What Are Your Prospects for an Industrial Coup?

Insights from a top site selection expert include: Foreign direct investment in the U.S. is hot. Time frames are shorter than ever. Small towns can land spinoffs from big cities. Opioid addiction downgrades Alabama's workforce.

Site selection specialist Didi Caldwell

Business Alabama spoke with site selection specialist Didi Caldwell to get her take on industrial siting trends and what economic development agencies can do in response.

Caldwell is founding principal of Global Location Strategies and is chair of the board of directors of the Site Selectors Guild. Global Location Strategies, based in Greenville, South Carolina, began as a division of international contractor Fluor (previously Fluor Daniel) and was a consultant to Mercedes-Benz when it chose Alabama as home for its U.S. headquarters.

In late January, Caldwell spoke at the Economic Development Association of Alabama Winter Conference in Birmingham, and returned on Feb. 19 to speak in Montgomery at an Alabama Municipal Electric Authority economic development roundtable event.

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What are some of the most important trends you see in industrial site selection?

One trend is that time frames have been compressed. You have to be aware of the importance of having all of the information available when site selectors come calling, and having the sites and the workforce ready. It’s not just the location decision that has been compressed, but also the time it takes to get a project up and running. Site selectors are looking to have all of the permitting processes completed and the sites acquired, and for that to be ready when they come calling.

Another trend is that activity level is high, particularly with foreign direct investment. We specialize in energy-intensive and capital-intensive industrial projects, and we see companies attracted to the relatively low cost of energy in the U.S. versus the rest of the world. In addition to the opportunity to grow market share, the U.S. has a good regulatory market, and the recently lowered corporate income tax rate doesn’t hurt either. It just heightens interest.

How does this heightened activity compare to the period of manufacturing decline in the U.S.?

I would say that the types of industry that we lost during the most recent recession were things that entailed a relatively low level of automation. They were labor intensive, and those activities went to Mexico and China and other low-cost locations. I don’t see those types of projects returning. Many of the projects that we are seeing now are more automated, and it makes sense to locate them near the raw materials. The labor component is less significant.

Today, there are companies making tee shirts in Arkansas with low labor input and a lot of automation. The type of jobs that come with these automated industries are skilled and higher paying. The jobs that have been retained, and that will be created in the future, are much higher skilled and higher paying.

The other thing influencing FDI in the U.S. is a flight to safety. With the current political climate around the world, with uncertainty in Europe and in oil markets, military conflicts, trade and terrorist risks and even natural disasters interrupting long supply chains, the U.S. is seen as a really safe place to do business.

You talked about the labor force participation rate as being increasingly important, more important than the unemployment rate. How can a community assess that?

You can have very large swings in labor force participation. Alabama has the 3rd lowest labor participation rate in the U.S., probably because of a combination of things, but one thing we are seeing nationwide is the effect of opioids on labor force participation. There is a Brookings Institute study that I used in my presentation yesterday that illustrates opioid addiction across the country. The study clearly shows that this rampant crisis of substance abuse impacts Alabama.

Another thing that affects labor force participation is having to take care of children and elderly family members. Some communities have factors that are particular to them, places like Florida that have a high percentage of retirees, or university towns that have a lot of students.

Besides client companies, do you also work as a consultant for economic development agencies?

We work with both the industries and the economic development agencies. They have different interests, but they usually meet in the middle. For many of the companies we work for, Alabama may not be on their radar screens. A lot of overseas companies are not aware of U.S. geography, so you want to be sure that you get on their radar screen. You have to be very targeted in your marketing approach; define what your sweet spot is, what infrastructure and utilities you have, and your workforce attributes so that you can narrow down what kinds of prospects you go after.

We often see communities that target a particular industry, such as automotive. My question is what subsector of automotive is your target — the OEMs, or are you thinking about plastic injection molding, aluminum fabrication, wiring harnesses, or navigation equipment? Out of that whole spectrum, you might be good at certain things. Build a business case around that niche and build your site selection package around those things. Also, think about who your resellers are. Your megaphone is only so big, but if you work at the regional and the state level, you have a larger voice, and you can better spread the word about what you have to offer.

I do think that communities can be selective about the kinds of industry they target, but they also have to be realistic about what they can expect. We work with a lot of biotech companies, but there are only so many places in the country that are suited to biotechnology. For most communities in Idaho or Tennessee or Utah, it’s just not going to happen. They have to look for other targets of opportunity, and they have to evaluate them by their own merits — what is the tax base, the types of jobs that will be created, the number of jobs and the environmental impacts, and then do the cost-benefit analysis.

Are incentives an important part of recruiting industry?

I think that incentives usually don’t move the needle until the site selection comes down to the final two or three locations; when the competition is so close the incentives may tip the scale. Generally, they only make a good location better. Industries are not looking to take a scorched earth policy. They just want to have the feeling that they got a good deal; that the community is working with them. Likewise, the communities are looking at the return they’re getting. Almost always, the cost-benefit analysis is a win for the community.

Is Alabama getting its story out there?

The state of Alabama does a good job of presenting the state, getting on the radar screens of overseas companies. We see them at the annual SelectUSA Investment Summit in Washington D.C., hosted by the Department of Commerce. Alabama is always there, talking about the value proposition that Alabama has, and the state has project managers and offices and efforts overseas, especially in Japan, where they take an active role. Also, Alabama has name recognition to build upon. There is a popular song with Alabama in the song title, which is something that Iowa doesn’t have. I encourage prospects to build upon recognizable attributes like that. That’s half the battle.

Have you worked with companies that have located in Alabama?

Yes, we have been involved with many projects that have chosen sites in Alabama. My predecessor who hired me, Bill Dorsey, was a part of the Mercedes-Benz siting. More recently we were involved with Hexcel’s expansion in Decatur. We were involved with the Brose North America location in Tuscaloosa, and every year we have several projects that have us looking at Alabama.

Is the U.S. steel industry having a comeback owing to recent tariffs?

We see a lot more investments in arc furnaces rather than in blast furnaces, but these decisions are not based on temporary trade policies. They have been planned for upwards of a decade, but certainly, some companies are in a position to take advantage of some of the current tariff situation.

What can rural areas do to be more competitive?

Yesterday I spoke with the Alabama Municipal Electric Authority about strategies for rural areas. In the big centers like the (San Francisco) Bay Area and Atlanta, the costs have become such that the smaller companies looking for tech talent are getting crowded out. High prices for such things as warehousing and distribution have them looking to more rural areas where there is more availability of land, it’s less expensive to live and work, and there is less of a NIMBI (not in my back yard) attitude. They are still looking for a place that has a nice quality of life, and if a small town can focus on community building — as with the Main Street program in Alabama — and develop a downtown and a sense of community, they will be able to attract the workforce talent needed by these companies. So, there has been a bit of a paradigm shift. They are not taking incentives off the table, but these smaller communities are now developing programs to attract talent— student loan repayment, cash-back down payment on homes and nonfinancial incentives that are nonetheless welcoming mechanisms. It’s a shift to investing in ways to attract talent. Alabama is doing some cool things in this regard with its Opportunity Zones.

Caldwell was interviewed by Chris McFadyen, editor of Business Alabama.

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