CLARKSVILLE, Tenn — Brandon Hamilton knew his future didn’t include a four-year degree.
He didn’t care for English, math or even social studies. What he genuinely enjoyed was working with his hands. Hamilton had the support of his mother and father to forgo the classic four-year college route and instead pursue a two-year technical degree. But others weren’t as keen on the idea.
“I did get blowback from other family members because they had corporate jobs: ‘Hey, you need to go to college; you need to get a four-year degree,’” said the 31-year-old Clarksville resident. “But I knew that wasn’t where my heart was.”
The stigma of dirty, hot and dangerous factories has plagued the U.S. manufacturing industry for decades. The reputation — at one time very deserved — persists today even though new plants advanced to the point where automation helped eliminate hazardous, monotonous jobs.
Hamilton works for Hankook Tire, which opened its first U.S. manufacturing facility two years ago in Clarksville, an hour northwest of Nashville.
The factory is nothing like manufacturing plants of 30 years, 20 years or even a decade ago.
Work areas are spotless. Employees walk alongside autonomous vehicles gliding across the floor ferrying materials and freeing up employees to focus on more important tasks. Machinery and automation processes are so sophisticated the company prohibits outside photography in an effort to guard its tire-making intellectual property.
“Most people think of the industrial revolution and people dying and hard hats, and it’s not like that,” Hamilton said of working in a manufacturing plant. “It’s amazing to be able to work at a plant that’s so automated.”
Also amazing: Texas wasn’t a finalist for Hankook’s new plant and approximately 1,000 jobs. Its new $800 million facility both represents what experts call the fourth evolution of manufacturing and a geographical shift.
For decades, manufacturing plants migrated from the Rust Belt to the Cotton Belt as companies sought business-friendly governments and weaker unions.
The shift intensified this century. Southeast states and communities started targeting advanced manufacturing jobs which provide one of the few opportunities for people without a traditional college education to pursue a vocation rife with career ladders. Plus, a manufacturing plant acts as an economic development magnet, often attracting more jobs to the area.
True to the trend, Hankook executives said the three other finalists were sites in Alabama, South Carolina and Georgia.
Manufacturing is a fundamental part of the Texas economy. The Lone Star State is home to the second-most manufacturers in the United States behind California — and has the type of measurables manufacturers prioritize when examining sites for prospective projects.
Manufacturing in Texas has performed well since the recession, especially since the rebound of the oil market.
On its own, Texas manufacturing produced the equivalent of $230 billion worth of GDP in 2018. That means the manufacturing industry in Texas is about a fifth of the size of Mexico’s entire economy. Dallas-Fort Worth’s manufacturing industry accounts for 30 percent of the state’s total manufacturing GDP.
When Texas goes after prospective business in earnest, it usually wins. There’s good reason in the 13 years CNBC has conducted its “Best States to Do Business” rankings, Texas has never finished outside the Top 5.
A prime example is the JSW Steel expansion in Baytown which broke ground in October 2018. The project has plans to hire 500 additional people and invest up to $500 million in what is a major win for the community which sits east of Houston.
“This investment is a direct result of my visit to JSW Group’s Global Headquarters in Mumbai earlier in 2018,” Governor Greg Abbott said in response to written questions from the Dallas Business Journal for this story.
But despite those impressive numbers, when comparing Texas to other states, particularly those in the Southeast over the past decade, a question remains:
With all of its built-in geographic and regulatory advantages, why aren’t even more manufacturers – with their good-paying jobs – choosing Texas?
The orbit of the supply chain
General Motors’ largest North American facility in Spring Hill, Tenn., is home to an industrial orchestra.
Throughout the colossal factory, the noise of 3,700 people building the GMC Acadia and Cadillac XT5 and XT6 fills the ears. Tools buzz. Robots clank and clatter. Songs like The Addams Family theme and The Victors, the University of Michigan’s fight song, play over loudspeakers, signaling an employee requested attention from a supervisor. Each area has its own tune as a differentiator.
The plant’s payroll reached nearly $300 million last year, but its importance to the community extends far beyond the employees working under its roof, which sits 45 minutes south of Nashville.
An original equipment manufacturer is a facility where components made by suppliers are brought together for final assembly. When a big OEM locates to an area, it acts as a catalyst for economic development.
“As the automotive industry has migrated to this area, suppliers have migrated to this area,” said Joe Yuhasz, Material & Production Control manager for the Spring Hill plant.
Suppliers want to be close to their customer, the OEM, to cut down on shipping costs, so they often end up locating nearby.
Sometimes the suppliers of those suppliers do the same thing. The automotive industry has one of the most complex supply chains of any consumer product, so this structure can run three or four layers deep.
In North Texas, the GM plant in Arlington acted as a magnet two years ago when plans were announced to set up a supplier park next to plant.
The move resulted in 1,250 automotive jobs located next to the GM facility that pumps out full-size sport utility vehicles like the Cadillac Escalade and Chevy Suburban. A GM executive said the company has saved $1 billion in logistics costs through the use of supplier parks around their largest production facilities.
Over the past several decades, the Southeast became a rival to the Midwest in the automotive industry as many international automakers looking to expand in the U.S. chose to locate in the Sun Belt. That’s created a community of automobile OEMs and suppliers that’s growing every year.
For example, Tennessee has about 1,000 automobile companies in the form of OEMs or Tier 1, 2 and 3 suppliers, said Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development. Three of the large OEMs in the state that employ thousands of people and support thousands more are Volkswagen in Chattanooga, Nissan outside Nashville and General Motors in Spring Hill.
Rolfe understands the importance of attracting OEMs to the Volunteer State. One of the questions his team considers when courting companies is the impact it’ll have on the region as a whole.
“The question is: ‘What is the multiplier?’” Rolfe said. “In some industries, it’s one and a half times. For every job created at the manufacturing plant, you can quickly see where three, four or five additional jobs are created as a byproduct to support the ecosystem of the OEM.”
Some jobs matter more
Within manufacturing, production of some products is more beneficial than others.
Durable manufacturing refers to the production of goods used for multiple years, like automobiles, planes and furniture. Nondurable manufacturing refers to products with shorter lifespans like food, lightbulbs and paper products.
For every 100 durable manufacturing jobs, another 744 indirect jobs are supported, according to the Economic Policy Institute. One hundred nondurable manufacturing jobs correlates to 514 indirect jobs, the think-tank says.
Whereas 100 jobs in other industries, such as finance and health care, correlate to 364 and 206 indirect jobs, respectively.
An example of this played out in North Texas when Boeing won a $9.2 billion contract to build trainer jets for the U.S. Air Force in 2018. Final assembly of the jets will occur in St. Louis. But a key Tier 1 supplier, Triumph Group, and Dallas-Fort Worth as a whole stands to benefit.
Triumph was chosen to construct key components for the jet in its Red Oak plant about 20 minutes south of Dallas. Triumph said Boeing winning the contract equated to 950 jobs added in its plant or separately by its suppliers, with the majority of those jobs sitting in DFW.
Triumph has dozens of production facilities across the nation, so why did it choose North Texas?
Red Oak is one of the newest aerospace manufacturing plants in the country, with construction completed in 2013. The community invested in the plant, and was therefore set up for this opportunity. The hundreds of extra jobs most likely wouldn’t have come to North Texas if Triumph was still in its old facility.
“This operation, it used to be based on Jefferson Street in Dallas and we built the new facility about five years ago to reduce cost and take advantage of the latest automation,” said CEO Dan Crowley at the time Red Oak was chosen to supply the parts. “That investment gave us the foundation.”
North Texas is home to a bevy of high-tech manufacturers and serves as a hub for defense contractors.
About 289,000 people work in DFW’s manufacturing sector producing some of the most recognizable products Americans buy. Thousands of North Texans make locomotives at the Wabtec plant in Fort Worth, beauty products at Mary Kay’s new $100 million Lewisville facility and eyeglass lenses at Essilor of America in Dallas.
The largest sector of the area’s manufacturing industry is aerospace and defense. The technology being worked on locally is some of the most advanced in the world, and rivals other defense hubs around the country such as Washington, D.C., and Southern California in terms of sophistication of products and available jobs.
Lockheed Martin employs 16,400 people in Fort Worth to build the F-35 Lightning II fighter jet, the most expensive weapons system ever developed, and 3,500 additional people at its Missiles and Fire Control business headquartered in Grand Prairie.
The 7,800 Raytheon employees in McKinney and Richardson make products like sophisticated sensors outfitted on aircraft. The company recently announced plans for a high-tech McKinney factory that will employ 500 people.
And the bulk of L3Harris’ 8,000 North Texas employees work on highly classified aerospace programs in its Greenville facility an hour northeast of Dallas.
“I think DFW is one of the biggest defense hubs,” said Raanan Horowitz, president and CEO of defense contractor Elbit Systems of America, which employs nearly 700 people at its Fort Worth headquarters.
Elbit is a supplier to many of the large defense contractors — it helps make the helmet for F-35 pilots, for example — and also acts as a prime contractor for the U.S. government for products used to monitor the U.S.-Mexico border.
“People don’t realize it, but this is actually where you have some of the largest names in Lockheed, Raytheon, Bell, L3. You have significant presence here,” Horowitz added.
Waning importance in DFW and Texas?
The North Texas economy is growing like few others in the country, but its manufacturing industry is at risk of being left in the dust.
Dallas-Fort Worth’s GDP grew 28 percent over a five-year timeframe while DFW manufacturing grew at half that rate.
When asked if he thinks that’s reason for concern, Mike Rosa, senior vice president of Economic Development for the Dallas Regional Chamber, instead pointed to other aspects of the area’s economy that have boomed recently: the service sector, finance and corporate relocations that account for the dominant portion of growth in the area.
“I feel very good about manufacturing in this region and in the state of Texas going forward,” Rosa said.
He said between eight and 10 companies are considering DFW for a manufacturing project at any given time.
On a single particular day in May, for example, the DRC said nine prospective manufacturing projects were considering North Texas, each with an average job count of 400. Three were projects that would bring fewer than 100 jobs, four between 100 and 1,000, and two over 1,000 jobs.
In the last few years, the DRC said it helped bring Vistaprint to southern Dallas, Louis Vuitton to Keene, and Golden State Foods to Burleson. Those three projects resulted in 600, 500 and 150 jobs, respectively.
Others aren’t as confident as Rosa that North Texas — and the rest of the state — is doing all it can to recruit high-tech manufacturers to select the region.
Ball State University has been grading states on metrics that underlie manufacturing success since 2008. In the university’s most recent report card, Texas received a “C.”
Some of the metrics which dragged down Texas’ score were tax climate and human capital, which both received a “D+.”
“The area that I think really ought to worry most Texas residents is human capital,” said Mike Hicks, professor of economics and the director of the Center for Business and Economic Research at Ball State University. “You just don’t have the labor force readiness that you need to make big expansion into advanced manufacturing.”
Regarding taxes, one change the aerospace industry in particular wants to see is the state’s franchise tax become similar to the Federal Acquisition Regulation.
Because of that difference, Texas is missing out on an additional $4 billion a year in economic activity, according to a study from TXP, Inc. Of all the Texas markets, Dallas-Fort Worth has arguably the highest exposure to aerospace and defense.
“This small, but meaningful change to our tax code will drive big results for our industry and for Texas,” Tay Fitzgerald, vice president of Operations at Raytheon Space and Airborne Systems, a business unit based in McKinney, told the Business Journal earlier this year. “Aligning the franchise tax to the FAR levels the playing field, makes us more competitive, helps create more jobs and in turn provides more revenue to the state. It’s a win-win.”
Cozy relationship with oil and gas
While DFW manufacturing is growing at only half the rate of the region as a whole, it’s faring much better compared to the rest of the state. North Texas is one of the more diversified economies in Texas, while other areas are overly dependent on one industry.
From 2013 to 2018, Texas manufacturing GDP grew merely 2.8 percent. That ranked second-to-last in the country, according to data from the Bureau of Economic Analysis. Only Connecticut’s manufacturing sector, which is basically nonexistent, grew at a lower rate.
The reason why Texas manufacturing has been so up and down in the past is because of its dependence on perhaps the single most volatile industry – oil and gas.
“The manufacturing industry in Texas produces a lot of equipment for the oil and gas sector,” said Keith Phillips, assistant vice president and senior economist for the Federal Reserve Bank of Dallas. “When the energy sector goes down, that has quite a negative effect on Texas.”
Since the mid-2000s fracking boom, the connection between Texas manufacturing and oil has only deepened. This decade, the Permian Basin in West Texas has once again become a major actor on the global stage.
Oil prices started to plunge in 2015 when the Organization of the Petroleum Exporting Countries flooded the market with foreign oil in attempt to kill off emerging regions like the Permian Basin.
As the oil industry suffered in Texas, it dragged down the manufacturing sector.
But the energy market swoon doesn’t account for all of the lackluster performance in Texas manufacturing over the past decade. The U.S. Bureau of Economic Analysis divides manufacturing into different sub-sectors when breaking down a state’s GDP.
Take two oil and gas-dependent sectors — chemical and petroleum — out of the equation and Texas’ manufacturing GDP is up 13 percent over a five-year time period.
In the same timeframe, states in the Southeast have seen their respective manufacturing GDPs increase 19 percent.
If Texas was growing at the rate of the Southeastern states, even with petroleum and chemical taken out, the Lone Star State’s manufacturing GDP would be $7 billion higher, a substantial economic impact even for a giant such as Texas.
The state’s reliance on oil and gas can be a boom when times are good. The oil market’s rebound has resulted in a manufacturing employment spike in Texas during the last 12 months.
“I’m proud that Texas gained significantly more manufacturing jobs over the year than any other state,” said Gov. Abbott.
Texas manufacturing employment rose from 879,900 in June 2018 to 906,500 a year later. The 3.0 percent growth rate is indeed robust.
Among the Southeast states, only South Carolina eclipsed that rate. Its manufacturing employment increased by 3.1 percent. The Southeast as a whole averaged 1.1 percent growth.
Taking a step back however, it’s clear Texas has been playing catch-up since the oil market took a nosedive a few years ago. Since January 2015, Texas manufacturing employment increased just 0.7 percent, much lower than the 6.9 percent Southeast average.
And since the economy started to recover from the recession, Texas manufacturing employment has grown 11.3 percent, compared to the Southeast average of 15.8 percent.
If Texas had grown at a level consistent with the Southeast since the recession — even taking petroleum and chemical out of the equation — Texas would have 36,500 more manufacturing jobs than it has today. That number is akin to nine GM Arlington Assembly plants.
‘We’re not going to be killing chickens’
The Golden Triangle in Mississippi and Huntsville, Alabama are separated by just a three-hour drive on winding pockmarked roads with spotty cell service through forests of loblolly pines, tulip poplars and shagbark hickory trees. But the regions differ starkly.
The Golden Triangle is a rural, industrial area in East Mississippi that fell on hard times when low-skilled manufacturing jobs migrated out of America or were replaced by robots.
Huntsville has one of the highest-skilled workforces in the nation dating back to World War II, but realized it needed to diversify away from the federal government.
Even given their differences, leaders in both areas agree on an essential building block for their communities — advanced manufacturing. The Golden Triangle sees advanced manufacturing as what to build its economy around going forward, while Huntsville’s solid and growing footing in the sector is now letting them chase high-tech jobs.
Joe Max Higgins, Jr., CEO of the Golden Triangle Development LINK, is tasked with bringing companies to one of the poorest regions in one of the poorest states in America.
The Golden Triangle’s boundaries are West Point in the north, Columbus in the east and Starkville —home of Mississippi State University — in the west.
The area became industrialized in the 1950s as manufacturers sought cheap labor and weak unions. As those jobs vanished, the area was in desperate need of revitalization.
The LINK was formed in 2003 and decided the Golden Triangle was done chasing minimum wage positions that had left them in its precarious situation.
The Golden Triangle wanted high-paying, advanced manufacturing jobs to reverse the outbound flow of residents affecting it and other rural communities across the country. With better jobs available in the region, the hope is people would stay and not leave for bigger metro areas with better employment opportunities.
“We won’t create a job for a job’s sake,” Higgins said. “That’s a goddamn recipe for disaster, especially in a rural place.”
The area needed momentum, and got that when Airbus Helicopters, which has its headquarters in Grand Prairie, decided to build a production facility in Columbus.
“That was a signature win for us because up until that time, you could have classified us as a widget-and-squidget-, cut-and-sow-, clip-and-snip-type community,” Higgins said. “Low-skill, high-volume type of work.”
The community has the benefit of being located in the Tennessee Valley Authority’s coverage area. TVA is a nearly 90-year-old organization that sells electricity to businesses and local power companies.
TVA’s Megasite Program certifies plots of land in its coverage area to be used by large-scale manufacturers. A site must have at least 1,000 acres, interstate access, potential for rail service and enough power to support a large manufacturing facility to earn certification from TVA as a megasite, according to the Alabama Department of Commerce.
A plot of land already certified by TVA as a megasite has a leg up on competition as speed to market is becoming a more important variable when manufacturers consider potential sites. Having power hookups already on site means the plant can be built faster and cheaper.
The Golden Triangle received megasite certification for a plot of land that would become a Severstal steel mill. The mill traded hands in 2014 for $1.6 billion and is now a Steel Dynamics facility. Average salary at the mill is north of $100,000, Higgins said.
The community has seen other companies choose the area to be closer to the mill, an essential building block for so many industrial products.
Other Golden Triangle wins included PACCAR, which builds engines, Aurora, a Boeing subsidiary that makes unmanned autonomous vehicles, and Yokohama, an automotive tire manufacturer.
Now, Higgins can be more discerning, like when Peco Foods, a poultry company, wanted to put a chicken processing plant in the Golden Triangle. Higgins’ answer was an emphatic “no.”
“We’re past that,” Higgins said. “You want to do that, go to some other place. We make UAVs, we make steel, we make engines, we make automotive tires. We’re not going to be killing chickens.”
Higgins learned they wouldn’t actually kill chickens in the facility. The company would process the meat into nuggets, bread them and ship them out to restaurants.
Then he asked the most important question: How much do you pay? Wages start between $15 and $17 an hour plus benefits, which comes out to between $31,000 and $35,000 a year.
The average per capita income in that area near downtown West Point is $18,000, Higgins said. The facility will eventually employ up to 300 people.
Advanced manufacturing requires skilled labor and because the Golden Triangle is a rural area, community leadership is worried about whether there will be enough qualified talent to fill the jobs coming into the community. LINK leadership identified six years ago it needed to focus on workforce development.
Every state needs a workforce pipeline, and one of the best ways to establish a strong one is through community colleges and trade schools. This is one area where Texas is lacking.
“Texas has not been particularly known as having a strong vocational training in the community college system,” said Dean Barber of Barber Business Associates, which advises communities on economic development strategies. “I’m sure there are strides being made in individual communities, but I’ve been in communities in Texas, especially in rural Texas, where the only thing they’re teaching is cosmetology.”
The Golden Triangle scrounged together federal, state and local money to build a $42 million training facility called the Communiversity. The facility has 21 training bays where manufacturers can train employees. And it has room to expand as more manufacturers come to the area.
The area understands the need to invest in manufacturing workforce education. If the Golden Triangle can’t get the workforce pipeline necessary to fill these jobs, companies will stop coming.
“Much like all rural communities in the nation, we’re too small to lose people for jobs,” said Macaulay Whitaker, chief operating officer at LINK. “We’re not in danger of that right now, but we can see it in 10 years. We want to make sure we’re making the changes now.”
So, is it working? Is this economic development strategy improving the quality of life in this small East Mississippi region?
Higgins said the general manager of PACCAR told him when they opened the Columbus plant, he sent a steam clean crew to the company parking lot to clean up the oil and transmission fluid from the lot every six weeks. In the years since the opening, people are sporting nicer rides to their PACCAR jobs.
“I’m talking about an old beater car, just baling wire and duct tape holding it together to get to work,” Higgins said. “Everybody doesn’t drive new cars there now, but there ain’t anybody driving junk.”
Not just rockets
Three hours to the northeast, Huntsville has one of the most advanced workforces in the country thanks to its ‘Rocket City’ moniker earned after World War II when the area built rocket propulsion systems for NASA.
The North Alabama city has one of the highest location quotients of architecture and engineering occupations in the nation, according to the U.S. Bureau of Labor Statistics.
Rocket City is a major defense hub, but city leadership realized it needed to diversify away from the federal government. Huntsville is going after the same type of jobs as the Golden Triangle.
“Ten years ago, we made a decision we were going to diversify into advanced manufacturing,” said Tommy Battle, Huntsville mayor. “We were looking very much into how we can get ready for what we saw as the next step.”
Huntsville courted Volkswagen when the German automaker examined sites for a massive manufacturing plant. The city took Volkswagen up in a helicopter to show them a site, but while in the air, a Volkswagen representative pointed to another plot of land they liked better.
Huntsville said they could get roads, sewer and power up and running soon. But in the end, the city came in second to its neighbor up the road, Chattanooga, for the factory.
Huntsville leadership took what Volkswagen said to heart and developed the site anyway. And, it earned the valuable TVA megasite certification.
Having the area ready to go was key when Toyota, which has its North America headquarters in Plano, and Mazda began looking for a place to build a $1.6 billion manufacturing plant where 4,000 people will be employed.
The plant will make 300,000 vehicles a year, split evenly between Toyota and Mazda vehicles. The two Japanese rival automakers partnered on the plant in part to cut costs.
Toyota North America Chief Executive Jim Lentz told Automotive News the $800 million investment Toyota is making in the plant is “a relative bargain,” for the 150,000 vehicles it will produce at the facility.
Georgina Chapman, director of Workforce Development at the Huntsville/Madison County Chamber, is making sure the community is ready for the thousands of jobs coming online in the next couple of years.
It’s easier to fill jobs when an OEM with the name recognition of Toyota or Mazda starts taking applications.
“You can’t even go down the street without someone knowing Toyota-Mazda is hiring,” she said. “People are interested in driving 45 minutes to an hour for these jobs. They will probably get inundated with applications even without the chamber doing our efforts.”
With the number of suppliers relocating to the area or expanding their operations — Toyota has an existing plant in Huntsville, too — the total impact will be closer to 10,000 jobs, Chapman said.
Diversifying its economy is a continual process for Huntsville. Advanced manufacturing has been a critical piece of puzzle, and Battle feels confident the business the city attracted put Huntsville in a good place for the next 5 to 10 years.
Now, city leadership is preparing for what the economy of 2025 and 2030 will demand from local industry. Battle said the city will start chasing technology jobs in artificial intelligence and blockchain verticals.
“Is that autonomous vehicles? Autonomous flying vehicles? You don’t know,” Battle said. “We’re trying to make sure we’re putting in the infrastructure so that we’re ready to jump into the future and ready for the technology of the future that’s coming along.”
What manufacturers want
Texas and the Southeast have a big advantage when courting manufacturers — perhaps the most important advantage — of being right-to-work states.
States with right-to-work laws ensure employees cannot be forced to join a union and required to pay dues as a condition of employment. As a result, states with these laws have a weaker union presence which makes it more enticing for big manufacturers to set up shop because labor costs are lower.
Some large manufacturers call states without right-to-work laws home, like Tesla’s Fremont, Calif., facility and Boeing in Washington, where it employs more than 65,000 people in the state.
Overall, new manufacturing projects are overwhelmingly going to right-to-work states. The difference is evident when considering manufacturing job growth.
Over a five-year time period ending in 2018, manufacturing employment in states without right-to-work laws is up 3.2 percent. In the 27 right-to-work states, it’s up 7.4 percent.
“That’s really where you see all the manufacturing going,” said George Curry, senior vice president at JLL. He pointed to major automobile plants like Toyota in San Antonio, BMW in South Carolina, Volkswagen in Tennessee and Mercedes in Alabama as examples. “All those states have one thing in common: They’re right-to-work.”
The other major factor manufacturers consider is a qualified labor pool. Curry said his team at JLL looks at four factors when scoring an area’s workforce: density within a 30-45-minute drive, amount of semi-to-high skilled people, education infrastructure for employees to attain needed skills, and predicting the cost of each desired position to develop a workforce operating cost model.
Some manufacturers also place emphasis on which other manufacturers already have a presence in the area. The more high-skilled jobs already exist in an area, the higher chance turnover becomes an issue and wages rise.
That problem affects fast-growing metro areas like Dallas-Fort Worth more than rural areas with fewer employment options.
In Texas, the average manufacturing salary was $77,660 in 2018 and $82,449 in the four counties that make up Dallas-Fort Worth.
Those figures are significantly higher than the rest of the country, where the average manufacturing salary across all 50 states is $63,577.
'Workforce engine'
Manufacturers also want to be close to the end user. For example, a high-volume plant like an auto manufacturer ideally wouldn’t be located on the coast or the edge of a mountain range because its delivery radius would be cut down significantly.
That was one of the factors Hankook Tire considered when deciding where to put its first American manufacturing facility. The Clarksville plant opened in 2017, and the company now employs 1,000 people at the factory after completing Phase I of site development.
The plant has capacity to make 15,000 tires a day. More additions will double capacity and the plant will eventually employ 1,800 when the next phase finishes, making it the largest private employer in Montgomery County when Phase II is complete next decade.
After considering sites across the nation, Hankook whittled down the finalists to sites in Clarksville, Tennessee; Macon, Georgia; Montgomery, Alabama; and a site along I-77 in South Carolina near the North Carolina border, said Jay Kim, vice president of Corporate Strategy.
In addition to community enthusiasm about the project – volunteers would drive Hankook executives around the city — the Fort Campbell military base served as a workforce gold mine.
Every month, hundreds of soldiers retire from the base which straddles the Kentucky-Tennessee border, and many enter civilian life. Fort Campbell is one of the largest military bases in the country, along with places like Fort Bragg in North Carolina and Fort Hood in between Waco and Austin.
“They know how an organization works, they know how to follow orders, they know to be there on time – that’s a big asset from a company’s point of view,” Kim said of employees from Fort Campbell.
Jeff Truitt, chief executive of the Clarksville-Montgomery County, Tenn. Economic Development Council, said the community captures about 40 percent of the 380 soldiers exiting every month from the base, up from about 20 percent a few years ago when the community started recruiting military retirees in earnest.
“They buy a higher-than-average-priced house, they pay their taxes on time, they’re 60 percent more likely to be involved in the community,” Truitt said. “When people discuss workforce — because I know it’s an issue facing Georgia and Texas — we have a solution. We have a workforce engine that is cranking out workers.”
Fort Hood, one of the largest military bases in the country and home to 38,000 soldiers, is located two and a half hours down I-35 from North Texas.
Between permanent change of station, expiration time of service and retirement, between 800 and 1,200 soldiers leave the base every month, said Tyler Broadway, Fort Hood spokesperson. Exiting soldiers often choose to stay in Texas.
“The top cities in Texas include Houston, Dallas, San Antonio and Austin,” Broadway said, not offering specific percentages of where exiting soldiers relocate. “Many choose to stay in Central Texas as well.”
Another key variable manufacturers consider is speed to market. Communities that have sites ready to go have a major leg up on the competition, like TVA-certified megasites. If the permitting process runs smoother in a community than others, that’s an added plus.
“Texas fares very well in this category,” said Steve Berger, senior vice president with CBRE’s Industrial Brokerage Group in Dallas. “As a general rule, our communities are welcoming and the permit process is fairly clearly outlined. That is generally true with the states in the Southeast, as well.”
Show me the money
Not just manufacturing companies, but all types of organizations receiving economic incentives receive a lot of attention when deals are first announced. The attention amplifies when something goes wrong.
Amazon retreated from New York City after lawmakers publicly questioned a $1.5 billion incentive package. Major iPhone supplier Foxconn has come under scrutiny for changing the type of product to be made in its Wisconsin plant and hiring people slower than anticipated after receiving a more than $4.5 billion package.
Those in the private and public sectors agree incentives shouldn’t be part of a company’s core fundamentals when choosing sites. If the location doesn’t have the appropriate workforce pipeline, for instance, incentives won’t make up that difference.
It’s only when project sites have been thoroughly vetted that incentives usually enter the conversation, more like the icing on top of a cake.
“But don’t underestimate the importance of having icing on a cake,” Berger said. “If we have two cakes sitting side by side, most people are going to choose the one with icing.”
Looking through incentive data shows what states and local communities prioritize, and each place is different in terms of how aggressively they offer incentives. Good Jobs First is a policy organization that tracks incentives offered by state and local officials.
Since 2007, South Carolina, Alabama, Mississippi, Tennessee, North Carolina and Georgia gave 64 percent of total incentives to manufacturers, according to Good Jobs First. Two states, South Carolina and Alabama, gave more than 85 percent of incentives to manufacturers.
Out of all incentives doled out to Texas companies since 2007, manufacturers received
8 percent.
“If you want to grow the economy, say 3 percent per year, the first place you should look or try to talk about is manufacturing,” said Keith Belton, director of the Manufacturing Policy Initiative in the Paul H. O’Neill School of Public and Environmental Affairs at Indiana University. “Because manufacturing in the U.S. has historically driven, and still does, drive productivity trends.”
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