in a snow drift come spring, curled up in a fetal position.

This is no country for old men (unless you came here young).

Poor Ron

I actually felt sorry for him. Ron Ruberg was one of three site selection consultants invited on this Alaska familiarization tour by the AEDC.

“I’ve been to Maine four times and four times I was promised that I would see a moose,” said Ruberg, a partner with Location Advisory Services. “I have yet to see a moose.”

There were three of us — Ron, and Dan Levine, also of New Jersey with MetroCompare – and then me, the shivering Texan who was constantly being reminded that Alaska dwarfed the Lone Star State. My retort was lame, but it was all that I could think of. “Well, we’ll just see about that if you ever melt.”

But this moose thing was really getting under Ron’s skin. He even started to question if moose actually existed in the wild at all as we traversed some pretty rugged ground with no moose in sight.  Arriving at the airport to catch my departing flight home after five days in Alaska, I took pictures of two moose mulling about in the FedEx parking lot. 

I emailed Ron pictures to prove to him that yes, moose, really do exist, if not in the wild, at least at airport parking lots. I bet he yelled at the computer screen.

Live, Work and Play

Anchorage is not the first city where I’ve heard this phrase. Until now, I considered it a worn out cliché. But here in Anchorage, it has real meaning. Because of the harsh realities of Alaska, you need a balance to life or you just won’t last. You have to purposely pursue life here or you are going to fold your tent and go home, back to the lower 48.

So I was constantly hearing from my hosts that there were always plenty of things to do here in Anchorage, even in the dead of winter, much of it centered outdoors. I think this live, work and play is a mantra for survival.

It was striking to all three of us consultants that the real evangelists for Alaska were mostly transplants – men and women who chose to come and build lives here. They were all pioneers of sorts, all very much entrepreneurial, betting on a future on the frontier.

And that has to be a strength for Alaska, this unrelenting entrepreneurial drive to make a business and a life work. It supersedes all, including costs. Businesses bank on this sheer determination. It’s the reason why they exist. Heck, it’s the reason why Alaska exists.

Work will get you farther. “People don’t make it here on their mouth, but what they do. If you work hard, you are recognized for it,” one businessman told me.

There are no country clubs in Alaska, and I doubt if there ever will be.

The Life of a Box

The airport intrigues me. I sense there is something very big here, waiting to happen.

Well, it’s already big. The airport in Anchorage is the fourth busiest air cargo hub in the world, serving 49 cargo destinations and accepting on average of 500 widebody cargo aircraft landings per week. It operates 24 hours a day and never closes for snow.

And Anchorage is one of only two places in the United States that allows for foreign-based shippers to unload cargo from one plane and put it on another plane. That transloading process might provide for opportunities in sorting and assembly at nearby facilities, but so far that has not happened.

It is interesting to note that airport authorities to a large degree do not know what is in the boxes or the process of how they ultimately got to Anchorage. Once they figure out the life of a box, well, maybe they can plan accordingly and create economic development opportunities.

The airport exemplifies Alaska. You know the opportunities are here and that they can be big. It’s just putting the pieces together and making it work.

At the AEDC, the focus may shift from recruitment to BR&E – business retention and expansion. I think that is the smarter strategy in the long run. Not only are more jobs created by existing industry, but businesses seem committed to this place. They are here for a reason and they are going to tough it out.

There is a code here. You never pass by someone who is in need of help. That can have life or death consequences.  A helping hand, a solutions provider, is always welcomed, which is what BR&E is ultimately about. It works just about everywhere, but it should especially thrive here on the last frontier.

A special thanks to my guide Will Kyzer with the AEDC, who never got me killed, and Don Dyer, with the Matanuska-Susitna Borough, who enlightened me on sustainable living, Alaskan style.

One last thing, there is no law school in Alaska. I think other states could learn from that.

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 He can be reached at 972-767-9518 or at dbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be 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.