troan - advanced industries article 10 2014

ADVANCED INDUSTRIES

THE LABOR FACTOR Advanced Industries' Reliance Upon A Highly Skilled Workforce

A COMPLEX BUSINESS PARADIGM Tech Companies Partnering With Host Communities

Fall 2014

2014

Ad\·anced industries have been described

by the Brookings Metropolitan Policy Program

and McKinsey & Company as "the nation's most

strategic inno\·ation and STEM (science, technology,

engineering, and math) worker-intensive industries

(that are) prime movers of regional and national

prosperity in developed countries." Brookings and

McKinsey have further identified 23 sectors with

above-average R&D investment as being advanced

industries. Among these are the automotive and

aerospace industries, including related suppliers,

which we have chosen to focus on in this special

publication.

We first look at the need for skilled labor in

advanced industries, which are working to close

the skills gap through internships and co-op and

training programs. They are working with the

states and communities in which they are located

and utilizing local educational resources. They are

partnering with their host communities in other

ways as well, in order to grow in place, benefiting

from tax abatements, exemptions, and rebates,

as well as training and other incenth·es. A closer

look at the auto industry, in particular, reveals its

geographic spread and how new lightweighting

technologies are leading to further industry

investment.

The articles in this publication were written

by experts in the field and will prove \'aluable to

companies in advanced industries. If you would

like to contact any of the contributors, email

me at [email protected]. Full contact

information for all of the sponsoring organizations

that can help with your location and expansion

needs is listed in the back of this magazine.

J1~~Edito r

ADVANCED INDUSTRIES

1 EDITOR'S NOTE

2 THE ROLE OF LABOR IN

ADVANCED MANUFACTURING

Advanced manufacturing will continue to be reliant upon human interaction for the application and management of technology.

6 TECH COMPANIES PARTNER

WITH HOST COMMUNITIES

Increasing world competition is driving an increasingly complex business paradigm for aerospace and other technology companies.

1 2 THE CHANGING GEOGRAPHY OF THE AMERICAN AUTO INDUSTRY

Where is auto production currently concentrated, and where will the industry expand in the future?

1 7 ADVANCED MANUFACTURERS UTILIZE

INCENTIVES TO IMPROVE FINANCIAL

PERFORMANCE

Incentives have moved from the fringes of a project to being a part of the competitiveness equation in bringing manufacturers back to the U.S.

2 3 AUTOMOTIVE LIGHTWEIGHTING

LEADS TO INDUSTRY INVESTMENT

New fuel economy and greenhouse gas regulations are leading to the demand for new materials as well as new manufacturing and design methods to lightweight vehicles.

2 9 EUROPEAN AUTO MAKERS LOOK TO NORTH AMERICA

Direct investment in North America is allowing European automotive companies to distinguish themselves from their competitors.

3 2 SPONSORS DIRECTORY

ADVANCED INDUSTRIES I 2 0 1 4

Geoffrey

Highlight

ADVANCED INDUSTRIES

ADVANCED MANUFACTURING WILL

CONTlNUE TO BE RELIANT UPON HUMAN

INTERAGTlON FOR THE APPLICATION AND

MANAGEMENT OF TECHNOLOGY.

BY BRAD LINDQUIST, SENIOR MANAGING DIRECTOR,

NEWMARK GRUBB KNIGHT FRANK

These days, it is hard to find a new project announcement for a business that manufactures or

produces something in the United States that is not classified

under the "advanced manufacturing" umbrella. It is used

repeatedly, after all, as the universal description for just

about any and all manufacturing operations taking place in

the United States and other developed countries.

It is readily apparent that in the past decade, any

manufacturing processes a company identifies that are not

reliant upon technology, yet driven by manual labor, have

already shifted production to lower-cost countries. Many

companies that sought to capitalize on decreasing their

operational costs overseas, and in particular in China, are

now experiencing the effects of rising labor-cost pressures,

resulting in their search for the next emerging "hot spot"

location that can provide low-cost, unskilled labor that is the

foundation for traditional manufacturing.

2 ADVANCED INDUSTRIES

2014

An Authoritative Definition Advanced manufacturing, however, is not dependent

on pursuing the lowest-cost environment around the globe.

Advanced manufacturing, while lacking an authoritative

definition, is more likely to be:

• Capital-intensive utilizing expensive machinery

and equipment requiring a low-risk location (when

considering natural disaster, economic, political, and

social stability)

• Energy-intensive with extremely sensitive equipment

highly dependent on a reliable power supply

• Labor-intensive, yet requiring fewer positions, with an

increasing demand on higher-skilled labor to execute

necessary tasks due to process automation

• Proprietary in nature and based on unique knowledge

requiring strong intellectual property laws

U.S. as a Leader As a leader of innovative manufacturing solutions, the

United States is well positioned in the global economy to

see increased/ continued investment and projected related

activity for these so-called advanced manufacturing

operations- from the revival of the domestic automotive

industry through innovative and cutting-edge technologies,

to growth in related transportation industries and sectors

that ha\ e al o \'i ibly improved (such as aircraft, trains, and

spac hip-). Advanced manufacturing techniques are also

creating greater efficiencies for the production of everyday

consumer goods, such as those in the food and medical

industries.

Advanced Industries Work to Close

Quality education and training that fills the pipeline of skilled workers

are key drivers of economic growth and prosperity. As the nation faces major

workforce hurdles in the coming years, there are a handful of companies and

states that are proactively solving the issues to meet future challenges.

the Skills Gap When the nation's growing gap in skilled workers came to the forefront,

Iowa's leaders quickly mobilized and through public/private partnerships

implemented initiatives to focus on science, technology, engineering, and

math (STEM) education. Co-chaired by Iowa's Lt. Gov. Kim Reynolds and Vermeer CEO Mary Andringa, Iowa's STEM

efforts have garnered national attention among educational and policy leaders in Washington, D.C., as one of the

best state models.

"We're a state that collaborates and makes things happen quickly," says Mary Andringa, CEO, Vermeer

Manufacturing Corporation. "And nothing is more evident of this fact than our STEM initiatives."

To date, more than 3,100 Iowa K-12 classrooms have implemented STEM programs, with nearly 100,000

students involved in the various programs. Awareness of STEM and its importance among Iowans has reached

41 percent in 2013.

Based in Pella for more than 65 years, Vermeer is a global manufacturer

of heavy-duty agricultural and industrial equipment like bale processors,

compost turners, and pipeline drills. More than 2,400 engineers, machinists,

welders, assemblers, IT, logistics, and marketing professionals work in Iowa

for Vermeer.

"Our workforce is more than ski ed and productive, they are engaged,"

says Andringa. "They take great effort to understand the in-market needs

of our customers and end-users."

Vermeer feeds its talent pipeline through extensive college-level co-op

Welders at Vermeer Manufacturing in Pella, Iowa, keep their skills sharp with ongo1ng training at local community colleges.

programs, internships, and training programs that reach down into the high school and middle school levels. With

an office at Iowa State University's Research Park, several engineering students split their time working for Vermeer

on-campus or at the production facility.

Iowa's network of 15 community colleges offers comprehensive educational programs and often adapts or

enhances curriculum to meet the needs of area employers. "By leveraging state funding, we've collaborated with

Des Moines Area Community College to enhance the welders training program," Andringa explains. "With this

financial and educational support, we've been able to elevate the skills of our current welders and add more to

our workforce with each session we hold."

ADVANCED INDUSTRIES I 2014 3

Why is the United States currently well positioned for

these projects? With the exception of the U.S. tax climate,

other critical location factors typically associated with the

key criteria cited above are competitive advantages for the

United States when compared with other developed nations.

As the leading innovator of new advanced technologies,

the U.S. is able to compete on a global scale, even with a

relatively high cost of labor; because the application of

technology and innovation support advanced levels of

production, the volume of labor required is reduced.

In addition to offsetting the high-cost labor market

with fewer overall jobs, the U.S. appears to be enjoying a

period of abundant energy resources, and offers among the

lowest-cost energy for developed countries anywhere in

the world. Additionally, the overall risk profile (economic

and social stability) of the U.S. is relatively low. There are

effective intellectual property laws and a high level of

transparency on how business is conducted. Finally, despite

an aging infrastructure network, there is still access to highly

reliable core utilities, such as water, sewer, telecom, gas, and

electric- all important factors when determining where to

invest hundreds of millions of dollars or more for a single

operation. Yet, an underlying factor remains the access and

availability of skilled labor.

The Labor Factor It has been a common theme to hear about the shortage of

skilled labor, despite the relatively high unemployment over

A student at Southwestern Illinois College uses a CNC machine to create a metal object to specifications programmed into the machine.

4 A DVA NCEDINDUSTRIES

Manufacturing maintenance training at Daley College, Chicago

the past few years. A typical manufacturing position requires

a different profile of employee than in previous generations.

Reportedly, more than 27 percent of all manufacturing

employees have a bachelor 's degree or higher. The wages

of manufacturing jobs continue to rise as well (which may

be a reflection of the growth of advanced skills to support

the changing manufacturing base) with an average annual

manufacturing salary in the U.S. at nearly $60,000.

The continued innovation and technology implications

infiltrating and driving manufacturing advancements

dictate very specific human interaction and support. The

ability to develop and retain talent for these specific projects

and industries is imperative to their success. Where other

key location criteria can be measured very directly (cost

of electricity, state tax structure, risk of natural disasters),

the ability to measure the implications of labor is more

di~ficult to attain. No single fac tor can clearly establish the

ability of a location to offer the immediate presence of labor

skills. Comparative wage levels may reflect a long tenured

workforce in their respective positions rather than the skill

level of the labor force. Educational attainment for a location

can't be pegged to a specific industry or labor subset. And

there are dozens of other criteria that can be considered, but

still not clearly point to the right labor environment for a

project.

Labor economists can assess specific positions relative

to their respective industry presence, seeking to establish

trends and growth in a particular location to determine the

ADVANCED INDUSTRIES

capacity of a labor market to support a project's needs. A

high presence of a particular skill may indicate a general

"herdin " effect, whereby projects and companies are

competing for the same type of skilled labor (think life

sciences or aviation clusters). Other projects may also seek

Continued on page 11

Workforce Training Vital to

Today's innovative companies require highly skilled workers-

a need that cannot be overstated. Kentucky is among those states that have

focused their efforts on supplying the workforce that current and future

companies need.

Business Health The key has been to eliminate the bureaucracy and, in its place, offer

personalized services depending on the needs of the individual company.

To accomplish this, Governor Steve Beshear announced the creation of the

Kentucky Skills Network. The network combines the efforts of several state

government and educational institutions to provide one-stop workforce services and resources for new and existing

employers. This includes customized recruitment and training solutions, as well as implementation assistance.

Qualifying Kentucky companies are eligible for recruitment and job-screening services at no cost. Additionally,

flexible grant funding is available to offset t he costs of customized and in-house training needs and to establish

apprenticeship programs and to provide free safety and OSHA training. State tax credits are also available for

approved training programs for existing employees of qualifying companies. Last year alone, training was provided

for more than 83,000 Kentuckians in fields including manufacturing, healthcare, information technology, energy,

distribution, and research and development.

An Automotive Success Story One of the most popular and effective tools used t hrough the Kentucky Skills

Network involves grants and tax cred its. One company that benefited from a

grant was INOAC, a Tier II supplier of 'nstrument panels to Ford and Toyota

-two companies that contribute to Kentucky ranKing third in the nation in

automotive production.

In 2009, INOAC needed to train its workforce ·n new production processes.

The supplier formed a partnership with t he Springfield-Washington County

Economic Development Authority, the Kentucky Community and Technical

College System, and the Kentucky Cabinet for Economic Development. The Kentucky Skills Network provided

INOAC no-cost recruitment services and awarded t he company a $160,000 grant to offset the cost of two years

of employee on-the-job training. INOAC was also able to secure additional training assistance from the local

community and technical college. As a resu it, INOAC was able to grow its Springfield workforce from 180 four years

ago to 330 today.

According to Kurt Krug, vice president of North American Human Resources for INOAC, business leaders

are sometimes unaware of how government agencies can help, or they may fear red tape and rejection, but he's

impressed with Kentucky's team approach. He notes, "Kentucky is doing some very good, creative things .. . the way

I see it, everyone benefits. It's a true partnership."

ADVANCED INDUSTRIES I 201 4 5

I DVANCED DUSTRIES

INCREASING WORLD COMPETTTlON IS

DRIVING AN INCREASINGLY COMPLEX

BUSINESS PARADIGM FOR AEROSPACE

AND OTHER TECHNOLOGY COMPANIES.

BY .JEFF TROAN, DIRECTOR,

LOCKHEED MARTIN ECONOMIC DEVELOPMENT DPPORTUNmES

American management structure and process owes its origins to three individuals: Deming,

Drucker, and Sloan. Of the three, W. Edwards Deming

probably remains the most pertinent today. His definition

of quality as a product "produced to the customer 's

specification, at or ahead of schedule, at the lowest possible

cost" forms the basis of a host of process optimization

programs, from Six Sigma to Total Quality Management.

Since the early 1980s, aerospace and technology

companies around the world have embraced Deming's

principles, and strained waste and defects from the

manufacturing process. That has led to the realization

by many business sectors that, given targeted workforce

development support, a very broad class of labor can

produce high-technology products around the world.

Thus, today we see German cars produced in rural China,

communication satellites built in southern Mississippi, and


2014

software development projects executed in Puerto Rico

(and that's just a snippet of mankind's recent workforce

development accomplishments).

At the same time, the fall of the Soviet Union in 1989

has led the world to the realization that any sustainable

economic system has to be rooted in capitalism. That,

combined with other environmental factors like improved

networking capabilities and the spread of English as a

common business language, has led to an explosion of

productivity in the former Eastern Bloc and developing

world, opening both new markets and new production

location opportunities for the world's corporations.

And so, the planet has become a very competitive

place, where it is increasingly difficult to differentiate one's

company based solely on heritage factors like business

process optimization and workforce. What arises is an

extension of the business process optimization model to the

business climate.

This trend isn't something one can ignore as a product

line manager, site selector, or commerce official. In a mature

industry sector, even the most process-efficient company

with the highest quality workforce will find survival

challenging if its tax climate is unfavorable, it operates

in an area with a high cost of living (driving up its labor

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make eastern North Carolina an ideal location for advanced manufacturers.

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costs), utilities are expensive and/ or unreliable, and the

infrastructure is aging. Capitalism, despite its many faults, is

a wonderful driver of efficiency. Unless you're producing at

or near Deming's optimal production point, Adam Smith's

invisible hand will strike you from the field, posthaste.

Extending Business Process Optimization to the Business Climate

New business managers at major aerospace and

technology corporations talk about discriminators and

disruptors. Discriminators provide a notable technical, cost

or schedule advantage that improves the chance of winning

a major proposal or building market share. Disruptors

are much more rare. They are such significant changes

in operating practice, that it is difficult for a competitive

intelligence team to predict them, and they have a market

reshaping impact on new work.

THE PROCESS OF MAINTAINING THE BALANCE BETWEEN CORE AND NONCORE BUSINESS HAS BECOME MUCH MORE COMPLEX.

Business climate modifications are reaching proportions

that put them in the disruptive category. Boeing's relocation

to South Carolina and Oklahoma; L3 Corporation's

relocation of Aircraft Maintenance, Repair and Overhaul

operations to Waco, Texas; Northrop Grumman's new

aircraft design and manufacturing facilities in Saint

Augustine and Melbourne, Florida; and Airbus' new aircraft

fabrication facilities in Alabama are just a few examples of

disruptive level moves in aerospace and technology.

Business climate modifications are the province of

public-sector economic developers, the consulting agencies

that support them, and the corporations forward-thinking

enough to see the paradigm shift. Economic development is

a method by which a local community can artificially modify

its business climate to enable targeted industry sectors to

8 A DVA NCED INDUSTRIES

con tinue to produce, where natural capitalist principles

would drive the work elsewhere.

Economists break out producers into two categories: core

and noncore. Core businesses import cash into a community

and export product (either a good or service) outside the

community (either domestic or internationally). These

are the core engines of capitalism that propel all the other

sectors of the economy. Noncore businesses take the "spend"

generated by the payroll and procurement of core businesses

and create secondary activity. These businesses are also

important because they create induced employment in

sectors as diverse as construction and retail. They also create

the taxable transactions that provide the revenue necessary

for municipalities to maintain public services and retain core

employment.

A community that lacks core employment is either in

economic decline, or serving as a bedroom community to

someone else's core business (economic seepage).

A community that lacks noncore employment

can't generate secondary and tertiary taxation

and employment. The core money slips away

(economic leakage).

The process of maintaining the balance between

core and noncore business has become much more

complex over the las t 50 years. Gone are the days

following World War II, when the United States

had the majority of the viable production capacity

on the planet. Firs t, Europe and Japan recovered

production capacity, followed by the modernization of the

former Eastern Bloc nations, and finally the developing

world. The significant core business loss that the United

States end_ured during the early years of the 21st century

has reduced the number of core employers, and made the

surviving companies very cost-conscious.

To attract and retain (yes, retain) core businesses in

the twenty-first century, communities will have to offer

significant workforce development support, combined with

a business climate package that makes their companies

competitive with producers that enjoy lower labor costs and

more favorable taxation.

The good news is, to a large extent, noncore businesses

will follow the new cash spend of core businesses, so they

can endure a harsher business climate than one's core

ADVANCED INDUSTRIES

engine, rebalancing community financial models. However,

communities should remain cognizant of quality-of-life

issues and acceptable residential housing stock, to ensure

core business employees locate (and spend their salaries) in

the community.

"But shouldn't every company be taxed the same?"

Workforce Training Takes Flight in the Aerospace Sector

Workforce development is critical to a state's economic development

mission. This is particularly true when it comes to Mississippi's expanding

aerospace industry, which was launched in the 1930s when Pioneer Aerospace,

a part of Zodiac Aerospace, began manufacturing parachute systems in the

state. After decades of continued growth, Mississippi is now home to more

than 20 aerospace leaders as well as NASA's Stennis Space Center.

State officials collaborate with companies and Mississippi's 15 community

colleges to tailor workforce-training programs to meet specific company needs. When GE Aviation announced the

opening of its 300,000-square-foot facility in Batesville, Miss., in 2008, company officials cited a successful working

relationship with the state and its universities as key to its location decision. The company collaborated with

Northwest Community College to train workers in the sophisticated skills necessary to

manufacture composite parts forGE's GEnx jet engine, including fan platforms and fan

case assembly.

In 2013, GE Aviation expanded to meet global demand. Based on the success of its

Batesville location, Ellisville became t'1e company's second location in the state, and

the company invested $56 million to employ 250 workers at its 344,000-square-foot

composites manufacturing facility. GE Aviation partnered with Jones County Junior

College for workforce training and credits the success of its Mississippi operations to

its partnership with the state's community colleges. These institutions offer programs of

particular interest to aerospace companies, including aviation maintenance technology,

avionics, and unmanned aircraft systems.

"GE Aviation's growing partnersh'p with the state of Mississippi is creating long-term

economic growth," said David Joyce, president and CEO of GE Aviation at the opening

of the Ellisville facility. "We couldn't be happier with our Batesville operation, and we look

forward to the growth of our new Ellisvi e operation."

Mississippi's nine public universities also play a vital role in research and development.

Established in 1948, the Raspet Flight Research Laboratory at Mississippi State University

is the largest university flight lab of its kind in the U.S., and its business incubator provides

an economical start-up facility for companies like GE Aviation, Aurora Flight Sciences, and

Stark Aerospace.

Rolls-Royce opens its second jet engine test stand at NASA's John C. Stennis Space Center in Mississippi . The Outdoor Jet Engine Test Facility performs jet engine testing on the latest, most advanced Rolls-Royce civil aircraft engines, including the Trent 1000, which powers the Boeing 787 Dreamliner, and the Trent X:VVB, which powers the Airbus 350X:VVB.

It's no wonder that the companies located in Mississippi's aerospace corridor continue to grow. In fact, 2013 and

2014 have yielded significant expansion for Raytheon, Rolls-Royce, General Atomics, and Aurora Flight Sciences.

ADVANCED INDUSTRIE S I 2014 9

The answer is, really, no, and such a policy can be very

destructive to community economic balance.

First, flat taxation is never fair. For example, communities

that tax primarily on capital investment inherently

overburden capital-intense industries, and those that

primarily tax wages, unfairly burden research and

development firms.

Second, different employers face different economic

pressures and provide different value to the local economy.

In the new world economy, "new cash spend" is king,

and that can only be provided by a dwindling number of

core employers. Economic balance is maintained by the

community through a combination of judicious fiscal policy,

modified taxation, and affordable housing stock.

What the Paradigm Shift Means to Aerospace and Technology Companies

Core businesses in the aerospace and technology sector

need to be attuned to the business climate and partner with

host communities to preserve a competitive position. Until

recently, this usually meant moving operations to a receptive

community, because public-sector economic development

officials tended to view economic development packages for

heritage employers unfavorably.

While moving an entire operation (millions of square

feet and thousands of jobs) to a new community is certainly

a decisive way to improve a company's overall business

A Lockheed Martin F-35 f ighter aircraft being produced at the company's factory in Fort Worth, Texas

1 0 ADVANCED INDUSTRIES

climate, it does have its disadvantages. Such a strategy has

the following negatives:

• An accounting write-off of all assets at the former

operations site;

• Carrying cost on the vacant facility before resale;

• The cost of the new facility;

• Operations shutdown as the company relocates tooling

to the new site (or purchase of duplicate tooling);

• Relocation of key employees to the new location;

• Recruiting of most of the workforce as new; and

• Significant training obligations to enable the new

workforce.

Many of these costs can be covered via a well-negotiated

economic development partnership with the new town's

public-sector coalition (state and local government,

domestically). A good package will include all four categories

of economic development incentives: (1) statutory; (2)

discretionary; (3) legal construction; and (4) legislative.

Generally, a legislative move is utilized to commit enough

funds from general revenue to support project financing. This

is also a good time for the public coalition to modify ancillary

statutes to best accommodate the targeted industry in general.

Once complete, the public coalition constructs facilities

to the requirements of the company, and leases them the

assets at a discounted rate. In many states, such public

sector "ownership and lease" will define a form of legal

construction that exempts the property from ad valorem

taxation. Discretionary and statutory economic development

programs can then be combined to help support equipment

relocation, calibration, and installation, as well as play a

major role in workforce development and recruiting. Key

employee relocation costs seem to be the most difficult

expense to get reimbursed, but they occasionally can be

recovered through a discretionary fund.

All that said, many companies fail to realize that this

support is not free, and they are going to be bound by possible

recapture obligations by the same contract that brought

them the favorable business climate. Economic development

recapture, commonly known as "clawbacks," comes in many

forms. In general, failure to achieve job generation, average

salary, and capital investment goals means the corporation

will forfeit part or all of its economic development partnership

support. Recapture terms may increase its lease rates, or the

ADVANCED INDUSTRIES

public coalition may simply require cash penalties for failure

to meet tar2:ets. Further, many states have "digital rules"

on recapture, where missing a target by one job can cost the

corporation a ignificant penalty.

is both ethical and cost-effective. Even states like New Jersey

and California are now participating with multiple economic

development programs that look to retain key employers.

Clawbac ha,·e to be considered in the company's

financial and either covered via termination liability from

its customer , if possible, force majeure, or reserve funds.

The economic de,·elopment contracts are best monitored

Companies need no longer assume they have to relocate

to survive. The changing emphasis in the public sector on

retaining the economic base opens a myriad of options, from

facilities consolidation efforts to new business economic

development partnerships. These preserve and improve

as part of the quarterly financial process, so that operations

management remains aware of the consequences of its day

to-day decision-making.

the heritage workforce and minimize new investment in

facilities and infrastructure.

The good news is that the heritage model is changing, as

the public sector is coming to the conclusion that preserving

core employment through economic development principles

So, whether you are a corporate executive or a public-sector

policymaker, I will leave you with a passage from Charles

Darwin. "The future belongs not to the strongest or most

intelligent, but to those most able to adapt." Good hunting. • •

new or emerging locations to deploy

their assets, requiring a more intense

process and business involvement to

access or develop the core labor skills

required.

device manufacturer. It is critical that

partnerships between the business

community and higher education

institutions are e tabli hed.

If the skills gap in manufacturing

REGARDLESS OF MANUFACTURING SECTOR, A COMPANY MUST HAVE THE NECESSARY SKILLED WORKFORCE AVAILABLE FROM THE START.

---

Partnering With Educational Institutions

Regardless of industry or sector

of manufacturing, a company must

have the necessary skilled workforce

available from the start. The best

community will have the ability to

provide or develop a workforce with

the requisite skills, whether it is for

a company that manufactures and

a sembles executive jets or a medical

positions is as wide as we are lead to

believe, then it is even more imperative

that the business community takes

a proactive approach to addressing

the issue in partnership with local

learning institutions- creating new

programs, training workshops, etc. to

meet their needs rather than remaining

silently on the sideline. It's no wonder

that there is often a tight connection

between advanced manufacturing

Role of Labor Continued from page 5

projects and the presence of a local

training institution, whether it's the local

community college or a major university.

Many states now include grants

directly to educational institutions

as part of incentive and inducement

packages to attract substantial new

projects/ investment/ job creation

opportunities. These grants may not

directly benefit a company's bottom

line, but establishing the foundation

for a sustainable workforce pipeline

through partnership with local higher

educational institutions is a critical

component to the long-term viability

of many companies to successfully

operate in a particular location.

States and communities that are

able to demonstrate support for the

development of people skills will

be best positioned to see continued

growth in the advanced manufacturing

sector. • •

--------------------------------------------------------------------------------------------------~ ·

ADVANCED INDUSTRIES I 201 4 1 1

ADVANCED INDUSTRIES

WHERE IS AUTO PRODUCTION CURRENTLY

CONCENTRATED, AND WHERE WILL THE

INDUSTRY EXPAND IN THE FUTURE?

BY DENNIS CUNEO, P ARTNER, FISHER & PHIUUPS LLP

An ancient Greek philosopher once commented that there is nothing permanent except

change. This is certainly true of the American auto industry,

which has been transformed over the past three decades.

The companies making vehicles in America changed, and the

location of auto production also changed. Future change in the

industry could impact its manufacturing geography once again.

A Brief History The restructuring of the American auto industry began

in the 1980s- and accelerated during the Great Recession,

which resulted in the bankruptcies of GM and Chrysler.

Since the Great Recession, the industry has recovered,

with U.S. production close to pre-recession levels. The

industry is once again profitable and growing, leading to

new opportunities for communities seeking auto-related

investment.

Auto assembly plants are among the crown jewels of


2014

economic development. A typical auto plant will employ

up to 5,000 people, with above average wages and benefits,

and will generate thousands of spinoff jobs. According to the

Center for Automotive Research in Ann Arbor, Mich., every

assembly plant job creates a total of 10 jobs in the supplier

and support industries.

The auto industry also spurs huge R&D expenditures

-both by the automakers and their suppliers. Booz & Co.

estimates that the global auto industry spent $102 billion

on R&D in 2013, about four times more than the aerospace

and defense industry.• A Brookings' study notes that high

value engineering and R&D-intensive industries, such as

automotive, are " the prime movers of regional and national

prosperity."' That explains why so many state and local

economic developers continue to focus on attracting auto

investment.

When I first started working in the auto industry in

the early 1980s, five companies - GM, Ford, Chrysler,

American Motors, and Volkswagen - assembled vehicles

in 21 states scattered throughout the nation. In addition

to their traditional base in the Midwest (Michigan, Ohio,

Indiana), the Detroit 3 operated plants on both coasts and

in the South/Southwest. Over the next three decades,

the Detroit 3 restructured, closing plants in several states,

and consolidating most of their American manufacturing

operations into their traditional Midwest base. At the same

time, the Asian and European automakers started building

cars in the traditional automotive states, such as Ohio and

Indiana, and also in the Southern States, which saw a rapid

growth in vehicle manufacturing.

Auto Alley and the Auto West Corridor After three decades of restructuring by the Detroit 3,

and expansion by Asian and European automakers, most

auto production in America is now consolidated in an area

nicknamed "Auto Alley," roughly defined as the corridor

between I-65 and I-75, running from the Great Lakes to the

Gulf Coast.'

While auto production is likely to remain centered in

Auto Alley, the auto industry is also expanding west of Auto

Alley, in an area that I will dub the" Auto West Corridor."

This area is roughly bounded by I-55 in the east and I-35 in

the west, extending from Illinois to Texas, and is home to 10

auto assembly plants. States in this corridor are well placed

to compete for future automotive investment.

When GM and Ford consolidated most of their

manufacturing in Auto Alley, they did not close their

assembly plants in Illinois, Kansas, Missouri, and Texas. Since

the Great Recession, these automakers have announced more

than $3 billion in new investments in those plants, creating

several thousand new jobs. A recent Brookings' study notes

that the Kansas City metro area, with large GM and Ford

assembly plants, is now the second-largest auto-industry

trading hub in North America, after the Detroit area.•

Over the past decade, Toyota built two new assembly

plants west of the I-65/I-75 corridor- in Tupelo,

Mississippi, and San Antonio, Texas- and recently

announced that it will create a new North American

headquarters near Dallas that will employ 4,000 people.

Nissan started up its Canton, Mississippi, plant in 2002,

also west of the I-65/I-75 corridor, and is in the process

of expanding the facility. Mitsubishi recently expanded

production at its Normal, Illinois, plant, and Chrysler added

a third shift as part of the $700 million expansion at its

Belvidere, Illinois, plant.

Taken together, when the current expansions are

completed, the six automakers will employ over 40,000

people in the corridor. This investment in new auto assembly

capacity has been followed by new supplier investment in

the region. Missouri, for example, has recently announced 10

supplier expansions and new plants, creating 1,000 jobs.

Rapid Expansion of Mexico's Auto Industry Another factor that may contribute to the future growth

of the Auto West Corridor is its proximity to Mexico, which

is emerging as a major automotive hub. Twenty years after

the passage of NAFTA, Mexico has attracted significant new

automotive investment. BMW and Mercedes are the latest of

a string of automakers that have announced plans to build

new assembly plants there.

As Mexico's auto assembly has expanded, so has it

auto parts sector. Delphi, which was formerly GM's parts

division, is one of several parts manufacturers that have

shifted a significant portion of their North American

production to Mexico from the U.S. Mexican parts content

in American-built vehicles has increased fourfold since the

enactment of NAFTA. On average, a vehicle made in the

United State contains more than $4,000 worth of Mexican

made parts. ' For example, Ford's Wayne, Michigan,

assembly plant sources 27 percent of its parts from Mexico,'

and Volkswagen's Chattanooga plant sources 15 percent of

its parts from Mexico.'

The rapid expansion of the Mexican automotive industry

has raised alarm bells, especially in some of the Southern

VEHICLE PRODUCTION IN NORTH AMERICA

ADVANC E D INDUSTRIES I 2014 1 3

States, which haven't seen a new greenfield assembly plant

since Volkswagen announced its Chattanooga plant in 2008.

Although some see Mexico's burgeoning auto industry as

a threat, it is an opportunity for others. The auto industry

in North America is rapidly integrating, with vehicles and

parts moving across the border in both directions. Proximity

to Mexican parts suppliers could provide a logistical

advantage for plants located in the Auto West Corridor, if

the trend toward increased Mexican parts content continues.

As illustrated in the table on page 16, assembly plants

located in the southern part of the corridor are closer to

Mexico than many of the assembly plants located in Auto

Alley. Fewer miles from Mexico means lower transportation

costs for Mexican parts, which are making up an increasing

percentage of the content of American-made vehicles.

To be sure, the auto industry is alive and well in

Automotive Alley, which has seen some $29 billion in new

investment (in existing plants) since the Great Recession.•

But the recent new investment in the Auto West Corridor

and its proximity to Mexico suggest that states in this

corridor may be in a position to compete for the next new

greenfield U.S. auto assembly plant.

The West Is Back In Play Moving further west, northern California is an emerging

hub of automotive activity, with the Tesla plant in Fremont,

California, and the uptick in automotive activity in Silicon

Valley.

Automotive Suppliers Cluster in Central Mexico's Industrial Parks

The corridor of suppliers to the automotive industry that has developed

in Mexico Bajio's Region is important to the many car and truck makers that

have chosen to locate their manufacturing facilities there.

Castro del Rio Technoindustrial Park (CDR)- a Marabis Development

and the largest private industrial park in the state of Guanajuato- is home

to many of these companies, basically because it is just 17 miles from the

GM plant and 21 miles from the VW engines plant, both in Silao; 18 miles

from the Mazda plant in Salamanca; and 42.5 miles from the Honda plant in

Celaya. Nissan Aguascalientes is also located only 112 miles from CDR; Mexico City is only 200 miles away; the U.S.

border can be reached in nine hours; and both east and west coast seaports are within just six hours.

To top it off, the park offers a premium utility infrastructure with available, expandable sites. More than

700,000 people live within a 15-mile radius, providing a young, qualified

workforce at a competitive cost. Additiona lly, and very 'mportant for

a development of its kind, a public inst itution CONALEP) can train

technicians on-site; this is thanks to the Schaeffler Group which initiated

this program based on the German model of creating a tailor-made

training program, another important advantage for suppliers to the

automotive industry and other firms.

Within the past eight years, 57 companies - including more than 45

international firms - have set up shop in CDR. Marabis Group has one more industrial park in the neighboring area

besides CDR in lrapuato- Marabis Abasolo, also in the state of Guanajuato, is only 40 minutes away from CDR,

with the same world-class infrastructure that international companies are looking for to run a successful industrial

manufacturing operation.

1 4 A D VAN CED INDUSTRIES

Four decades ago, California was home to five auto

assembly plants operated by the Detroit 3. After the

NUMMI joint venture shuttered the last remaining auto

assembly plant in California in 2010, most observers wrote

off auto production in the state. But a newcomer, Tesla, has

successfully started up operations at the former NUMMI

plant, and now employs several thousand people there.

Tesla builds electric vehicles and is looking for a site for a $5

billion "giga-factory" to make batteries, which it says will

employ 6,500 people. As of this writing, Tesla has narrowed

its search to five states, all located in the Southwest and

West.

Silicon Valley has recently attracted significant auto

related investment, causing one tech blog to proclaim that

the valley is becoming "the new Detroit." As vehicles add

Toyot a, San Antonio TX

GM, Arl ington TX

GM, Kansas City MO


DISTANCE TO SAN LUIS POTOSI, MEXICO (a major automo i e and logistics hub}

605 miles

891 miles

1,425 miles

1,580 miles

1,730 miles

1,980 miles

more technology and software, the nine largest automakers

and three largest global auto suppliers have set up offices

and R&D facilities in Silicon Valley. A company best known

for its Internet search engine, Coogle, is making a significant

investment in the auto industry as it develops

self-driving, autonomous vehicles. It recently

unveiled a prototype vehicle that it designed and

built without a steering wheel, brake pedals, or

an accelerator. A video of the vehicle, which can

be found on You Tube, shows happy passengers

going along for a ride in a driverless car. Some

in the industry are speculating that Coogle

may be the next new automaker. Among auto

industry experts, opinions differ about when

fully autonomous vehicles will be viable. IHS, a

prominent auto industry forecasting firm, predicts 54 million

autonomous vehicles will be on the road within 20 years

-and that by 2050 nearly half of all vehicles will be self

driving.

Whatever the outcome, the development of the

autonomous vehicle is yet another indication that the auto

industry is in another, long-term disruptive phase, which

will have implications on where vehicles are developed and

built. ~ew developments could lead to new opportunities.

State and regions once considered "out of the mix" for new

auto investment might find they are back in the game. • •

!_-::: ance, 2013 report on Auto Innovation 2 :!~< ngs, ·Metro North America: Cities & Metros as Hubs of Advanced Industries & Integrated Goocs Trade" j Or:e of he first to coin the term "Auto Alley" was Tom Klier, an economist with the Chicago Fed.

See"" s book w1th James Rubenstein, Who Really Made Your Car? Upjohn Institute, April2008 Ca"aoa. which abuts the northern tip of Auto Alley, is a significant auto manufacturing hub- but it -as ost several plants and lags behind Mexico for new auto investment. 1 3•ool(ings, "Metro North America: Cities & Metros as Hubs of Advanced Industries & Integrated Goods Trade" 5 Scot.abank. Global Auto Report, March 2014 6 Economic Contribution of the Ford Michigan Assembly Plant," Center for Automotive Research 7 Volkswagen Growing Plants With Strong Routes in North America," Automotive Logistics, April 2013 8 Center for Automotive Research

ADVA CEO INDUSTRIES

INCENTIVES HAVE MOVED FROM THE FRINGES

OF A PRO.JECT TO BEING A PART OF THE

COMPETITIVENESS EQUATION IN BRINGING

MANUFACTURERS BACK TO THE U.S.

BY GREGORY BURKART, PRACTlCE LEADER,

SITE SELECTlON & BUSINESS INCENTlVE ADVISORY SERVICES

DUFF & PHELPS, LLC

The U.S. economy has begun to rebound. By 2015, some experts are predicting that the manufacturing

sector could add approximately 1.1 million jobs over the

2010 base. '

Three factors are driving the resurgence of U.S.

manufacturing. First, the U.S. dollar is weak. The fa,·orable

exchange rate helps the U.S. become a competitive producer

of goods and attracts foreign investment. In 2002 1

purchased 133 Yen. Today, that same dollar purchases only

100 Yen. The same is true with the Euro, despite all of the

troubles on the continent. Today $1 buys only 0.75 Euro

versus 1.14 Euros 10 years ago.

Second, the U.S. labor force is becoming more

competitive. As productivity rises faster than wage costs,

unit labor costs in the U.S. are falling. According to The

2014

Bo ton Consulting Group, worker productivity has been

growing fa ter in the United States than in Western Europe

and China. From 2005 to 2010, worker productivity in the

L" .. grew at 2 percent annually, while the major economies

of Western Europe averaged only 0.4 percent. This trend

continued in 2011 and 2012, with U.S. productivity

increasing 2.6 percent and 2.2 percent, respectively, while

Europe averaged only 1.1 percent increases.

Compared with China, U.S. workers are 2.8 times more

productive. In 2010 real output per worker was $120,000

in the U.S. versus $35,000 in China. Even though Chinese

productivity is increasing, by about 8.4 percent per year,

their productivity is not rising fast enough to offset annual

wage increases of 18 percent. The Boston Consulting Group

estimates that by 2015, the total labor-cost savings of

manufacturing goods in China will be only 10 percent to 15

percent when productivity-adjusted labor is considered.

Third, Chinese logistics costs are rising. The total cost

of China's logistics rose by 18.5 percent in the first half

of 2011 due to rising prices of raw materials, labor, and

lending rates. Transport costs rose by 15.5 percent, storage

costs soared 22.7 percent, and interest expenses jumped

24 percent. At these levels, China's logistics costs are more

than double the average in Western Europe, Japan, and the

ADVANCED INDUSTRIES I ZD 1 4 1 7

United States. Moreover, when you add a risk premium for

"black swan" events, the costs are even higher.

With increasing global competition, state and local

governments have the tools to improve the financial strength

of manufacturers locating within their communities. As

manufacturers analyze locations in the U.S., they should

consider tapping into economic development incentives to

further improve their performance.

SIMILAR TO AN ABATEMENT, A REBATE OR REFUND REDUCES A TAX LIABILITY; HOWEVER, A COMPANY PAYS THE TAX AND LATER RECEIVES A REFUND.

Let's look at some of the generally available incentives

that (1) reduce operating costs, (2) lower upfront

investments, and (3) enhance productivity. Also consider a

case study of an automotive supplier to demonstrate how

to think creatively about these basic incentives, combining

several programs into a holistic solution that juices your

financial performance even more.

Training Incentives Productivity is the lynchpin to U.S. competitiveness.

If manufacturers are repatriating projects, and if highly

automated shop floors are critical to their productivity, then

states and local communities need to offer a highly skilled

workforce. A common incentive is training, which comes in

a number of forms. For example, Louisiana has instituted the

FastStart program that replicates a private-sector consulting

model. It has been recognized as one of the best in the

country because it provides a comprehensive, free service

to companies including employee recruitment, screening,

training development, and training delivery.

For companies that want to conduct their own training,

Tennessee offers an excellent program. The Tennessee

Fast Track Job Training incentive is a cash grant that pays

50 percent of the committed training grant after 90 days of


employment, with the remaining training grant delivered

after associates have been employed for 180 days. Program

participants may also choose to submit their training

expenses and seek a reimbursement of their costs.

Abatements, Exemptions, and Rebates For companies investing in capital-intensive equipment

to increase their productivity, abatements, exemptions,

and rebates are particularly important ways to

reduce operating costs and increase EBITDA

(earnings before interest, taxes, depreciation,

and amortization). Some professionals use these

terms interchangeably; however, there is a slight

difference between each one.

An abatement is typically a partial reduction

in a future incremental tax, whereas an exemption

is usually a complete waiver of the tax for a

particular activity. A good example of an abatement

is Michigan's P.A. 198, which offers 50 percent

reductions in the incremental increase in property taxes

resulting from a project. For an exemption, Florida offers

another good example, as the state recently enacted a sales tax

exemption for manufacturing and processing equipment.

Similar to an abatement, a rebate or refund reduces a tax

liability; however, the timing is delayed. For a rebate or refund,

a company pays the tax and then, at a later point, receives a

refund. A good example is the property tax rebate in some

North Carolina communities such as Charlotte, which offers the

Business Investment Program (BIP) grants. Using this program,

grant recipients must consummate the qualifying investment

and pay all property taxes before grants are paid.

Payments or fees in lieu of tax (PILOT or PILOT) are a

closely related incentive offered in many Southern States. To

promote manufacturing, South Carolina offers a statutory

five-year property tax exemption as well as four types

of PILOTs known as "Big Fee," "Little Fee," "Simplified

Fee," and "Super Fee." nder a "fee," a manufacturer

may negotiate a lower assessment ratio, reducing it from

10.5 percent to a lower percentage but not below 6 percent

(4 percent is the minimum for certain projects investing

larger sums and creating jobs). In addition, a company may

negotiate for a fixed millage rate or adjust the millage rate

every five years for the period of the fee.

Help With Infrastructure Improvements Since logistical costs are also critical to luring manufacturers

from China, reliable infrastructure is important. Having good

freeway access, efficient rail yards (with access to multiple

carriers), and a port with efficient and predictable labor

relations is the backbone of low logistics costs.

On top of the property tax exemption and FILOT, South

Carolina offers the Special Source Revenue Credit (SSRC)

that can be used to pay for infrastructure improvements. In

connection with the "Little" or "Big" fees, a local community

may use the SSRC as either a credit against the fee payment

or float a bond and use the SSRC to pay the principal and

interest. In addition to infrastructure, a manufacturer

may use the proceeds of the bond or the credit to acquire

or improve real property or pay for personal property

dedicated to the project.

In addition to state-level grants, many local communities

have access to the U.S. Department of Housing and Urban

Development's (HUD) Community Development Block Grant

(CDBG) funds. Manufacturers may tap these grants to pay

for public infrastructure such as roads, water, and sewer lines

or water treatment facilities. HUD distributes CDBG funds to

SiTo Approach-$9.2 million incentives

-+ ------+--- -----~----

Sales Property Income Training Cash Tax Tax Tax Grant

each state and entitlement communities- <>enerally larger

cities and counties- to promote the employment of low- to

moderate-income individuals. For projects in non-entitlement

communities, a manufacturer may approach the state to tap

into its statewide allocation of CDBG funds.

Other Incentives To offset other startup costs, some states and local

communities offer cash grants, favorable financing, or free

land. The most sought-after incentive is cash. Several states,

such as Texas and Florida, offer grants to close deals. Texas

has the "deal-closing" Enterprise Fund that has provided

approximately 53 0 million for projects from FY 2004 to FY

2011. Other states (e.g., Michigan's 21st Century Investment

Fund) are more entrepreneurial with their incentives

and offer equity injections, loan-interest loans, or credit

enhancements to their expanding manufacturers.

Another financing tool is Tax Increment Financing (TIF).

Approximately 48 of the 50 states permit local governments

to use some form of TIF. To start a TIF, a local community

creates a district and within its boundaries captures the

incremental increase in one or more taxes. For example, in

Holistic Approach $12.2 million incentives

Real Estate Cash Training Income Property Sales Lease Grant Tax Tax Tax

The whole, in some instances, can be greater than the sum of its individual parts. Combining little know features of traditional incentives into a holistic solution often creates more value than merely focusing on individual incentives.


Pennsyl\'ania a TIF may capture property taxes, sales/use

taxes, gros receipts, gross or net profits, or income taxes.

Once a community captures the increment, there are

a couple options for conveying the benefit to a company.

If authorized under statute, a TIF Authority may pay the

incremental taxes to a manufacturer to reimburse for eligible

expenses or float a bond and use the captured taxes to

repay the bond. Pennsylvania permits fairly broad uses.

ADVANCED INDUSTRIES

The statute permits a TIF to reimburse for items including

construction, demolition, remodeling, or reconstruction

costs; new buildings or structures; acquisition of machinery

and equipment or land; public infrastructure located outside

TIF boundaries, if the investment will directly benefit a

project; financing costs, including issuance of bonds or

establishment of reserve funds; professional services;

administrative costs, including reasonable time spent by city

Shovel-Ready Sites Help Provide Speed to Market for Advanced

Advanced manufacturing has been defined as the use of innovative

technology to improve products or processes -and that just about takes in

all of today's manufacturing. The use of these innovative processes improves

products and, importantly, gets them to market faster.

Manufacturers

With that in mind, many advanced manufacturing companies are looking

at certified or shovel-ready sites. This has been an advantage for MidAmerica

Industria Park, which is ocated just 40 miles east of Tulsa, Oklahoma, at

"America 's Crossroads. " 1t's where 'nterstates 40 and 44 intersect, allowing

next-day delivery to nearly a quarter of the U.S. population.

At 9,000 acres, MidAmer'ca 's B ild ow program provides shovel

ready sites ranging from small parcels to larger tracts with al, uti ties i place. T e par also owns the water

and wastewater treatment systems and carries an umbre a PDES pe it to cover discharge requirements

for industries. MidAmerica has been designated a "cert fea ·lldustr'a park " by the Oklahoma Department

of Commerce. Since it's owned and operated by a public trust, red tape and fees have been eliminated and

construction can begin almost immediately.

Among the park's manufacturers are companies such as American Castings, Berry Plastics, RAE Corp., and

Performance Pipe. Shawn Spears, plant manager at Performance Pipe, notes,

"Our MidAmerica facility is the most effective in the entire system- for

production as well as delivery. Often this plant is chosen to deliver product

that logically should be delivered from another facility. The MidAmerica plant

is so efficient that even though product must be shipped further, it is still cost

effective to produce and ship from here in Pryor, Oklahoma."

Spears also cites the "can do" attitude of the people who run the park and

those who work in the support services in ano around it. Dalton Babineaux,

former president of American Castings, agrees: A huge plus we did not count

on when we located at the park was the oppo ity to partner with other companies in the area. We are very

:ortunate to have such talent.. .as our neighbors. •

Among the park's talented companies is Goog!e, which operates two data centers there. And, in September

2013, Google purchased the 1.4 million-square-foot former Gatorade manufacturing and distribution facility located

next to its MidAmerica campus.

ADVANCE D INDUSTRIES I 2014 2 1

or authority employees; relocation costs; and reimbursement

of prior expenditures related to allowed costs.

In some instances, nontraditional incentives are available

that do not provide cash or tax relief but can be of significant

value. Private-sector utility companies, along with local

communities that own their own utility services, may grant

reductions in electric, cable, water, or sewer ra - a: e <ap

in fees. A good example is ReCharge Tew Yor . \ "ch has 910

MW of power allocations available for busines:: - that meet

its program criteria. Another example is the Tennessee Valley

Authority, which offers a five-year credit against future utility

bills through its Valley Investment Initiative.

·:· ELECTRI CITIES

at N 0 R T H C A R 0 L. I N A, I N C.

NORTH CAROLINA IS A GREAT PLACE TO DO BUSINESSI

In fact, Site Selection magazine ranked North Carolina 2nd in its annual Top Business Climate survey for 2013. So if you 're looking at North Carol1na, let ElectriCities ' Economic Development team illuminate the

way. We represent more than 70 public power communit ies across the state. To help serve you better, contact Brenda Daniels, Manager of Economic Development at 800.768.7697, ext. 6363 or bdaniels@ electricities.org for more information.

CONCORD International Business Park location: 4541 Enterprise Dr., Concord, NC 28027 Building size: 88,527 s.f. expandable up to 141,000 s.f. Year built: 2011 Acreage: 12.8 acres Ceiling height: 28 feet Dock doors: 4

KINSTON Highway 70 West Industrial Park location: 2010 Smithfield Way, Kinston, NC 28504 Building size: 40,000 s.f. expandable to 160,000 s.f. Year built: 2009 Acreage: 9 acres with additional a acres available Ceiling height: 30 fe et Dock doors: 2 dock-high, 1 drive-in Flooring: 10 mil vapor barrier

CONCORD Concord Airport Business Park Location: 7055 Northwinds Dr., Concord, NC 28027 Building size: 150,000 s.f. Year built: under construction Ceiling height 32 fe et clear Dock doors: 20-30 side loa ding Flooring: 6 inch conc rete Adjacent to Concord Regional Airport


MONROE Monroe Corporate Center location: 447 Goldmine Rd .. Monroe. NC 28 11 0 Building size: 102.000 s.f. Year built: 2013 Ceiling height: 30 feet clear Dock doors: 4 dock-high, 1 drive-in Flooring: Stone

SHELBY

es Walls: Str c a precast concrete 100':'. ESFR

CONCORD Concord Airport Business Park

location: 7035 Northwinds Dr., Concord, NC 28027 Building size: 400,000 s.f. Year built: under construction Ceiling height: 36 feet Dock doors: 40-80 side loading Flooring: 6 inch concrete Adjacent to Concord Regional Ai rport

Creating a Holistic Solution for Manufacturers by Combining Traditional Incentives

In Georgia one local community

combined several traditional incentives

to create a unique solution for an

auto supplier. It floated a tax-exempt

bond, repaying the bond with lease

payments and recaptured tax revenues.

The community used the proceeds

to construct a facility owned by its

Industrial Development Authority (IDA)

and leased it to the manufacturer. The

lease was triple net and resulted in a

savings of $1.25 per square foot, largely

because the implicit cost of funds was

5.63 percent versus 12.0 percent that a

private developer would have to pay.

The triple net lease was a gross rate

in practice because the manufacturer

received property tax abatement from

the taxing authorities, while the IDA

paid for the common area maintenance

and the insurance on the structure.

The iDAsplita$1million

OneGeorgia Authority cash grant with

the manufacturer; $500,000 for tenant

improvements and $500,000 for site

grading and infrastructure development.

Using this project as a template to spur

other development, the community today

touts its economic success by attracting

over $3 billion of new capital investment

and having created 20,000 jobs within the

last 10 years. • • 1"US Manufacturing Nears the Tipping Point - Which lndustnes, Why and How Much?" bcg.perspect1ves, The Boston Consult•ng Group :S,kin, Zi nser, Hohner and Rose, 3/22/1 2)

ADVANCED INDUSTRIES

NEW FUEL E'"CONOMY AND GREENHOUSE

GAS REGULATIONS ARE LEADING TO THE

DEMAND FOR NEW MATERIALS AS WELL

AS NEW MANUFACTURING AND DESIGN

METHUDS TO LIGHTWEIGHT VEHICLES.

BY .JOSHUA CREGGER, PRO.JECT MANAGER;

AND GREG SCHROEDER, ASSISTANT DIRECTOR,

MANUFACTURING, ENGINEERING, & TECHNOLOGY:

CENTER FOR A UTDMDmVE RESEARCH

r United tates require that the portfolio of vehicles sold each

model year become increasingly fuel-efficient over time.

These regulations facilitate the use of various fuel economy

irnprming technologies, such as alternative fuels, electrification,

ad\"anced powertrain, energy-efficient peripherals,

aerodynamic improvements, and vehicle lightweightin<>. Let's

examine the national regulations, automotive lighh,·eightino

technologies, and related capital investment needs.

Fuel Economy and Greenhouse Gas Regulation Corporate Average Fuel Economy (CAFE) regulations were

first enacted by Congress in 1975 as a policy to increase fuel

SG L Automotive Carbon Fibers production, Moses Lake, Washington

2014

economy of passenger cars and light-duty trucks. In 2009, new

national fuel economy and greenhouse gas (GHG) standards

for vehicles were proposed in the U.S. These new regulations

harmonize the . ational Highway Traffic Safety Administration

1 :HI'SA) CAFE standards and the U.S. Environmental

Protection Agency (EPA) GHG regulations. NHTSA is

tasked with regulating fuel economy and EPA is tasked with

regulating GHG emissions- though they are closely related,

meeting one regulation does not guarantee meeting the other

regulation. With harmonization, automakers will be able to

satisfy both sets of regulations.

The first phase of the regulations, which covers vehicle

model years 2012 through 2016, will increase the combined

required CAFE for light-duty vehicles (trucks and passenger

cars) to an estimated 35.5 miles per gallon (mpg) by the end

of that period. This level of fuel economy is a substantial

increase from the previous mandates, which in 2011 required

a combined light-duty vehicle CAFE of 24.1 mpg. Similarly,

the second phase, which covers vehicle model years 2017

through 2025, will increase the CAFE requirement for light

duty vehicles to an estimated 54.5 mpg by the end of that

period.

The national fuel economy and GHG standards have

already had an effect on the design of new vehicles and


~ (j)

t :::> 0 u

are poised to have an even greater influence on vehicle

innovation in the near future . For the first time, the

combined CAFE for passenger cars and light duty-trucks

exceeds 30 mpg. (See chart on page 27.)

Automotive Lightweighting Technologies Vehicle weight is a considerable factor in ,·ehide fuel

economy; it is estimated that a 10 percent reduction in vehicle

mass can result in a fuel economy impro,·em of up to 5

Is the U.S. Automotive Sector Really Recovering?

The U.S. auto industry is the world's third-largest, trail"rg o~

powerhouses China and Japan. Since the industry's collapse · 2008, the

U.S. economy has struggled; however, recent industry trends seem to

indicate the $34 billion cash infusion of 2008 to two of the Big 3 industry

players (GM and Chrysler) is beginning to have a broad and positive impact

on the U.S. economy.

Gains in the industry are occurring in places like North Carolina, which

ranks 1Oth among all states in total automotive cluster employment, even

though it doesn't have a single auto assembly plant: 34 of the top 150 North American OEM parts suppliers have

a facility in the state. Its prime East Coast location, a nationally-acclaimed STEM education initiative, engineering

programs at two universities, a nearby independent auto test track, and an available mega-site are a few reasons

why nearly two dozen automotive suppliers call eastern North Carolina home, and several have announced plans to

expand over the past few years.

Expanding OEMs Among these, Keihin Carolina System Technology (KCST) of Tarboro

expanded in 2011, creating 50 new jobs and investing more than

$13 million to expand its 370-employee facility that manufactures engine

control units and electronic assemblies for Honda, Honda Power Sports,

and Acura.

In nearby Goldsboro, Cooper Standard, a leading supplier of body

sealing, fuel, brake and emissions, thermal management, and anti

vibration systems expanded its body and chassis faci lity to accommodate new products and programs. The $17.9

million expansion created 137 new jobs.

Carolina Technical Plastics (CTP , a plastic injection molding plant in New Bern, N.C. , added 25 employees in

2011 and made substantial investments "nto · s plant , ensuring its ability to meet growing consumer demand.

Due to its strict quality standards and superior techn"cal abilities, CTP has been awarded the opportunity to

manufacturer 18 new products for The Brose Group, production that had been housed in Mexico.

And just last year, ASMO, a Japanese-owned manufacturer of front wiper motor li nkages, arms, and blades as

well as radiator fan motors announced plans to create 200 new jobs and invest at least $100 million at its Greenvi lle,

N.C., facility by the end of 2016.

If short-term lessons from major auto manufacturers and a diverse range of suppliers, like those in eastern North

Carolina, are any indication of the future, the U.S. automotive industry and the U.S. economy have a genuine basis

for confidence .

. , _ _________ _______________________________ _


D A VOTE, THEY'D MOVE HERE.

Numbers don't lie. Iowa has one of the nation's lowest costs of do1ng business. We're a right-to-work state with a cost of living that's below the national average. Ours is an environment built for businesses to prosper. lt"s why our advanced manufacturing exports are up 179%. Why the growth of our bioscience companies has far outpaced the nation. Why we're home to over 94,000 of the nation's most savvy finance and 1nsurance pros. Why our diverse economy is third in the nation in job growth. Dig more into the numbers at iowaeconomicdevelopment.com. With numbers like these, no wonder we're "Iowa Nice".

iowaeconomicdevelopment.com

ICJWA® ec-o om1c- devc.:lopmen+

I) iowaeconomicdevelopment [e1 businessiowa

...

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a:: s 2

to 7 percent. ' Though achieving greater fuel economy is a

main driver for many lightweighting material and process

technologies, there are other benefits. Weight reduction is also

appealing to automakers because it tends to increase other

performance factors valued by consumers: ride and handling,

braking, and acceleration. Another key motivation for using

new and more highly engineered materials is to improve

vehicle safety and crashworthiness.

IC

By switching to lightweighting materials- such as high

strength steel, aluminum, magnesium, and composites- and

adopting new forming (e.g., hot stamping and high-integrity

casting) and advanced joining (e.g., adhesives, friction stir welding,

fasteners, and laser welding) technologies, automakers will be

able to significantly reduce the weight of new vehicles. By 2025,

automakers are expected to reduce the average vehicle mass by 10

percent or greater versus their 2010 counterparts.

From 1995 to 2010, there were substantial changes in the

a:l >, ' :;: . t

tS I BMW i production at Moses Lake: 120 carbon fiber tows right before they get wound on spools


materials used to create vehicles. During that time period, there

was increased use of advanced high-stren!rth reel (AHSS),

composites, and aluminum, as well as a decrease in the use of

iron castings and regular (mild) steel. As automakers continue

to implement lightweighting strategies, these material trends

will persist and may even accelerate.

Government and industry are hea\i.l~· in\·esting to support

lightweighting. The states of Michigan and Ohio have leading

research efforts in materials lightweighting. The

recently announced American Lightweight Materials

Manufacturing Innovation Institute (ALMMll), a

public-private partnership and a National Network

for Manufacturing Innovation (NNMI) institute, will

have its main office in Detroit, Michigan, and will

conduct significant activities in Columbus, Ohio.'

The federal government's $70 million contribution

to ALMMll will be matched with at least $78 million

in private funds . ALMMll will focus on the use of

lightweight metals in transportation applications.

In February 2014, the federal government announced that

it would be accepting applications for the creation of another

relevant NNMI institute, which would be focused on advanced

composites manufacturing (primarily focused on carbon fiber

and glass fiber reinforced composites).' As with ALMMll, the

federal government will support the institute with $70 million

to be matched with private funds.

Advanced High-Strength Steel (AHSS) -New AHSS

implementations are developed every year. By using high

trength steel over mild steel, companies can create thinner

components (decreasing vehicle weight) while achieving

the same crash performance, although the adoption of high-

trength steel poses some challenges to the manufacturing

and assembly processes. Third-generation steels are being

developed that are ultra-high strength and more formable than

other AHSS. Unlike some AHSS materials, third-generation

steels do not require a special forming process, such as hot

stamping, and are able be cold-formed like mild steel, thus

using much of the existing steel-based infrastructure in

the industry. Third-generation steels are currently under

development, but could be used in vehicles in the near future.

These third-generation steels are seen as a threat to other

lightweight materials, such as aluminum, due to tl1eir potential

to prmide lightweighting with very little cost penalty.

Alumi -Manufacturers and material providers are also

new alloys and joining technologies to increase the

· urn in vehicles. Replacing steel with aluminum

_ reduce vehicle weight by 35-45 percent. Aluminum

ominant material in powertrain, heat exchangers,

ee . It is also an emerging material for vehicle

'enders and roofs) and closures (e.g., hoods, doors,

::ate . In 2012, 34 percent of hoods on new vehicles

urn, and by 2015 it is expected that 48 percent of

made from aluminum.' In 2012, the average new

vehicle· percent aluminum; aluminum in vehicles is

expected .ncrease to 10.4 percent by 2015.

In Janll<10 201-i, Ford unveiled its 2015 F-150, which is

the first hio- -Yolume aluminum-bodied vehicle to go into

production. The new model is 700 pounds lighter than the

outgoing F-150. Ford is investing $359 million to retool the

Dearborn Rouge River plant body shop, paint hop, and final

assembly to accommodate the change. Following Ford' leari,

other automakers are considering introducing aluminum

bodied vehicles.' According to a recent report from Ducker

40

E' 35 0 c 8 ~ 30 w c -.2 ~ r;; 25 ~~ Cll ._

~ ~ 20

j ~ .... ~ 15 Cll c ..... "' = 10 ... 0 c. ... 0 5 u

0 00 0"\ 0 ..... ,.... ,.... 00 00 0"\ 0"\ 0"\ 0"\ ..... ..... ..... .....

N CV1 '<t L/') <.0 ,.... 00 0"\ 00 00 00 00 00 00 00 00 0"\ 0"\ 0"\ 0"\ 0"\ 0"\ 0"\ 0"\ ..... ..... ..... ..... ..... ..... ..... ..... ..... .....

ADVANCED INDUSTRIES

Worldwide, 18 percent of new vehicles will have all aluminum

bodies by 2025, up from less than 1 percent of new vehicles

today.' In the U.S., high-volume pickup trucks are expected to

lead this transformation to aluminum.

Responding to increased demand for aluminum, suppliers

are working to increase capacity. Alcoa, one of the world's largest

producers of aluminum, is investing $300 million to build a new

production line in Davenport, Iowa, and $275 million to add more

capacity at a plant in Alcoa, Tennessee.' Novelis, another producer

of rolled aluminum, has invested $120 million to add new capacity

at a plant in Oswego, New York Other companies such as

Constellium NY, Aleris Corp., and WJSe Metals Group are looking

into making U.S. investments.

Composites- Composites also have great potential for a

variety of applications, as they can be customized by varying

the mix of polymers and reinforcement fibers to meet the

pecifications of particular components. Advancements in

colo , feel soft skin feel), resistance to ultraviolet rays, and

vroper mana~ement of thermal expansion properties have

for many components both

an ou ide the ,-ehicle (fascias, lids, air foils, knobs, and

36.5

28.3

24.5

20.9

, '<tLI')I.Df'.OO 0"\ 0 ..... N m '<t L/') <.0 ,.... 00 0"\ 0 ..... N CV1 '<t CT\0"\ CT\CT\0"\ 0"\ 0 0 0 0 0 0 0 0 0 0 ..... ..... ..... ..... ..... CT\0"\0"\ CT\CT\ 0"\ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 'C""'f r1 T""'t M M ..... N N N N N N N N N N N N N N N

Model Year

-.-Total Combined CAFE -e-Passenger Car CAFE -...- light Truck CAFE

Source: NHTSA 2014

Corporate Average Fuel Economy Summary by Year, 1978-2013


•

other components). A significant portion of the interior seating

and trim involves plastic, rubber, and composites.

Automakers have examined using composite body panels

in their vehicles and, with its excellent strength-to-weight

ratio, there has been particular interest in using carbon-fiber

reinforced composites in vehicle bodies. Such materials have

already been used in Formula 1 racecars, supercars (e.g.,

Bugatti Veyron), and airplanes (e.g., Boeing 787).

IN ORDER TO HANDLE THE NEW L GHTWEIGHTING MATERIALS.

Carbon fiber-reinforced composites are also used in the

BMW i3, which was released in November 2013, and in the

BMW iS, which was released in June 2014. The raw material

is produced in Japan and sent to SGL Automotive Carbon

Fibers (a joint venture plant owned by BMW and SGL Group)

in Moses Lake, Washington, where it is converted into carbon

fiber strands. The carbon fiber strands are sent to Germany,

where they are woven and processed into automotiYe parts

before being shipped to the BMW factory in Leipzig for

final assembly. In May 2014, SGL Automotive Carbon Fibers

announced that, due to the high automotive demand for carbon

fiber, the Moses Lake plant would undergo a $200 million

expansion, tripling its capacity and making it the largest carbon

fiber plant in the world.•

Fanning, Joining, and Modeling -In addition to the materials

themselves, much of the advancement in the automotive materials

relates to manufacturing and design methods. Some of the

biggest developments in materials technology involve application

technologies such as joining (e.g., resistance spot welding, fasteners,

adhesives, weld bond adhesive, laser welding) and fabrication (hot

forming, thin-wall die casting, composite molds, and aluminum

forming) techniques. Material assessment is also important, and

computer-aided engineering (CAE) is used to model new materials


(e.g., mold flow analysis, formability, and crash simulations).

Economic Development Opportunities Opportunities to attract investment abound in the current

market. To meet fuel economy and GHG emissions regulations,

automakers will continue to change the material makeup of

their products. The inclusion of these materials in vehicles will

require new investments on the assembly line, as automakers

retool and recalibrate their facilities to handle new

materials. Meanwhile, automotive suppliers, in an

attempt to keep up with higher demand from the

automakers, will continue to expand their existing

plants as well as building entirely new facilities,

just as BMW's demand for carbon fiber and Ford's

demand for aluminum have already led to new

investments in U.S. plants supplying those materials.

Though ligh tweighting is creating some new

opportunities in the material supplier space, there

are many more opportunities in the overall material

supply chain. As materials change, all the parts of the supply

chain must also change. For instance, the areas of design

engineering, prototype development, tooling, fabrication, and

joining will see many opportunities as automakers continue

the push for vehicle lightweighting. Economic developers

will continue to focus on assisting existing companies that are

transitioning to work with new materials that require more

complex engineering, enhanced skills, and R&D support. • •

The Center for Automotive Research (CAR) is a nonprofit organization based in Ann Arbor, Michigan, with more than 40 years of experience in leading industry research and events, as well as developing new methodologies, forecasting industry trends, advising on public policy, and sponsoring multi-stakeholder communication forums .

1 NHTSA. (2012). "Corporate Average Fue Economy for MY 2017-MY 202S Passenger Cars and Light Trucks." National Highway Transportat1on Safety Administration, U.S. Depanment of Transportatton. Pages 435-436. August 2012. 2 ALMMII. (2014}. American Lightwetgh Ma:er a is Manufacturing Innovation InStitUte (almmii.org}. 3 DOE. (201 4) "Clean Energy Manufactunng Innovation Institute for Compos1tes Materials and Structures." Advanced Manufactunng C>Rce Energy Efficiency & Renewable Energy, US. Department of Energy. February 25, 2014. 4 Ducker. (2014). "2015 North Amencan L•ght eh•cle Aluminum Content Study. Ducker Worldwide for DriveAiuminum, the Aluminum Associatons Aluminum Transportat1on Group. June 2014. s Priddle, Alisa. (2014). "F-150 Is Catalyst as Alummum Goes Mainstream 1n Auto Industry.· Detroit Free Press. July 13,2014. 6 Ducker. (2014). "2015 North American L•ght eh•cle Aluminum Content Study." Ducker Worldwide for DriveAiuminum, the Aluminum Associ a:. on s Aluminum Transportation Group. June 2014 7 Martell, Allison and Mason, Joseph1ne '201 o! Alcoa and Novel is Steel For Next Test •n Aluminum Auto Race.n Reuters. June 19,2014 8 BMW (2014). "BMW Group and SGL Group to Tnple Production Capacities at Moses Lake Carbon Fiber Plant." BMW Group. May9, 2014.

ADVANCED INDUSTRIES

DIRECT INVESTMENT IN NORTH AMERICA

IS ALLOWING EUROPEAN AUTOMOTIVE

COMPANIES TO DISTINGUISH THEMSELVES

FROM THEIR COMPETITORS.

B Y DAVID LEvERETT, CONSULTANT PARTNER, HMC GLOBAL

The recent resurgence in direct investment in orth America by European automotive manufacturers

is hardly surprising. Continued flat sales projections

and production inflexibility in Europe have forced the

industry outward to livelier markets. China and other large

developing regions are obvious targets given their dramatic

recent economic expansion and continued expectations of

strong increases in transport demand and discretionary

spending. As European automotive brands are well reaarded

in the e markets, they certainly have the potential to

aenerate attractive margins that can no longer be achie\·ed

at home. But these fast-growing, younger markets rin

with them certain risks. Political uncertainty, currency

instability, inconsistent regulatory environments, wear le al

protections, and unreliable distribution infrastructures are

just some of the issues that can quickly turn overseas direct

investment into a loss-making affair.

2014

These risks are particularly acute for the closely

integrated and infrastructure-sensitive production chains

of the European automotiYe industry. Long-term strategic

alliance "ith upplier , an environment supportive of

acti\·e product de,·elopment, and heavy dependence on

a broadly educated and highly engaged workforce are all

defining elements of the European approach to automotive

manufacturing. Duplicating (or even just approximating)

this productive but complex relationship outside of

Europe requires educational, legal, and labor structures

that simply do not exist in many developing markets.

European manufacturers have discovered over the last

few years (often the hard way) that basing production site

decisions primarily on projected host-market growth and/

or low production costs is unlikely to result in creating the

manufacturing environment they require.

Some Options In short, the traditional model of overseas production

siting, based primarily on chasing market growth and/ or

low production costs, has proved too unstable for European

automotive firms defined by their more long-term strengths of

branding and product innovation. Production investments in

high-growth markets with underdeveloped legal and business

A D VAN CED INDUSTRIES I 2014 29

frastructures have all

ax:~ often resulted in grand

::-rofits being marginalized

i:>:· unpredictable "local

Key Attractors for European Automotive FDI in the USA·

years as an important factor

in their production site

selection. The top seven

95% 8"3%...;

75%

results are illustrated in the

accompanying chart c ts of doing business,"

_uch as inconsistently

applied regulations (both

in staffing and trade), lack

of IP protection, restrictive

m-vnership and profit rules,

and insufficient control of

production quality.

Market Tramable Immediate Academ1c Export Forward- Lower

Even just 10 years ago

that list, for most companies,

would have had only two

elements: market potential

and lower cost And thus,

most of the European

automotive firms that

Potential and Vertical and Support Infrastructure Think1ng Costs Adaptive Horizontal System Tax

Workforce Support for R&D Enwonment nfrastructure

Pu1dformostEuropean

manufacturers, retreating back

to solely producing at home

* %based on times included in the top-3 motivat ions for U.S. FDI, as publicly announced by European automotive firms and their representatives (201 0-2013)

chose to develop offshore

production were making

their calculations based on

is simply not an option. Relatively high production costs and

general rigidity in the local manufacturing infrastructure make

it impossible for European-based firms to competitively cater

to the world's demand for their products by export alone. This

condition is further exacerbated by the increased tendency

of many developing countries with high market potential

to actively discourage imports in what they see as critical or

lucrative manufacturing industries.

But in North America, European automotive firms find

a business and legal environment that has maturity and

stability equal to their own, but with greater operational

flexibility and projected market growth. Pu1d the adYanced

infrastructural support in much of 1orth America

encourages many European automoti\'e firms to employ

a more complex mix of tangible and intangible factors

when evaluating potential production sites. Thus, more

value can be placed on production factors that promote

long-term presence, such as the ability to maintain a skilled

and adaptable workforce, access to a modern support and

distribution infrastructure, strong legal protections, R&D

support, a stable political and economic environment, and

responsive capital markets.

A recent report commissioned by HMC Global, a

leading foreign direct investment consultancy, ranked the

key attractors for European automotive firms choosing

to produce in North America. This information is based

on the times each indicator was publicly announced by

manufacturers and their representatives over the last three

30 A D VANC ED INDUSTRIES

similar assumptions and weightings. That is not to claim

that the members of Europe's automotive industry have

operated as a monolithic enti ty, pursuing identical objectives

and utilizing identical methodologies. But, historically,

these firms have faced relatively little latitude in production

mechanisms in their heavily regulated home markets. Pu1d

until recently, overseas production siting decisions by these

firms have been dominated by the rather straightforward

combination of seeking high regional growth and low

production costs. Thus, facing very similar circumstances,

these firms unsurprisingly often pursued very similar paths.

Defining Choices But firms now recognize the importance of these broader

metrics to the success of their overseas productions and are

actively tailoring the mix to better suit tl1eir increasingly

divergent strategies. Where Fiat may place greater value on

buying into traditional U.S. industry infrastructure and local

brands, BMW finds the export links supporting its South

Carolina operations vital to the plant's success and its overall

global strategy. MalUe places a heavy weighting on good access

to a trainable and adapti\'e workforce, while ContiTech's siting

strategy focuses on supporting both its automotive and non

automotive segments. These firms, their objectives, and even

their methods can no longer be painted in a single hue. They

are each distilling the factors that have made their companies

successful and looking for ways to constructively introduce

those elements into their overseas production.

I

MaraOIS desarrolladora

EXICO'S CENTER FOR BUSINESS & INDUSTRY Build to Suit Facilities for Lease or Sale I Land for Sale I Design Build

~ ~~PARaue ~ TECNOINOUBT RIAL

CASTRO DEL RfO Within the past eight years , 57 companies- including more than 45 international firms- have set up shop in CDR, the largest private industrial park in the state of Guanajuato

• Premium utility infrastructure with available, expandable sites

• More than 700,000 people live within a 15-mile radius, providing a young, qualified workforce at a competitive cost

• A public institution CCONALEP) can train technicians on-site

• 17 miles from the GM plant and 21 miles from the VW engines plant in Silao

• 18 miles from the Mazda plant in Salamanca

• 42. 5 miles from the Honda plant in Celaya

• . ', ~ 6 o rs • or1 eas and west coast seaports

a c 9 ~ rs · om he U.S. border

Marao1s aoasolo Located in Abasolo, also in the state of Guanajuato, Marabis Abasolo is only 40 minutes away from CDR, with the same world-class infrastructure that international companies are looking for to run a successful industrial manufacturing operation

Me xican Standard for In d u I t rI a I I' or k s

: www.castrodelrio.com.mx ~ • <

.:~ .. .. ~ . ">' ~ • ~-~- -

And it is the distributed nature of business governance

in North America that is enabling European firms to

create a more tailored fit for their specific production site

requirements. Automotive manufacturing in North America

has now expanded well beyond the traditional bases in the

Midwest states, with Canada, Mexico, and all continental

U.S. regions seeing growth in greenfield investment over

the last few years. Each nation, each state, even each city

or borders. With recent announcements about BMW and

Daimler beginning production in Mexico, soon all European

automakers producing in North America will have major

production sites in at least two of the region's three nations.

Component suppliers are also following the trend.

European automotive firms are openly embracing the

or county can offer different approaches and advantages,

giving interested firms the opportunity to better match a

location to its operating objectives, structure, and practices.

wide range of siting choices available in North America and

carefully building production capability that suits multiple

strategic objectives beyond simply boosting the bottom line.

This approach is doing more than just helping these companies

improve the probability of success in their overseas direct

investments. It is providing them with new opportunities to

fundamentally distinguish themselves from their competitors

-not just at the marketing and branding level, but also at the

very heart of any manufacturing firm, i.e., in production and

development. Firms that have a clear understanding of this

will be well positioned to make the most of the automotive

production environments developing in North America. • •

This process is further advancing in complexity as firms

build broad integrated production networks across multiple

states and nations in the region. They are increasingly

relying on the excellent communications and transport

infrastructures in North America to pick and choose the best

mix of sites for the various elements of the production chain

-while showing less and less regard for distance and/

ALABAMA C3 AIDT The Alabama Robotic Technology Park is Alabama's premier training center tasked with providing highly advanced training specifically for robotics and automation technologies. The RTP consists of three individual training faciltties -each targeted to a specific industry need: The Robotics Maintenance Center, the Advanced Technology Research and De;elopment Center, and the Integration, Entrepreneurial and Paint/Dispense Training Center. Rick Maroney

SPONSORS DIRECTORY

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s 39205

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IOWA ~ Iowa Economic DevelopmentAuthority(IEDA) The Iowa Economic Development Authority (IEDA) is a publicprivate partnership endorsed by the Governor and Iowa legislature. We focus on educating start-up companies and helping existing companies become more innovative while retaining and attracting companies that are creating jobs. Our role is to make Iowa a great place for business. Debi V Durham, Director Iowa Economic Development Authority 200 E. Grand Ave. Des Moines, lA 50309 515-725-3000. 515-725-3010 [email protected]

~ ~

http:/ /www.iowaeconomicdevelopment.com/

KENTUCKY ~ Kentucky Cabinet for Economic Development Kentucky is open for business. Whether your company is looking for an ideal location, competitive utility rates, a highly skilled labor pool, or flexible workforce development programs. Kentucky is the choice for companies to do business. Explore the many advantages of the Commonwealth and you'll find Kentucky will go the extra mile to exceed your needs. Mandy Lambert, Commissioner, Business Development Kentucky Cabinet for Economic Droelopment Old Capital Annex • 300 W. Broadway Frankfort, KY 40601

~i~ a [email protected] • www.ThinkKentucky.com

32 ADVANCEDINDUSTRIES

NORTH CAROLINA 22 ElectriCities of North Carolina, Inc. ElectriCities is a not-for-profit government service organization representing 70+ NC cities and universities that own electric distribution systems. A site selection professional can receive detailed reports from our extensive databases on dozens of NC sites, from mountains to coast within 48 hours of a request. We're your turnkey services partner. Brenda Daniels, Manager, Economic Droelopment ElectriCities of North Carolina, hzc. 1427 Meadow Wood Blvd. Raleigh, NC 27604 1-800-7 68-7 697 ext. 6363 [email protected] • www.electricities.com

7 NCEast Alliance The CEast Alliance is a regional economic development corporation serving approximately one million residents within several small metropolitan and micropolitan areas from the fringe of the Research Triangle to the Atlantic Coast. The Alliance provides community capacity building and provides companies with location and expansion assistance including identification of available sites and buildings. Kathy Howard, Vice President, Client & Workforce Droelopment NCEast Alliance 3802 Hwy. NC 58 N. • Kinston, NC 28504 252-522-2400 • Fax: 252-523-9017 [email protected] • www.nceast.org

[!]~· ~ .. 0

[!] 00'

OHIO 19 JobsOhio Ohio is the only state in the nation now posttioned to capitalize on the economic game-changers that experts say will drive future prospertty in the global marketplace. The catalysts, including shale energy, big data, advanced manufacturing, talent, and infrastructure, are already making a difference for category-leading national and international businesses that now call Ohio home. JobsOhio 614-224-6446 [email protected] www.jobs-ohio.com

OKLAHOMA 15 MidAmerica Industrial Park MidAmerica. Oklahoma's largest industrial park, is located at "America 's Crossroads" and offers a robust infrastructure, shovel-read! s es, exceptional incentives, and three on-site training ce"ters at no cost. Home to E.l. duPont, Siemens, Goog'e and other Fortune 500 companies. Ted A:: .· ... , CEcD, Director of Economic Droelopment MidA ?Irlca Industrial Park P.O. Box 945 • Pryor Creek, OK 74362-0945 918-825-3500 or 888-627-3500 teda [email protected] wvv"rr'w ,..,..a p.com

MEXICO 31 Castro del Rio Technolndustrial Park

~~ ~1.~

To date 57 companies have located in Parque Technolndustrial Cas ro de q o (CDR) in the state of Guanajuato, providing a you g ua 1ty work force with on-site training, a premium

· ':) · "'•astructure, and close proximity to automotive asserrb a d supplier plants. Marabis Abasolo, featuring same qua ltty infrastructure, is only 40 minutes away from CDR. Castro del Rio Teclmolndustrial Park Carretera Federal Km. 125+250 Tramo lrapuato-Silao Rio Danubio No. 845, C.P. 36810 lrapuato, Guanajuato, Mexico 52 462 623 4968 [email protected] www.castrodelrio.com.mx

The Alabama Robotics Technology Park (RTP) The Alabama RTP's mission is to provide a technically trained, highly skilled, and educated workforce for automation and robotics, to assist public and private entities in developing new robotics systems and technologies, and to promote the creation, growth, and expansion of companies through innovative technology

solutions.

The Alabama RTP features industry-specific training in areas like:

Robotic Systems (Material Handling, Weld, Paint/Dispense)

• Advanced Manufacturing Line (?-Robots, 3-PLC's, 4-Visions)

• Overhead Cranes

• Forklift Safety OSHA Classes ( 1 0 hour and 30 hour )

8 70E Arc Flash Safety

AIDT ISO 9001 : 2008

-- - - -

ROBO TICS TECHNOLOGY PARK

ALABAMA I ............

. www.alabamaRTP.org

--1 I

I \ \ ' .......... -

__ -----"["' _------ --7 __

RTP~ ol-\un""'\"" Tanner, "'L \-6-S

Birmi"2"""' \-"10 \

\..()5

--------

---

' ' ' '

There are 4.7 million barrels of Bourbon aging in Kentucky- the largest inventory since the 1980s.

Meaning there are more barrels of Bourbon in Kentucky than people

Kentucky produces enough Post-ite notes in one year to circle the globe over

98 times

It takes about 188 billion peanuts to equal the amount of Jite peanut butter produced

annually in Kentucky

Kentucky produces 38 million pounds of Mini Babybele and Laughing Cowe cheese,

which is equivalent to the weight of 25,333 Holstein cows

Louisville, Kentucky supplies kitchens around the entire world with

Reynolds Wrape aluminum foil

Corning's Kentucky plant developed the process and made the forst run of Corninge

Gorillae Glass, now used n more than 1,000 product models, and more than 1.5 billion devtces worldwide

Kentucky produced over one million cars and light trucks in

2012, more than enough to line up from Seattle, Washington to

Miami, Florida

Kentucky produces enough Dippin' Dotse ice cream annually

to fill nearly five Olympic-size swimming pools

MAKING QUALITY PRODUCTS FOR OVER 200 YEARS

Kentucky's most recent manufacturing GOP growth rate was 10.7 percent,

the third highest in the nation. With growth like that, what better reason IS there to locate or relocate yo

business in Kentucky? We're withm 600 miles of 65 percent of the U.S. population, IT'aking us a logistical cream to

move your products to all corners of the world. Visit ThinkKentucky.com to exptore the mar., options Kentucky ho as for you.

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troan - advanced industries article 10 2014

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