Dean Barber

Archive for the ‘Site Selection’ Category

Ride the Tiger

In Site Selection on April 26, 2015 at 3:48 pm

During the 1992 presidential campaign, then candidate Ross Perot, an astute Texas businessman if there ever was one, warned that NAFTA (North American Free Trade Agreement) would create a “giant sucking sound” of jobs going south to the cheap labor markets of Mexico.

There is no question that many companies have turned to Mexico because of its proximity to the United States and because of its substantially lower labor costs, factors that became more enhanced with NAFTA. You don’t have to be Jack Welch to figure that out.

Just in the past couple of weeks alone, three behemoth world-class manufacturers, Toyota, Ford and Goodyear, announced plans to build major facilities in Mexico.

Toyota said it will build a $1 billion plant in the central state of Guanajuato, north of Mexico City, to produce Corollas, while Ford will spend $2.5 billion on new engine and transmission factories in Chihuahua and Guanajuato.

Advantage Mexico

Low labor costs and fewer tariffs gives a huge competitive advantage to Mexico, where eight automakers have opened or announced new plants in the past two years.

A worker in Mexico costs car companies an average of $8 an hour, including wages and benefits. That compares with $58 in the U.S. for General Motors and $38 at Volkswagen’s factory in Tennessee, the lowest hourly cost in the U.S., according to the Center for Automotive Research.

Mexico also trumps the U.S. on free trade. It has agreements with 45 countries, meaning low tariffs for exporting globally. That, along with low labor costs, convinced Audi to build an SUV factory in the state of Puebla.

Audi will save $6,000 per vehicle in tariffs when it ships a Q5 to Europe, compared with building the same vehicle in the U.S., says Sean McAlinden, chief economist at CAR.

What Does Volvo Know?

So these substantial cost advantage factors in favor of Mexico, both in terms of labor and tariffs, have to make me wonder why Volvo is centering its focus on South Carolina and/or Georgia for a new $500 million plant. What does this company know that the other automakers don’t know?

Mind you, I would be gratified if Volvo does build in the U.S. Both Georgia and South Carolina have good business climates in comparison to many other states. But I still fail to see the rationale.

Some would counter with the answer of quality or transportation costs. Based on what the industry is doing, not saying, I believe quality is now largely a moot point. The automakers are getting the quality they want, and even luxury models are planned for production in Mexico.

In terms of transportation costs, I think it is safe to say that such costs do not offset or exceed the savings offered by lower labor rates and the NAFTA agreement afforded to Mexico.

Was Perot Right?

But between 1994 and 2000, the U.S. economy created 2 million jobs annually, despite NAFTA.

The truth is that both exports and imports are good for just about every country in the world. Exports typically create better-paying manufacturing jobs while, imports give consumers more choice at lower cost, and they force competing domestic firms to improve their game.

There is no question in my mind that Detroit had gotten lazy and complacent and was turning out pretty crappy products in the 1970s and 80s. Slowly, the Big Three began to realize that Japanese automakers were for real and were not going away.

In short, Detroit had to up its game to survive. (But that’s another story for another day.)

Battling a Ghost

Today, President Obama finds himself battling the ghost of NAFTA in his desire to pass legislation in Congress ratifying the Trans-Pacific Partnership, an agreement, among 12 nations bordering the Pacific, aimed at reducing trade barriers and promoting greater economic cooperation

Obama says that critics of TPP — primarily organized labor, most Democrats and environmental groups – are wrong to see the proposed trade agreement as another NAFTA. The president argues that unlike NAFTA, TPP would compel other countries to adopt enforceable labor standards, leveling the playing field and opening them up to U.S. exports — creating more U.S. jobs.

“When I listen to criticism of this deal, what I primarily hear is criticism of NAFTA,” Obama said. “If you don’t like the fact that labor provisions aren’t enforceable right now, why wouldn’t you want a trade deal that makes labor provisions enforceable with some of the same countries we currently trade with?”

Said the president to a group of supports last week: “You need to tell me what’s wrong with this trade agreement, not one that was passed 25 years ago.”

Strange Bedfellows

It is interesting to note that the president is getting most of his support on TPP from Republicans and the nation’s business community, although not all are in lockstep by any means.

Kevin L. Kearns, president of the U.S. Business & Industry Council, opposes TPP, calling the proposed agreement “another giant step in the industry-by-industry giveaway of American manufacturing,” while the National Association of Manufacturers and the U.S. Chamber of Commerce supports the ratification of TPP.

The way I see it, the Asia-Pacific region is a tiger we’re going to have to ride. For the U.S. not to do so will be to our competitive disadvantage.

I say this because, according to the International Monetary Fund, the world economy will grow by $21.6 trillion over the next five years. Nearly half of that growth will be in Asia, where the region’s middle class has grown by 2 billion people in the past 20 years.

On the Outside Looking In

This a lucrative market to say the least, but U.S. companies have lost market share in the Asia-Pacific region because many countries maintain steep barriers against U.S. goods.

Trade agreements, if they are done right, are crafted to overcome these barriers. However, Asia-Pacific nations are clinching trade deals among themselves that threaten to leave the U.S. on the outside looking in.

The number of trade accords between Asian countries surged from three in 2000 to more than 50 today, with some 80 more in the pipeline.

Meanwhile, the U.S. has just three trade agreements in Asia, with Australia, Singapore and South Korea.

Remember, one of the main reasons that Audi cited for picking Mexico over the U.S. for its future new assembly plant was because Mexico had twice as many free trade agreements in place with other countries than the U.S.

Now I would be lying to you if I told you that I knew the intricacies of TPP. I don’t and I bet very few people do.

But I do believe that free trade agreements in principle, if negotiated right, can benefit U.S. companies by opening up potential new markets to them, thereby creating U.S. jobs. A study by the Peterson Institute for International Economics estimates that TPP could boost U.S. exports by $124 billion by 2025.

So let’s try to ride this tiger.

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 Plano, Texas. He can be reached at dbarber@barberadvisors.com or at 972-767-9518. If you liked what you read here, invite him to speak at your next meeting.

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An Update on Texas: The Governor and The Entrepreneur

In Site Selection on April 19, 2015 at 10:26 am

Because companies need to know about future opportunities and economic developers nationwide should be aware of their competition, let me tell you what’s happening here in Texas where I live.

For the first time in a long time, the Texas economy, the 14th largest economy in the world, shows signs of sputtering. Don’t get me wrong, there will continue to be job growth, but it will be dampened at least in certain parts of the state.

That is because in communities largely dependent on oil and gas, there have been layoffs and even business closures. And it’s all because of depressed energy prices.

What’s good for you and me at the pump, is not so good for the industry and some local economies.

A Sobering Indication

Job growth in Texas in 2015 is projected to be 1 or 2 percent, lower than the national average for the first time since 2003. And last month, Texas posted its first monthly decline in total jobs in more than four years, a sobering indication of what slower growth looks like.

But the good news is that Texas will weather this storm, because its economy is now quite diverse and no longer as dependent on the oil and gas industry as it once was. Still, with depressed prices and hundreds of rigs having been idled, it’s having an effect.

Manufacturers of parts used in drilling, as well as hotels and restaurants that cater to the oilfield workers in Texas, North Dakota, Ohio and other states, are also feeling the impact of lower oil prices.

A New Governor

Texas has a new governor in Greg Abbott. He is of the belief that the best job creation program is tax reduction, a premise that I generally agree with.

Now I thought this new governor might be some Tea Party kook. Being a centrist on matters of politics, I am generally wary of extremists, right or left.

But during a conference call a few weeks ago in which site selection consultants were introduced to him, I found Gov. Abbott to be quite mainstream and reasonable.

And even better, he seems to be a champion for economic development and offered up some real substantive ideas on how to improve Texas’s competitive position in attracting business investment..

The Texas Enterprise Fund Gets Bolstered

For one thing, he is going to increase funding to the Texas Enterprise Fund by the tune of $50 million. Now that is significant as there was some speculations that the TEF could be eliminated.

As of Dec. 2014, the Enterprise fund started in 2004 had awarded $576.2 million to 129 projects (corporate expansions) resulting in $24.39 billion in investment.

Gov. Abbott is also pledging to reduce business taxes and fees by $1 billion a year while increasing spending on roads and transportation by $4 billion. Now I’m not sure how that’s precisely going to work, but press reports indicate that the House and Senate are largely going along with that.

Targeting the Franchise Tax

Music to my ears is the fact that Abbott wants to reduce property taxes and eventually eliminate the state’s franchise tax. He cites a study that showed that eliminating the franchise tax in Texas would generate 41,500 new jobs, $3.4 billion in new net investments and $9.8 billion in new personal disposable income by 2017.

“While we are fortunate in Texas to not pay a personal income tax, we are paying as consumers and employees when it comes to the business franchise tax. Every dollar paid in business franchise taxes could instead be invested in higher wages or new jobs,” Abbott wrote earlier this month.

“To keep Texas the best state for business and job growth, the state must significantly reduce and eventually phase out the business franchise tax. This reduction in the franchise tax will help attract even more job creators and encourage even more Texas entrepreneurs to invest their capital in opening or growing a business.”

Many governors talk about economic development and some actually do something about it. It’s still early, but judging from what I’m hearing, Abbott appears to be a doer.

My Point Is …

I’ve played cards in England and I’ve gambled in Spain. And along with my ramblings I’ve met some big names.There’s been governors, senators, congressmen and such. Singers, actors,artists,and writers of much. I’ve hobnobbed with preachers, judges and crooks. And professors whose knowledge have all come from books. Now some of these people have impressed me a lot, and some of these people I can truly say not.

Please accept my apology for this poor attempt at poetry. If I have a point, and I think I do, it is that I have met a pretty wide group of people, some of whom are “famous” and some of whom are not.

But it is the entrepreneurs who generally impressed me the most.

A Man with a Plan

I met one such entrepreneur this past week. You may have heard of him — Emmitt Smith. Shoot, even my wife, who has no interest in sports, has heard of him.

To re jog your memory, Emmitt is a former Dallas Cowboy and widely considered to be one of the premiere running backs to have ever played the game.

I remember him when he was at the University of Florida and just shredding, just tearing apart my beloved Alabama defense. I knew then that he was destined for the National Football League.

And in the NFL, he did the same thing, shredding defenses, including that of my beloved Pittsburgh Steelers. His 18,355 lifetime rushing yards still stands as a NFL record.

But being a legend on the football field only gets you so far, and Emmitt well before he left the game, started planning for his future.

Today Emmitt heads a commercial real estate services company, E. Smith Realty Partners, and has surrounded himself with some topnotch talent that is doing work nationwide.

Smith is one of a growing number of former professional athletes pursuing second careers in commercial real estate. They include ex-Red Sox slugger Mo Vaughn, former tennis champion Andre Agassi, one-time New York Jets wide receiver Keyshawn Johnson, ex-Los Angeles Laker Shaquille O’Neal and Basketball Hall of Fame member Magic Johnson

He Knows His Stuff

We talked about the booming North Dallas corridor and the big projects happening there – Toyota’s North America headquarters, Nebraska Furniture Mart and “The Star in Frisco,” a 91-acre mixed-use project that will include Dallas Cowboy’s new headquarters and training facilities .

We talked about the vast amount of property available to the south of Dallas, which should be ideal for manufacturing and distribution because of all the multiple interstates nearby.

We talked about Fort Worth’s great walkable downtown, compared to that of Dallas, and how the Trinity River Basin could be used to bring the two cities, where historic rivalries have existed, closer together.

And we talked about how the availability of water could be critical to future growth for the Metroplex, the common vernacular for the Dallas-Fort Worth area. See last week’s blog – It’s a Different World.

On these issues and more, he spoke with a degree of authority that made me understand that this fella knew his stuff.

No “Were” About It

When I was first introduced to Emmitt, courtesy of economic developers from Virginia Beach, Va., I was caught by surprise and stammered, rather stupidly, “Man, you were just great!”

Without missing a beat and with a smile, he said, “So I’m not now? You know I’m not done.”

No, he is far from done.

Emmitt’s story should play out much like that of Roger Staubach, the former Dallas Cowboy quarterback who built a successful real estate development company and then sold it to Jones Lang LaSalle for far more money than he ever made in football. Emmitt is following that same playbook.

So watch Emmitt, and his company, run. He’ll be shredding some defenses along the way.

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 Plano, Texas. Dean can be reached at dbarber@barberadvisors.com or at 972-767-9518. If you liked what you read here, invite him to speak at your next meeting.

It’s a Different World

In Site Selection on April 13, 2015 at 6:35 am

We’re all dependent on it. It’s an essential ingredient of life. But for most of us in this country, having clean, reliable water has been viewed almost as an inalienable right.

Farmers have known the importance of water – too much or too little can make or break a crop growing season – ever since man has been tilling the soil.

But now the rest of us are learning, ever so slowly, that water should not be taken for granted. Indeed, it is and will become even more so a cherished resource.

We are now seeing how the availability of water (or lack of) can impact communities in very lasting ways. “Water rights” – who gets access and how much — have resulted into “water wars,” which I will touch on.

For local economic developers and government officials, keeping their community ahead of the curve in terms of providing and meeting the water needs of residents and commerce should be a priority as future growth depends on it.

For companies seeking to expand operations in new locations, particularly manufacturers that use greater volumes of water in their processes, the current and future availability of water (and cost) should be a huge concern.

As a consultant who advises companies on locational decisions and communities on how to better compete for investment, I can tell you that this issue of water availability will only grow in importance. And I’m not just talking about drought-prone areas.

My First Water War

My first job out of college was as a reporter for The Columbus Enquirer in Columbus, Ga. That was back in 1979, and even then, there were news stories of “water wars” between Alabama, Georgia, and Florida.

Heck, I probably wrote a few of those stories.

Columbus sits on the Chattahoochee River. (On the other side of the river is Phenix City, Ala., a once wild and wooly place where you could get the hell beat out of you if you weren’t careful. But that’s another story. It’s not that way today.)

Upriver and Downriver

Upriver, the Chattahoochee River supplies 70 percent of metro Atlanta’s drinking water or more than 300 million gallons per day.

Downriver, the Chattahoochee merges with the Flint River in South Georgia to form the Apalachicola River, which flows into Florida’s Panhandle and empties into Apalachicola Bay on the Gulf of Mexico.

There used to be a thriving oyster industry in Apalachicola. (I remember buying oysters for $2 a dozen in restaurants there.) Today, the oyster industry in Apalachicola, which was multi-generational, is now on its last legs.

And the reason, so claims Florida, is because Georgia takes too much water from the Chattahoochee River to meet Atlanta’s growing demand.

Let’s Make a Deal

Georgia Gov. Nathan Deal has tried to kick-start negotiations with Florida Gov. Rick Scott and Alabama Gov. Robert Bentley to try to reach agreement in the long-running battle over a river system the three states share.

Deal’s effort follows decades of litigation over the amount of freshwater flowing from the top of the Apalachicola-Chattahoochee-Flint river system, in north Georgia, downstream to Apalachicola Bay.

It also follows a U.S. Supreme Court decision in November to consider a lawsuit filed by Florida against Georgia aimed at increasing the flows. This water war, decades in the making, still continues.

With Growth Comes Problems

About five years ago, I moved to Texas, coincidentally for the very same reason that the founders of the Republic of Texas moved here – warrants. (Just kidding.)

I live in Plano, which is part of the Dallas-Fort Worth “Metroplex,” a metropolitan area that has doubled in population in the past 30 years to 6.5 million and is projected to add 1 or 2 million more in the next five years.

In short, this place where I live is booming. Toyota is building it’s new North American headquarters just a mile from my home, which sits in the midst of various corporate campuses.

But with serious growth comes serious problems. Experts now say that drought-prone North Texas will outgrow its water supply by 2060. I would not be surprised if it happens well before then.

On the Front Lines Again

Soon after moving here, I started reading about a water district authority in North Texas wanting to build a pipeline into Oklahoma to get more water from the Red River and its tributaries.

But Oklahoma was not playing nice, at least according to the Texans, by not giving up the water, with the dispute lodged in the courts. So here I was on the front lines of my second water war.

In 2013, the U.S. Supreme Court ruled that North Texas couldn’t have their pipeline. Texas has long been thirsty for Oklahoma water, and has tried to get it by hook or crook. I have a feeling this story is far from over, despite the Supreme Court ruling.

Paradise Lost?

Woody Guthrie wrote in song lyrics that “California is a garden of Eden, a paradise to live in or see.”

The Golden State is indeed one the prettiest places on Earth, but you have to wonder about a place that can be ravished by a myriad of natural disasters — earthquakes, tidal waves, wildfires, and mudslides. I am just waiting for the swarms of locusts.

And now California is in its fourth year of drought, which is estimated to have an economic impact of, depending on which expert you believe, $3 billion to $5 billion this year alone.

Earlier this month, Gov. Jerry Brown, standing on bare earth in the Sierra Nevada Mountains where there should have five feet of snow, held a news conference and announced mandatory water use reductions for the first time in California’s history.

The governor directed the imposition of a 25 percent reduction on the state’s 400 local water supply agencies, which serve 90 percent of California residents, over the coming year.

Emphasizing that the drought could persist, Brown said Californians must change their water habits. “It’s a different world,” he said. “We have to act differently.”

U.S. Representative Kevin McCarthy, a California Republican who is the House majority leader, said Gov. Brown’s order “should not only alarm Californians, but the entire nation should take notice that the most productive agriculture state in the country has entered uncharted territory.”

A Megadrought Predicted

A group of climate scientists from NASA, Cornell University and Columbia University published a report in February predicting that the Southwest and Central Plains regions of the U.S. could see the worst droughts to hit North America in 1,000 years.

They found that moderately reducing carbon emissions in the next 50 years is unlikely to hold off these periods, including at least one “megadrought” that could hit by the end of the century.

Eleven of the past 14 years have been drought years across many Western states, according to U.S. Drought Monitor data. Groundwater supplies that typically provide relief during droughts have been depleted.

If this is the future we have before us, agriculture in this country will be challenged in ways that we may not fully understand now. We may indeed be entering uncharted territory.

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 Plano, Texas. Dean can be reached at dbarber@barberadvisors.com or at 972-767-9518. If you liked what you read here, invite him to speak at your next meeting.

What Will Volvo Do?

In Site Selection on April 6, 2015 at 1:36 am

Sometimes determining what I should write about in my blog, which targets an audience comprised of both economic developers and corporate executives, is the hardest part.

But by taking a cue from my former career as a journalist, a business editor of a daily newspaper, I usually have no shortage of topics from which to choose. I typically, but not always, write about news that directly impacts a business audience.

And in doing so, my aim is not so much for readers to necessarily agree with my conclusions and assessments. Rather, I just want them to think about this stuff, most of which I think is pretty important.

Many Choices

Now I had a lot to choose from this past week. Initially, I thought I would be writing about the historic drought that has been plaguing California and the mega-drought that could be on the horizon for much of this country. (And I will do that soon.)

Or I could write about the Texas Enterprise Fund and how a new and apparently thoughtful governor wants to bolster it and make it better, all the while reducing business taxes. (And I will do that soon.)

Or I could write about how another governor, who apparently does not consider himself the chief economic development officer of his state, ignored the pleadings from corporate residents such Cummins, Eli Lilly, Angie’s List, Salesforce, Inc., the NCAA and the State Chamber of Commerce and then paid the price for it.

(Yet another governor would avoid making the same blunder, listening to a corporate constituent in his state called Wal-Mart.)

Or I could write about Volvo, which announced last week that it would build a $500 million assembly plant in the United States and not in Mexico as has been the recent trend.

Or I could take elements from some of the aforementioned news stories and intertwine them in such a way that will not have our heads explode. Ok, let’s try that. I promise to be careful.

Volvo Picks the U.S.

First let’s look at the Volvo announcement. The company announced plans Monday to build its first factory in the United States, 60 years after it started selling cars in the country.

Despite its long-term presence in the U.S., Volvo has remained a small player. Last year its U.S. sales fell by 8 percent to just 58,000 units — representing a mere 0.4% of the market. Volvo sold 466,000 vehicles in 2014, a record amount of cars globally.

The plant to be built in the U.S. will be Volvo’s fifth factory, and will join existing plants in Sweden, Belgium, China and Malaysia. The announcement comes in the wake of a two-year turnaround of the Swedish brand’s fortunes since it was sold by Ford in 2010 to China’s Zhejiang Geely Holding Group Co.

Volvo CEO Haakan Samuelsson said the brand needs to prove viability, which is why the company needs a plant in the U.S.

“Volvo Cars cannot claim to be a true global car maker without an industrial presence in the U.S. Today, we became that,” Samuelsson said in a statement.

Four States in the Running

If you take press reports to heart, (I don’t but there’s often a kernel of truth to them as insiders will leak information), South Carolina, North Carolina, Georgia and Kentucky could be viewed as front runners for this future assembly plant.

Now here’s where things could, and I emphasize could, get a little dicey for Volvo and these four presumed favorites. And I mention this only because of the recent fiasco regarding Indiana’s unnecessary and backward “religious freedom” law and the corporate community’s response to it.

For had it not been amended, which was only done because of the furor that resulted, the law would have provided legal cover to discriminate against gay people. So why would major corporations want to weigh in on such a hot topic? One word – talent.

They are worried, and I believe rightfully so, that these “religious freedom” laws, and apparently about 20 states have them, will make it more difficult for them to attract top talent.

This is exemplified by a letter signed jointly by six CEOs to Indiana Gov. Mike Pence asking him to reconsider the Religious Freedom Restoration Act. (He didn’t.)

“We not only disagree with this legislation on a personal level, but the RFRA will adversely impact our ability to recruit and retain the best and the brightest talent in the technology sector,” the letter said.

“Technology professionals are by their nature very progressive, and backward-looking legislation such as the RFRA will make the state of Indiana a less appealing place to live and work. We cannot remain competitive without a talented workforce.”

Gay-Friendly Volvo

Now let’s go back to Volvo. An organization called Gaywheels.com apparently has done the research and has come up with a list of gay-friendly manufacturers that sell vehicles in the U.S.

By their definition, to be considered gay-friendly, an automaker must, at a minimum, “have a policy that prohibits workplace discrimination on the basis of sexual orientation.”

If Volvo, which has advertised in gay-oriented magazines, has made the gay-friendly list (and it did) because of its enlightened internal policies, the same cannot be said for the states where it is supposedly looking to build a new plant.

South Carolina passed a “religious freedom” law in 1999 that prohibits any state laws that “substantially burden” a person’s ability to follow their religious beliefs. As such, the law gives legal defense for businesses to discriminate.

What One CEO Did

Now how does Volvo senior management feel about that South Carolina law? Might they have the same concerns of let’s say Bill Oesterle back in Indiana.

Oesterle, the CEO of Angie’s List and a life-long Republican, has rejected the proposed fix to Indiana’s “religious freedom” law as inadequate and has called off a major expansion of its Indianapolis corporate campus. The proposed 1,000-job expansion would have included $18 million in incentives from the state and city.

In Georgia, state legislators expect a “religious freedom” bill to be back for the 2016 legislative session. Only the fear of backlash (news generated in Indiana) kept the bill bottled up in committee this time around. Now what would “gay-friendly” Volvo think about such a law?

Kentucky passed its “religious freedom” law two years ago to ensure that government action would not interfere with religious belief. It was vetoed by Gov. Steve Beshear before legislators overrode his veto. Now I wonder if Volvo knows about that Kentucky law?

But we must not forget progressive North Carolina, which has become a battleground in the fight for voting rights. Just when Indiana’s law was gaining notoriety, North Carolina lawmakers introduced matching Religious Freedom Restoration Act bills in the state House and Senate that could pose an even greater threat to civil rights than Indiana, according to some legal scholars.

But I’m sure Volvo knows all about what’s happening in North Carolina and is monitoring the situation carefully. Just like it is in South Carolina, Georgia and Kentucky.

Volvo’s Own Words

The following words come from the Volvo Group’s website. This is the company speaking:

“The Volvo Group hires and treats its employees in a manner that does not discriminate with regard to gender, race, religion, age, disability, sexual orientation, nationality, political opinion, union affiliation, social or ethnic origin. Workplace diversity at all levels is encouraged.”

Well, that’s good to know. Let freedom ring.

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 Plano, Texas. He can be reached at dbarber@barberadvisors.com or at 972-767-9518. If you liked what you read here, invite me to speak at your next meeting.

Sort That Database and Everything Will Be Gravy

In Site Selection on March 22, 2015 at 9:09 am

The Ides of March have come and gone, and I have come to praise economic developers and not to bury them.

For I once was one, and I like to think that I understand the pressures and the challenges that they face.

Still, I must tell you that economic developers will do things that leave me scratching my head and wondering, “what were they thinking?”

And sometimes, I have concluded that they just weren’t.

And I understand that, too. Sometimes I sit and think, and sometimes I just sit, which is a helluva admission coming from a consultant. Or from anyone for that matter.

The Invitation

So I received this email. I am not going to identify the economic development organization, because my purpose here is not to embarrass. For all I know, this ED group might be representing an exceptional community to live and work. Actually, I suspect it is so.

The original email asked that I “nominate excellence” and then vote on and attend “the second annual business awards” event for a small rural county in the Midwest.

Now I have never set foot in this community, and the truth is that I probably won’t unless it is at the bequest of a client for business purposes. That client could be a company that has hired me for locational analysis or the ED organization itself needing help.

My point is that as I am not a resident of the community and certainly not equipped to nominate or vote on any business to win an award there, I should not have received the email. Rather, it should have been directed to an internal audience, knowledgeable stakeholders within the community.

What’s more, I am not going to travel 1,000 miles to attend a two-hour local business awards ceremony. Ain’t gonna happen.

But I Responded

Now I could have let it go. I probably should have let it go, but I get so many of these same kind of emails, that I thought maybe I could turn this into a teaching moment. So I replied grumpily to the ED staffer who sent it to me:

“Just curious. Why would I have received this email? Isn’t this for internal stakeholders?”

Rhonda’s response (and that’s not her real name) was revealing in that she didn’t quite understand what I was trying to communicate. And that was partly my fault.

“You must have connected with our executive director at some point and we added you to our news/distribution list. I have removed your email from our list so that you will no longer receive news and updates from our organization.”

Whoa, whoa, whoa. That’s not what I am asking. So I replied back to Rhonda:

“I like receiving news and updates from a community when it is relevant to me in my role as a site selection consultant. I like to know of project announcements. Please understand that I am not asking to be removed from all your mailings.

“What I am suggesting and what I do not think is too particularly hard to do is to differentiate communication between internal and external stakeholders. If you do that, you will not be irritating site selection consultants like me. Thanks. – Dean”

Hooray, They Got It!

The next email took me by surprise, as it was from Rhonda’s boss, the executive director of the ED organization. The way I see it, “Jim” must be a pretty good boss, for Rhonda to share our email exchange with him. His email to me:

“Hi Dean, Jim Williams (again not his real name) here, executive director. Thank you for your constructive feedback. Thanks also to you, we have now started a “site selection consultant” list which we will target for when we have project announcements. Though I don’t always have a chance to read them, I enjoy receiving your LinkedIn blog posts. My Best, Jim.”

Now it’s obvious that Jim and Rhonda talked this out and it clicked. It took a little nudge from me, but they got it.

Now I am happy for them and for me. They no longer send me pointless information that I cannot use, but they do continue to stay in touch, which is what I want.

Dean’s Last Resort

Occasionally, very occasionally, I have had to unsubscribe from emails received from ED groups. That is a last resort measure that I hate doing but I felt that my hand was forced.

It happened with an economic development organization in California and another one in Florida. In short, they kept sending me inappropriate emails that would have been appropriate to people living in their communities.

I pointed this out, but to no avail. Nothing changed. I kept getting junk, typically invitations to breakfast and lunch events. Sadly, I had to cast them adrift.

Last month, a major regional ED group sent me an email with the subject matter: “Reserve your table for the 2015 xxxxx Awards Luncheon!”

My reply: “Thank you for the invitation, but I usually do not attend luncheons that are 2,000 miles away from me.”

This past week, I got an email from another economic development organization, to “participate in xxxxxxx University’s Strategic Planning Survey.” The questions were obviously targeted to those living in the community and not to a consultant in Dallas.

How Hard Is It?

I asked Ron Kitchens, chief executive officer with Southwest Michigan First, why he thought I continued to get these type of senseless emails from economic development organizations. He replied with his own question, which was really a brief answer and exactly to the point.

“How hard is it to sort out a database?”

How hard indeed? Frankly, I don’t think it should be difficult at all, and yet so many ED groups won’t do it. It leaves me baffled, and I’ve talked to other consultants who feel the same way.

Do Stay in Touch

But again, I want to reiterate that I welcome emailed communications from economic development organizations. I actually save these emails in an Outlook folder, as they could prove very helpful to me at future date.

I want to know about won projects and even lost projects. I want to know why a company chose to expand in your community and if an exceptional building or site has become available.

I want to know about workforce training initiatives and if an industry cluster has developed in an area. I want to know how and why a community has targeted certain industry groups and what progress has been made.

In short, I want economic development organizations to stay in touch with me and provide information that I might be able to actually use. And if they come to Dallas, I welcome the opportunity to meet with them if I am available. And I will try my best to be available.

Just don’t invite me to a breakfast or a luncheon a thousand miles away. That accomplishes nothing, junks up my email, and leaves me irritable.

So sort that database, give me information that I can use, and everything will be gravy.

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 972-767-9518. 

Baseball, Hot Dogs and Relationship Building

In Site Selection on March 16, 2015 at 1:19 pm

Wherever we live, whatever the culture we come from, whatever religion that we may hold, people have kicked or thrown a ball.

Probably well before people were scratching images on cave walls, they were playing with sticks and rudimentary balls. Such play, defines us as being human and brings us together.

And it was baseball, a distinctly American game that is now played worldwide, which taught me the concept and the importance of team. When I first started playing organized ball back in the ’60s, I was attending an elementary school in rural America where the principal actually took time off to work in the fields at harvest time.

I still have my trophy, with the figure of a batter on top. It is laughably small but it meant so much to me then and still does now, as it reminds me that I played second base on a team called the Pirates that won a league championship. I even played in the all-star game.

Leave it to say, baseball has been very, very good to me.

To Know the Heart and Mind of America

”Whoever wants to know the heart and mind of America had better learn baseball,” Jacques Barzun, the social commentator, wrote more than a quarter of a century ago.

And who cannot remember the speech given James Earl Jones, playing the role of Terrence Mann, in the 1989 film “Field of Dreams.”

“The one constant through all the years, Ray, has been baseball. America has rolled by like an army of steamrollers. It’s been erased like a blackboard, rebuilt, and erased again. But baseball has marked the time. This field, this game, is a part of our past, Ray. It reminds us of all that once was good, and it could be again. Ohhhhhhhh, people will come, Ray. People will most definitely come.”

The National Pastime Comes to Florida

And they did come to Florida, specifically for baseball, starting in the late 19th century. That was about the same time that sportswriters began dropping the phrase “national pastime” into their stories.

The Philadelphia Phillies were the first of the current major-league teams to train in Florida, when they spent two weeks in Jacksonville in 1889.

By the 1920s, with improved train and auto travel, Florida was becoming the hub of spring training. The warm winters and the enticements offered by local boosters, the forefathers to today’s economic developers, began to draw the attention of baseball executives.

The importance of baseball to Florida’s economy today became quite apparent to me last week, courtesy of Enterprise Florida Inc., the public-private statewide economic development organization. I was among a dozen site selection consultants invited to come and experience Spring Training and, boy howdy, did I have a blast.

The Impact of Team Factories

Fifteen Major League Baseball (MLB) teams operate spring training facilities in Florida, which in actuality are human resource factories designed to identify the big league players of tomorrow and sharpen the skills of the veteran players. Each team facility operate year-round and employ hundreds of people, including the players, at any given time.

The Florida Sports Foundation estimates the annual economic impact of the 15 spring-training teams, which play a 241-game schedule in 14 locations in Florida’s Grapefruit League, to be $700 million in economic impact.

Last year, more than 1.47 million fans attended the spring training games, the bulk of whom were tourists from other states.

A recent report compiled by the University of West Florida’s Haas Center showed that 13.3 million visitors came to the state of Florida for the sole purpose of sports and recreation, which was responsible for $44.4 billion in total economic output, or roughly 3.5 percent of the state‘s Gross State Product.

The sports and recreation industry supports more than 431,000 jobs and contributes more than $16 billion in wages to Floridians. Now those are some strong numbers, indeed, which is why Florida is not above granting tax incentives to MLB teams that want to expand their footprint in the state.

The Spring Training Baseball Franchise incentive is the state’s funding mechanism to attract and retain MLB spring training facilities in Florida. Teams are eligible for up to $500,000 annually for up to 30 years.

These dollars are typically pledged with designated Tourist Development Tax revenue and other local government resources to secure bonds to fund the acquisition, construction, or renovation of spring training facilities. Makes sense to me.

A New Team Manager

Heading the economic development delegation that welcome us site selection consultants to the Sunshine State was Bill Johnson, the newly appointed Secretary of Commerce and president/CEO of Enterprise Florida, Inc.

I liked Bill Johnson almost immediately. For one, he frequently paid homage to his predecessor, Gray Swoope, one of the most talented economic developers in the country and who turned the mindset around about economic development in Florida.

When Gray first took the job at EFI four years ago, I thought, “What in the hell is he thinking?”

Let’s just say that Florida then was not known for embracing economic development. Indeed, economic development was viewed indifferently or even suspiciously by many, including state legislators and local government officials.

While there continues to be no-growth mentality among some, economic development is far better understood and respected in Florida today, and I give Gray, and the professional staff that he assembled at EFI, much of the credit for that attitude turnaround.

So Bill, previously the director of Port of Miami, takes over from a bit of a superstar, albeit one that has gone over to the dark side (consulting). Gray is partnering with his former boss, former Mississippi Gov. Haley Barbour, in the formation of a new firm, essentially a subsidiary of the Butler Snow law firm, called VisionFirst Advisors.

Now I sure like the sound of that. Judging from what I read on their website, I’m not quite sure what they’re going to be doing. I think it’s what former President George W. Bush would call “strategery.”

But back to Bill, a fellow who displays much energy and seems to have a deep understanding of the importance of logistics and infrastructure, which should prove advantageous to both recruiting new companies and expanding existing ones in the state.

But even with his very solid background, Bill will do well to listen to Griff Salmon, executive vice president and COO; and Melissa Medley, senior vice president and chief marketing officer. These two are consummate pros, who left top economic development positions in Mississippi to join Gray at EFI. They have done great service to Florida and I hope they stay.

When Bill first addressed the consultants, he said the intention of our time together was not to talk about business but to simply have fun. But during the course of my 3 1/2 days in Florida, I talked with a lot of economic developers about their communities.

I also got to see the New York Yankees play the Boston Red Sox on Wednesday in Tampa; the Detroit Tigers play the Philadelphia Phillips in Lakeland on Thursday, and the Atlanta Braves play the Detroit Tigers on Friday in Kissimmee.

This was relationship building at its best, just using a backdrop of spring training baseball to bring us – the consultants and the economic developers — together. And that is what baseball does so well.

We talked over hot dogs and beers, about local major employers, workforce development initiatives and the aerospace industry, among other things, all the while watching the games. And it really doesn’t get any better than that.

Yes, baseball has been very, very good to me.

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

A Step Back in Time

In Site Selection on March 9, 2015 at 8:55 am

His photographs, documenting the absolute brutality of the moment, shocked a nation, and were instrumental in leading to the passage of the Voting Rights Act of 1965.

James “Spider” Martin was a photographer for The Birmingham News, a newspaper that I worked for 15 years. Mr. Martin, now deceased, left the paper before I joined it back in 1984.

Mr. Martin was at the Edmund Pettus Bridge in Selma, Ala., on March 7, 1965, to do his job, whereas the courageous marchers, whether they knew it at the time or not, were there to make history. And they did.

While trying to wipe the tear gas from his eyes, Mr. Martin used one of his cameras to block a blow from a trooper’s club. He recalled the Alabama state trooper saying, “Excuse me, I thought you’s a nigger.”

Mr. Martin, who was white, remembered thinking, “Alabama, God damn, why did you let it happen here?”

I have been to Selma many times in different past roles as journalist, economic developer, and consultant. And each time, I have had this strange feeling that I was entering a time warp, taking a step back in time to a place resistant of change.

Paraphrasing Mr. Martin’s thoughts, I have wondered, “Alabama, why did you let it happen at all? Why did you fight freedom and progress?”

A Narrative of Place

Today, as a consultant for both industry and economic development organizations, I think of myself as a place investigator. Given enough time on the ground, all places speak to me.

Whether I consciously know it or not, I am factoring in things like geography, terrain, people, history, industry and commerce. All come together to present a narrative of place and a picture forms.

And while I may employ GIS and sophisticated data bases in a site search for a company, in the end, I am looking for that narrative, that story of place that speaks to me and the client company that I am working for.

Every time that I have been to Selma, I have left confused and pondering, “What is it about this place? Why is this place so … different?”

It’s Not Even the Past

Mississippian William Faulkner wrote in Requiem for a Nun, “The past is never dead. It’s not even past.”

I think this fits Selma to the T, a complex place not easily understood by even other native Alabamians who are not from there. Not far from the Edmund Pettus Bridge, named after a former confederate general and Ku Klux Klan leader, is a billboard set up by a group dedicated to honoring Ku Klux Klan founder Nathan Bedford Forrest.

The sign, set up in recent days, invites visitors to see “Selma’s War Between The States Historic Sites.” But it also features a picture of the Confederate flag and an image of Forrest, who was also a Confederate general and a slave trader before the Civil War.

Beside Forrest’s picture is a quote adopted by his men: “Keep the skeer on ’em.”

Not surprisingly, many find the billboard offensive.

“It should be taken down,” Flossie Menifee, 67, who grew up in Selma, told a reporter with the New York Daily News. “The Ku Klux Klan, the hatred, the prejudice, I think it’s always going to be in Selma.”

Not surprisingly, Patricia Goodwin, head of the group Friends of Forrest Inc., doesn’t understand what all the fuss is about, which is revealing.

Defined Black and White

I have concluded this city is a very defined black and white place. Back in 1965, it was evenly divided, whereas today it is now 80 percent black. Correspondingly, Selma now has black leaders in positions of power, including the mayor, police chief, district attorney, six out of eight city council members.

But there remains a perceptible Old South mentality of white racial superiority among a minority here.

The Los Angeles Times reported that a former white city councilman, surveying the scene of downtown preparation for the 50th anniversary commemoration of Bloody Sunday, said, “It’s going to be nothing but a nigger street party.”

That same city councilman voted along with two other council members to use city funds to pay for a statute of Nathan Bedford Forrest in 2000.

Still, people are people, even if they see the world through different lens. Certainly friendships have formed and some black and white citizens have bonded together to bring economic prosperity to Selma.

An Island to Itself

But it largely hasn’t happened. Selma hasn’t blossomed into something much better in the aftermath of what happened on the Edmund Pettus Bridge. History may have happened here, the fruits of which society as a whole has benefited from, but history has seemed to bypass Selma.

I have always viewed Selma as sort of an island, rather isolated off by itself and not particularly easy to get to. I introduced the city to some Canadian investors who wanted to build a gum/candy manufacturing operation there.

That business didn’t happen, more because of the ineptness of the Canadians than anything Selma did. But it should be noted that a lot of things haven’t happened in Selma.

Alabama’s Third World

Dallas County, of which Selma is the county seat, was Alabama’s poorest county last year. The county’s population peaked in 1960 at 56,667 people, dropping to 43,820 in 2010, with a population that is 69.4 percent black and 29.1 percent white.

Selma has an unemployment rate of 10.2 percent nearly twice that of the national rate of 5.5 percent. The median household income in Selma from 2009 to 2013 was $22,478 – nearly half that of the state – with 41.9 percent of people in the city living below the poverty level.

The violent crime rate is five times the state average. Selma City Schools system, were taken over last year by the Alabama State Department of Education after a months-long investigation into allegations of academic issues, poor student performance, shoddy record keeping, and sexual misconduct.

My former employer, The Birmingham News, called the region, known as the Black Belt because of its rich soil, “Alabama’s Third World.”

“Selma sowed, but it did not reap,” James Perkins Jr., who became the city’s first African-American mayor in 2000 told USA Today. “So many of the benefits that went to other places in the South and around the world since the Voting Act of 1965 did not come to Selma. I hope this 50th anniversary will help Selma begin reaping some of those benefits.”

I think the mayor’s comments are accurate. Selma has not reaped from that which was sown. Sad but true.

A Night at the St. James

Some years back, I spent a night in the historic St. James Hotel in downtown Selma overlooking the Alabama River. The hotel had a charm about it, even if the towels were threadbare.

Walking around the downtown, I couldn’t help but notice wonderful architecture but so many of the buildings were in a state of decay and boarded up. Not much has changed.

The city now owns the St. James, and has contracted with a management company to run day-to-day operations, but it remains a money losing operation with a high vacancy rate. I’m sure there are better towels there now.

I’ll see you down the road.

Postscript, Monday, March 9. I have just watched a video on CNN in which members of a fraternity at the University of Oklahoma were engaged in a racist chant that included references to lynching. The video was reportedly shot on Saturday, the 50th anniversary of Bloody Sunday. This proves that ignorance and willful idiocy is by no means solely relegated to a small town in Alabama. Sadly, this malignancy extends even to our nation’s institutions of higher learning. Lord, help us.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Plano, Texas. He can be reached at dbarber@barberadvisors.com

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 to attract business investment, we can help. And 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.

Take Me to the River

In Site Selection on February 9, 2015 at 11:20 am

Many people, a surprising number of them being economic developers, believe that financial incentives provided to companies that invest in certain places amount to nothing more than corporate welfare, and is therefore a practice that should be abolished.

Nothing I can say will change their minds on that score. Nothing.

Frankly, I find the debate about incentives now quite tiresome and will seldom wade into an article about it.

But I will tell you this, if I’m working for a company on a location analysis project and a community views our interest with a degree of disinterest, we will duly note that.

Nice to Be Wanted

It’s only human nature that you go where you are wanted. That doesn’t mean that we go to the highest bidder. Far from it. Business reasons, not incentives, rule on location decisions.

But we do want to be invited to the dance, and we do want to dance with dealmakers who fundamentally understand that we seek a partnership with a community.

There are those economic developers and elected officials who get it and those who don’t. Now whom might you think that we prefer to work with?

Sometimes an incentive or a package of incentives just gets a community on equal footing with the competition.

Bad Land to Good

Back in 1993, the state of Alabama offered Mercedes Benz what appeared to be an ugly 1,000-acre site of up and down goat hills off Interstate 59/20 near Tuscaloosa.

Despite the challenging topography, the state assured the German carmaker that it could and would grade the site and transform it into one that would work for the company.

I don’t know how much was spent on earth moving, but it was part and parcel of an incentive package worth $250 million.

Since 1997, Mercedes’s original $400 million investment has grown to more than $4.4 billion. Thousands of people owe their job to the simple fact, among others, that bad land was turned into good. In hindsight, that $250 million incentive package was a pretty good deal for everyone concerned.

Don’t Forget Your Existing Companies

When we think of incentives, we tend to dwell on the dollar value by which a company is getting rather than the end stream result. And that can cause some resentment.

I’ve talked to more than a few senior executives who believed that a newcomer, sometimes even a competitor (certainly a competitor for labor), was being given special consideration in their community while their own company was being largely ignored.

I think there is real legitimacy to that notion, which is why all communities should never short shrift business retention and expansion. Always remember that it is your existing industry that creates the most new jobs. You take those companies for granted at your peril.

I’ve also talked to people who have been hurting – either unemployed or underemployed – and they openly wonder if they have real shot at a job for a new company that is coming to their community. They are discouraged and cynical, and view incentives as solely benefiting the owners of capital.

And there is some legitimacy to that notion, too. Too often, economic development efforts seem to concentrate on target industries rather than target constituencies.

Which makes the Community Ventures program as offered by the Michigan Economic Development Corporation a different kind of animal, at least one that caught my attention.

A River of Opportunity

It is the brainchild of Gov. Rick Snyder, who was the first chairman of the MEDC well before becoming governor. A Republican and a former venture capitalist, Snyder wondered how he could get people jobs who were considered high risk and with few employable skills. Jobs, he figured, would be the best antidote to crime and poverty.

Before I go into the details of this two-year old program, I want to tell you about Snyder’s “river of opportunity” speech that he gave last month to state lawmakers in his fifth State of the State address.

Snyder spoke of helping Michigan’s poorest and most disadvantaged residents get into the “mainstream” of the economy and society. He said he wanted to expand programs that put social service counselors inside schools to help address student absenteeism and help low-income parents get assistance and job training opportunities.

And this is the heart of Community Ventures, a $10 million a year program currently being offered in Detroit, Flint, Pontiac, Saginaw, where poverty is systemic. The idea is to link the habitually unemployed with companies that need low-skilled labor.

“It’s about creating an opportunity for success, not facilitating dependency,” Snyder said. “Let’s ramp up these programs.”

Companies Taking  a Chance

Under the Community Ventures program, companies are essentially paid a cash grant, an incentive to be sure, to take a chance on a person that they would normally not view as employable.

“We flipped the idea of workforce training around by going directly to the employers and asking them to take a chance on some of these folks. And when I say take a chance, we’re going to help de-risk it by giving you some cash,” said Michael Finney, senior advisor to the governor and former head of MEDC.

Companies are paid up to $5,000 for an employee hired under the program and who remains on the job for at least one year.

The focus of the program is to enable a person to essentially become an employee, making them job ready by addressing their needs, which previously stifled their ability to find work. Providing ransportation and child care usually heads the list.

“We try not to judge any shortcoming that an individual has – whether it is a criminal record, lack of education, lack of work experience – we don’t judge. But we try to provide support so that they can get employed and stay employed long term. And it is working,” Finney said.

Not a Hard Sell

While the numbers are not yet big, the potential of success seems real, which is why Snyder is pushing for the program to be expanded. About 2,600 people have been hired to date under Community Ventures, with about 70 percent reaching their one-year anniversary on the job at an average wage of $12 an hour.

“We expected it to be a hard sell to the companies but it hasn’t,” said Finney. “We thought we would be inundated with people and struggling to find employers who would be willing to take them. The reality is that as of last count, we have over 100 employers participating in the program.”

Saginaw Township-based Morley Companies, a call center operation, has hired more than 250 employee that have been pre-screened and pre-qualified by Community Ventures, with a retention rate of 83 percent.

“We’re also finding that they’re quite dedicated and loyal because they’re having a second chance at a job, a full-time job with benefits, at Morley,” said Dick Mott, vice president and chief financial officer, in a November interview with the MLive Media Group.

A state economic development program aimed at giving struggling people a second chance at a sustainable job through cash grant incentives awarded to companies. Some purists might contend that’s not a proper role for government.

But the way I see it, a full-time job gives a person a greater degree of independence, allowing them to pursue their dreams and be less dependent on social services.

Now why wouldn’t we want to see everyone swept up into such a river of opportunity? If a little prompting of companies is necessary, so be it.

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 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.

DETROIT VS EVERYBODY

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

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

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

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

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

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

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

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

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

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

A Neighborhood in the Making

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

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

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

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

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

Dan’s Downtown

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

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

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

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

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

Shinola Shines Here

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

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

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

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

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

The Backbone of the Country

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

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

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

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

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

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

A Manufacturing Innovation Center

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

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

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

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

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

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

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

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

Leave No One Behind

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

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

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

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

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas.

If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help.http://www.barberadvisors.com

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

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

Culture Shock May Give Unions Inroads

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

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

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

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

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

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

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

Culture Matters

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

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

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

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

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

They Did Not Go Away

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

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

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

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

VW’s World

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

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

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

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

Management’s New Engagement Policy

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

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

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

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

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

Mercedes in the Crosshairs

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

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

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

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

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

A Governor Pleas

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

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

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

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

Culture Weighs on Both Sides

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

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

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

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

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas.

If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help.http://www.barberadvisors.com

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