What happens when you manufacture products that the locals
can’t afford to buy? You move to
Georgia.
The announcement last Friday by Caterpillar to move to
Georgia will create 1,400 jobs according to Caterpillar
representatives and invest $200 million to build small tractors and excavators.
Another 2,800 jobs will be created around the country as a result of the new
plant.
Officials with
Caterpillar say the area's close proximity to the Port of Savannah was a key
element in the decision to build the plant in Georgia.
"Forty percent
of everything made here will be exported. So there are great American products
built by Georgia workers and exported around the world," said Caterpillar
CEO Doug Oberhelman and reported by Fox News.
Georgia's Governor
Nathan Deal called the plans to build the plant in the state a "great day
for Georgia." You bet it is, and
the story is bigger than just jobs in Georgia.
We can learn much from a case study in business from a company like
Caterpillar who faces the typical struggles of jobs creation, product life
cycle management, demand fluctuations and the pressure of competing in the
“right” economic environment. After all,
a lot has changed since this company was founded in 1883.
Fast forward to
2012 and blink and you will miss the 129 years of growth, subsistence, struggle
and creative compromise that a true entrepreneurial organization will shoulder
to stay in business. As did many
manufacturing companies, Caterpillar found survival in the downturn of the
1980’s by two methods. First they moved
facilities overseas to take advantage of the stronger US dollar in foreign
countries, and second it increased automation efficiencies which mean that it
needed fewer workers to do the job.
In the early 1990s Caterpillar looked to the
east and south for its future growth. The company strongly supported both the
North American Free Trade Agreement (NAFTA) and the General Agreement on
Tariffs and Trade (GATT), concluding that the elimination of trade barriers
could add sales. Sales growth in Mexico
and outside North America led to ventures in Japan, Russia, China and
Vietnam. Ongoing UAW contract battles
led Caterpillar to shift manufacturing to right to work states and foreign
countries.
The cycle of purchase power is now coming full circle it seems. With the continuing economic downturn,
companies are realizing that if they manufacture overseas, then the people here
at home who are unemployed because they lost their job to an overseas
initiative, can’t afford to buy the product.
Several government initiatives may be needed to make the “purchase
power” part of this picture whole though.
Yes we need tax reform. Yes we
need a pro-business environment. But
what we really need is an educated worker to do the job.
As we have written here before, the manufacturing worker today is very
different than that of 50 years ago.
Often in a white coat and not just a hard hat, these workers need strong
high school educations where graduation is expected. Caterpillar is not new to this dance and the
company expects an educated worker.
In 1968,
Caterpillar was early to enlist in a government-sponsored program to hire and
train people considered to be unemployable. This program was directed to
persons who had been out of work for extended periods. The hirees would work
half of the day at entry-level positions and spend the other half of the day
learning job skills for better-paying jobs.
According to Fox News, Georgia was among a number of states competing for the new
plant. Ground breaking is expected to take place in 2012. Production is slated
to begin late in 2013. Officials say the state granted about $45 million in
incentives to close the deal.
Companies like
Caterpillar are looking for logistics, workforce, speed and efficiency. North Carolina was a hot contender for the
Caterpillar deal according to Jim
Bradshaw, the Executive Director of the Brunswick County Economic Development
Commission, but they lost due to logistics.
A 50 foot channel is needed for their shipping needs, and the current 42
feet channel at the Port of Wilmington is not adequate. Our own Mobile Bay can have a depth of 75
feet, but on average is 12 feet, according to the World Atlas.
Alabama was a
contender for Caterpillar in 2010 as reported by Al.com, but we still had some
work to do at that time to attract business.
Work continues, and as late as last Thursday, the House of Representatives passed a key job-growth bill known as House
Bill 159. House members passed a
constitutional amendment that allows voters to give the Governor and the
Alabama Development Office the authority to offer incentives like those used on
the Mercedes project to recruit new industry to Alabama and prevent existing
industry from leaving the state.
According to Representative Barry Mask and reported by Stephen Crews in DothanFirst,
“We're trying to give our
state and local economic developers more tools to help grow existing businesses
and land new industry, both of which result in more jobs for Alabamians."
Mask continued, "I was pleased to work with colleagues from both parties
to make this bill better so that voters can be confident in the plan we put
before them." Opposition came from
the Alabama Education Association and the Alabama Democratic Party.
Crews also
reported that Speaker Hubbard said, "It's hard to believe anyone would be
against bi-partisan efforts to boost job growth". "When the economy grows, our education budget
grows, and we have more funds to put toward schools. More jobs and more money
for education means everybody wins. Most importantly, the people win over the
special interests."
This
constitutional amendment and enabling legislation will now move to the
Senate. A list of Alabama State
Incentives for Business may be found at businessfacilities.com. Let’s
just get it done.
Wonder what Neal Wade would have to say about this?
ReplyDeleteGood question. The port depth would be a consideration, but what about the other competitive opportunities?
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