US-Japan Economic Development Collaboration

Here is a perfect example of how EDO's here can work collaboratively with with counterparts abroad. This particular program relates to Japan. It makes great sense.

Regional areas in Japan are striving to internationalize their economies and thereby stimulate the development of both new and existing industries. At the same time, regional areas around the world are showing increasing initiative in developing business with regions in Japan. In view of such trends, the Japan External Trade Organization (JETRO) launched the Region-to-Region Initiatives program in 1996 to support two-way international regional development. Under the program, JETRO works with the regions to determine their mutual needs and objectives, and then to offer support for existing and new activities, mainly by conducting surveys, dispatching and receiving missions and holding seminars.

These efforts, coordinated through JETRO's extensive network of offices worldwide, can play a crucial role in bringing regions together for investment and technical tie-ups, collaborative research and development, overseas procurement by Japanese firms, and investment in Japan by foreign firms.

Go here to learn more.

Midwest Governors Seek Ways to Increase Economic Clout

Governors of Midwestern states should combine forces, like southern states did in 1971, to spur economic growth and fight the loss of manufacturing jobs, a group of experts recommended yesterday.

A committee, chaired by Gary Thomas, chancellor of the University of Missouri at Rolla, issued the recommendation at a meeting of the Midwestern Governors' Conference in St. Louis. While Thomas acknowledged that conference recommendations often are ignored, he said this suggestion may take root because it's designed to stem the loss of jobs.

The committee recommended the creation of a "Midwestern Growth Policies Board" modeled after a 13-state organization of southern states and Puerto Rico. The board is a nonpartisan public think tank that develops and pushes economic development policies for the southern region. It focuses on research, innovation and technology, globalization and the changing nature of the work force. Thomas said the board had played a role in the prosperity of cities such as Atlanta and Dallas, and the research "triangle park" of North Carolina, formed by Duke University, the University of North Carolina at Chapel Hill and North Carolina State University.

The recommendation will be presented to the Midwestern Governors' Association at its meeting in February in Washington.

Go here to read more.

Latest Word on Business Confidence

Business confidence turned up again as October came to a close. While confidence is still below its late summer high, the 4-week moving average is up some 40% for where it was at the start of the year and more than double where it was at its nadir in the lead up to the Iraq war.

North American businesses have experienced the most substantial recent improvement in confidence. High-tech producers in particular have become more optimistic, with confidence among these companies hitting another record high last week. Sales of IT equipment and software are improving. Manufacturers and transportation companies also remain notably positive. Stronger sales and a weaker U.S. dollar vis-à-vis the euro are lifting spirits. Transportation companies are benefiting from the rebound in manufacturing, which drives the demand for trucking, rail, sea and air freight companies.

Sales and pricing are improving. While weak sales remain businesses primary concern, only one-third now say that this is their biggest problem. Early in their year, well over one-half identified weak sales as their most pressing problem. Pricing concerns have also faded, with less than 30% saying that it is their most significant worry. Regulatory and legal issues are rising as a concern, with some 25% of respondents saying that it is their most significant problem.

Confidence remains weakest in Europe and Latin America. European manufacturers are especially dark, as they are being hit by the appreciating euro. Healthcare companies throughout the world are least positive, as discretionary healthcare spending in North America has softened and the pharmaceutical industry is struggling with a number of key drugs coming off patent. North American real estate companies have become recently less positive as well. This likely reflects somewhat higher interest rates, at least compared to where they were this summer.

Despite the improvement in sales and pricing, businesses remain cautious regarding their hiring. Job growth is vital to the sustainability of the recent economic revival. Without more meaningful job growth, the recent bounce in the economy will fade early next year once the boost provided by massive fiscal and monetary stimulus wanes.

Source: Economy.com

Short-Term Business Investment Outlook

Here is how economists at Economy.com size up business investment prospects in the short-term.

With stronger profits, better balance sheets, and surging demand, history strongly suggests that businesses will soon step-up their activities and a self-reinforcing virtuous economic rebound will assert itself. Real GDP growth is expected to accelerate from nearly 3% this year to close to 4% in 2004. The rise in payrolls will be sufficient to result in a declining jobless rate by this time next year.

There are of course reasons to be concerned that history is not reliable, however. Senior managers have been put through much in the past several years from terrorism, to wars, to corporate scandals. They may lack the confidence necessary to aggressively expand. This caution is evident, for example, in the continued paring of inventories and investment outside of the replacement demand driven IT purchases.

Another impediment may be the growing prevalence of global out-sourcing of U.S.production and jobs. Off-shoring describes the out-sourcing of previously U.S.-based production and jobs to overseas enterprises, whether they are affiliates of U.S.based firms or are other third party firms. The goods and services produced overseas are then imported back into this country. Off-shoring is not new to manufacturing, but it is new to a wide-range of other information and service businesses.



If you subscribe to Economy.com, go here to read more.

More Job Growth

The nation may finally be pulling out of its job funk. The economy added 126,000 jobs in October, more than double the number many economists had predicted, giving hope that the recovery is no longer a jobless one.

The figures from the U.S. Department of Labor released Friday also included revisions to the September and August figures that added another 125,000 jobs to the long-moribund economy.

Economists cautioned that the euphoria should be tempered as long as layoffs continue, jobs move offshore and hourly wages and salaries remain stagnant.

The report also pointed out that the unemployment rate remained virtually unchanged, with 8.8 million people still out of work and 2 million of those out of work for longer than six months, a near record high.

From Phoenix, here is what the region's economic development chief had to say. "We need to get the number to 200,000 jobs a month consistently to really bring down the unemployment rate," said Rick Weddle, president and chief executive officer of the Greater Phoenix Economic Council.

Go here to read more.

IT Employment May Start Growing Again

Here is a summary of a recent analysis of the IT industry by Economy.com.

U.S. information technology employment continues to fall, despite steadily improving demand for IT equipment, software and services. IT job growth is lagging sales because of robust productivity gains, a pronounced shift in IT manufacturing to lower-cost countries, off-shore outsourcing of IT service workers, and an ongoing focus on cost-cutting. Nevertheless, IT production is reaching the point where producers will have to stop cutting jobs, and some industry segments will likely see moderate job growth soon.

After a collapse in 2001, IT spending has staged a moderate and steady rebound (see chart). Businesses have started replacing antiquated computer hardware and updating software as profits have risen and confidence has improved. Consumer electronics spending has also staged a rebound following a decline in 2001. However, mounting IT job losses remain a massive impediment to the labor market and broader economy.

The U.S. has lost roughly one million jobs in IT industries since early 2001, accounting for roughly one-third of total job losses over the period. IT manufacturing jobs represent about half of the lost IT jobs. U.S. IT manufacturing jobs continue to fall for several reasons. First, since the late 1990s, there has been a structural shift in the production of IT hardware to lower-cost countries overseas. The U.S. trade balance in computer equipment has swung from a monthly surplus near $500 million in the mid-1990s to a deficit of almost $1 billion currently.

IT hardware manufacturers have found great cost savings by moving production to Asian countries, primarily China. This trend is also evident in global semiconductor sales data, which are broken out by purchasing region. The share of global chip sales going to the Asia Pacific region has doubled since the mid-1990s, to almost 40%. Alternatively, the share of chip sales going to North and South America has fallen sharply from one-third in 1999 to less than 20%. Chips are inputs into a multitude of electronics products.

Second, the very strong U.S. dollar last year also favored imported IT goods. As such, imports have satisfied a substantial portion of the recent rise in demand for IT hardware. While U.S. demand for IT hardware has climbed since the start of last year, U.S. computer and electronics equipment shipments have only recently been on the rise.

U.S. factories are now clearly benefiting from rising IT demand. Shipments at U.S. computer and electronics manufacturers have climbed for two consecutive quarters on a year-ago basis, after falling for eight consecutive quarters. Gains are stemming primarily from computer equipment and semiconductors. Nevertheless, neither of these industries has started to hire on net since they are managing to increase productivity enormously with their reduced workforces. Economy.com estimates that revenue per production worker hour is increasing at over 30% year over year for computer equipment and semiconductor producers

In conclusion, IT demand is accelerating thanks to strong consumer spending and budding business demand. U.S. IT producers are starting to benefit in the form of higher sales and profits. The factors currently driving business IT spending, namely improving cash flow, replacement demand and tax incentives, will persist in the near term, and expansionary IT spending will soon pick up with economic growth. In aggregate, IT producers will soon have to stop cutting workers to respond to higher demand. Productivity gains and off-shoring will continue to restrict employment growth, but declines in labor should soon subside.

Go here to read more if you subscribe to Economy.com.

NE Ohio Hoover Operations May Head South of the Border

Here is a perfect case study to learn from in terms of how major manufacturing companies are making facility location decisions in today's "dog eat dog" world marketplace. See the non-traditional solution I promise at the end of the article.

One way or the other, the future of Hoover Co. will be decided in the next few weeks. The struggling vacuum maker will either leave Stark County in 2005 or it won't. Company officials say the choice is up to members of International Brotherhood of Electrical Workers Local 1985.

Maytag Corp., which owns Hoover, has Hoover workers over a barrel. After months of sluggish sweeper sales hurting Maytag's bottom line, the parent company is asking for changes in the union contract to help cut costs. The most contentious requests involve health insurance and other benefits.

if you recall, Maytag recently completed a major set of US facility evaluations that concluded that the majority of Maytag's manufacturing operations will be relocated to Mexico over the next 12-18 months.

Maytag wants to require a co-payment for employee health insurance. Union members now receive 100 percent coverage. Employees also may be in for changes in their retirement-benefit plans. Any decision on that would not affect current retirees, Repace said.

On the production side of the contract, Maytag wants to adopt leaner manufacturing techniques and change job-security rules. The latter would let Maytag shuffle the production of certain vacuums among its plants in North Canton, El Paso, Texas, and Juarez, Mexico. That could save a lot of money because manufacturing is far more expensive in the North.

This is a project that will require a full-court press by Stark County and NE Ohio economic development officials. The question is whether anything can prevent Maytag from pulling the plug on the North Canton operations. Efforts in Iowa and illinois were unsuccessful in reversing corporate decisions to close local facilities in those states. My suggestion is to go to Maytag with a North American production and distribution solution that links operations across its various existing and new operating locations to produce an overall competitive advantage that the company cannot achieve by just moving to Mexico.

Go here to read more.

US Foreign Direct Investment Competitiveness: Take a Note

A.T. Kearney recently surveyed business executives and found the U.S. is losing ground to other world locations for new business investments, especially to China. The U.S. remains the second most preferred destination for FDI among respondents globally and the top choice for the leading FDI players - British, Canadian, Dutch, and Swiss investors.

The sharp fall in actual U.S. FDI inflows in 2002 ? roughly 80 percent ? was mostly the result of a global decline in M&A activity, suffering from deflated equity valuations and higher CEO risk aversion. Looking ahead, investors said the most important factor impacting U.S. attractiveness will be economic recovery ? with 93 percent indicating that U.S. economic growth, or lack thereof, will impact their outlook on the U.S. market.

Aside from the economy, investors viewed depreciation of the dollar as the most critical factor impacting U.S. attractiveness. Global investors have become accustomed to a steady, strong dollar over the last decade. Dollar fluctuations, coupled with a ballooning U.S. deficit increasingly financed by more volatile portfolio flows, have heightened investor concern about currency risk. About 14 percent of the global executives surveyed cited the U.S. deficit as likely to influence investor confidence in the U.S.

Future U.S. FDI attractiveness could be eroded by an ongoing war on terror, the A.T. Kearney study found. More than a third of global investors indicated that domestic security and terrorism is likely to influence the attractiveness of the U.S., more than corporate governance issues, corporate restructuring or trade agreements. Respondents believe increased border controls and more stringent visa requirements could undermine commerce, while the rising costs of homeland security are expected to push the U.S. fiscal position further into the red. Moreover, 14 percent of global executives believe a backlash against U.S. foreign policy in the Middle East, which could fuel increased concerns over terrorism, is likely to impact future U.S. FDI potential.

Notwithstanding these concerns, global investors view the open and competitive U.S. market system, flexible labor markets and productivity rates as the most important factors impacting U.S. FDI competitiveness. These positive attributes take greater weight in determining investors' outlook than security, terrorism or corporate governance. The lure of the world's largest market remains strong, according to the study.

What's my take? FDI activity will grow in 2004. Communities should be ready for more inquiries, especially as more foreign companies acquire existing US business operations. This is the time to strengthen your international business marketing efforts.

Download the AT Kearney report here.

Southwest Airlines to Close Little Rock Call Center

Consolidation continues to be the name of the game in the call center industry. SW Airlines announced plans to close its 720-person center in Little Rock, Arkansas, along with two other centers in Dallas and Salt Lake City.

Arkansas officials said they will continue to persuade SW to keep the center open, but had no indication that was possible. SW received a $13 million incentive package when it originally opened the center.

Most importantly, local and state economic development officials had to indication the center would close. Economic development officials were informed at the same time employees were notified by the company the center would close.

This situation points up the need for better intelligence about businesses in the communities. While it certainly is not possible to know in advance when every company is going to open, expand or close, more and more communities are finding themselves caught off guard by these notices. This is a case where it is important to be aware of national and global trends that are likley to impact local operations. In this case, it is well-known that call centers have been contracting since 9/11, especially those operated by the airlines. This argues for better strategic intelligence on business and economic trends impacting local economic development

Go here to read more.

Business Economic Outlook

You may want to review E&Y's October Business Economic Outlook. It provides a good basis for understanding future business investment plans and climate.

Get it here.

Next Step: Transformational Outsourcing

According to E&Y, the past ten years have seen explosive growth in the use of outsourcing. Its role has evolved from traditional outsourcing to deliver little more than modest improvements in costs, service levels and support capabilities to something called "transformational outsourcing".

Transformational outsourcing, as E&Y terms it, aims to deliver tangible results that can be measured in improvements to the share price, market position and return on capital—it also involves extra risk.

It is important to note that transformational outsourcing contracts very often still focus on more visible and readily achievable objectives, such as better reporting and management, stricter procedures around the introduction and management of change and performance improvement, as well as cost control.

According to the models currently available in the market, transformational outsourcing can be achieved by combining a number of key service elements. The outsourcing contract will need to be able to deal with all these service elements. So what are they?

-Management information
-Flexibility
-Speed of change
-Economies of scale and supplier partnerships
-Performance improvement
-Risk/reward share

As ever, where extra rewards and benefits can be found, so lurks extra risk. If you are thinking of entering into this type of arrangement, think hard before you simply reach for a well-worn off-the-shelf, outsourcing precedent. It may well need to be extensively re-thought before it can accurately reflect the risk management needs of this new and more ambitious breed of outsourcing relationship.

Go here to download the report.

E&Y Releases New Entrepreneurial Best Practice Report

Looking for insight to best practices by entrepreneurs? Here is one by E&Y (Ernst and Young) you will want to read.

This survey aims to identify the leading management & business practices of the 24 CEO Entrepreneurs who have been nominated to the Ernst & Young Entrepreneur of The Year® Awards Programme 2003 and Short Listed for Award by an Independent Judging Panel of their Peers. Leading Practices are identified under 4 main headings: marketing; finance management; and planning.

Go here to download the report.

New Outsourcing Study Due in Early 2004

A interesting study of outsourcing by the Industrial Asset Management Council is due soon. This is a report from the companies doing it, which makes it all the more important to read.

Outsourcing plays an important role in the corporate real estate management of IAMC's Active members' companies. Yet, member conversations and anecdotes suggest manufacturing and industrial companies may employ outsourcing differently than service-sector companies. A discussion of the topic at the recent Research Roundtable will provide the framework for a survey in October of how Active members use outsourcing. A report will be issued in early 2004.

Iowa Lands a Big One

Spurred on by $56.5 million in state and local incentives, Wells Fargo is riding into West Des Moines, Iowa, with as many as 5,300 jobs in a $118-million, 900,000-sq.-ft. (81,000-sq.-m.) expansion.

The project is the largest job-generator in Iowa's economic development history, according to state officials. Of the 5,300 jobs that Wells Fargo Home Mortgage and Consumer Credit Group could position in its new two-building complex, 2,000 will be new positions, company officials said. The San Francisco-based unit of Wells Fargo & Co. will transfer as many as 3,300 other existing jobs to the new office facilities.

Even so, central Iowa didn't automatically have the project snugly buttoned in its back pocket. Wells Fargo Mortgage earlier this year made it known that it was considering other states as well, including Arizona, California, Illinois, Minnesota and South Carolina. And incentives were one part of what it was considering, the company said.

Go here to read more.

State Business Climate Rankings Released

Site Selectiion Magazine ranks the states each year with respect to business climate competitiveness. Topping this year's rankings are: NC; MI; TN; OH; and VA.


Source: Site Selection Magazine, Nov. 2003

Which states got the best grades from CEO's?


Source: Site Selection Magazine, Nov. 2003

Go here to read more.

Down-Economy M&A Deals Succeed

A study by the Boston Consulting Groups says that mergers and acquisition (M&A) deals that take place during periods of below-average economic growth have a higher likelihood of success. It is really a quite interesting piece of research, which says that communities should keep an open mind to M&A deals coming their way.

Go here to download the report.

Retail Jobs Slide Due to Productivity Gains

Retail trade may not come immediately to mind when one thinks of innovation, but in fact, the sector has been as quick as any to adopt new technology. This is not because the leaders of retail companies are more visionary than others, but because brutal competition has forced them to adopt or die. The large number of retailers fighting for market share has driven them to find ever-cheaper sources for their goods and try to mark them up slightly less (or down slightly more) than the competition. One need only run through the list of retail companies that have merged, reorganized, and liquidated to appreciate the toughness of the industry. In this struggle to stay alive, retailers have been quick to adapt technology to speed up customer service, reduce inventories, and automate ordering.

As in every industry, however, improving productivity eliminates jobs, unless demand is rising faster than productivity. In volume terms, the retail sector has been doing well. Since early 2001, sales at retail outlets* have increased 13%, but falling prices mean that nominal sales have increased only 8%. With average hourly earnings for retail workers rising 7% over that period, retailers have had a strong incentive to make do with fewer employees. And they have. Since early 2001, the number of retail payroll jobs has fallen by nearly 400,000.

Go here to read more.

Health Care Costs Called "Job Killer"

Employee benefit costs have been rising at a fast pace over the past few years. The rise in benefit costs, coupled with falling inflation, has created a divergence between product prices and total labor compensation.

The growth in compensation is being driven entirely by the rise in healthcare and pension costs. Over the past two years, benefit costs have risen about 5.5% each year, outpacing growth in wages and salaries by nearly 2.5 percentage points.

The problem is particularly pronounced in manufacturing. Total compensation in manufacturing is up about 4.6% over the past year. During this same time, producer prices have been essentially stable (see chart). Although the sector has many other structural problems, rising benefit costs have surely added to the misery.

Informal evidence also suggests that benefit costs have been a major impediment to hiring. Polls of chief executives of major corporations have consistently listed health-insurance costs as the biggest barrier to adding workers. Also, according to a recent survey conducted by the Michigan Manufacturers’ Association, two out of five manufacturers in Michigan have laid-off workers or scaled back hiring due to rising healthcare costs.

Small businesses have been particularly hard-hit. Healthcare costs for small businesses have been rising at a faster pace than the national average. According to a survey conducted by Mercer Consulting, soaring worker healthcare costs overtook taxes as the biggest concern for small businesses. This is important because these businesses are also, typically, the first to begin hiring during a labor market upturn. By claiming an increasing share of cash-flow, rising healthcare costs are surely delaying hiring.

Go here to read more if you subscribe to Economy.com.

International Student Enrollments Declining

A new study by the Institite for International Education says the number of foreign students attending U.S. colleges increased by less than 1 percent in 2002-03 -- the lowest growth rate in seven years. It's just the latest piece of evidence that international students are shying away from the United States because of tough immigration rules.

The Institute of International Education said tightened visa procedures enacted after the 2001 terrorist attacks, which have delayed the entry of many foreigners into the United States, contributed to the low growth rate.

Foreign students started experiencing delays entering the country in the wake of the terrorist attacks on Washington and New York, as the federal government responded to calls for tighter domestic security. One of the Sept. 11 hijackers held a student visa.

U.S. schools want foreign students both for the revenue they bring in -- the IIE said international students spend up to $12 billion annually between tuition and other expenses -- and their contributions to academic research.

Go here to download the report or to read more.

Manufacturing Activity Up for October

The nation's manufacturing sector registered its highest level of activity in nearly four years in October, according to an industry report, suggesting that the solid economic growth of the third quarter is continuing in the fourth.

The Institute for Supply Management reported Monday that its manufacturing index rose to 57 last month from 53.7 in September.

It was the fourth consecutive monthly gain and pushed the index to its highest level since January 2000, when it last registered 57. The October reading was well above the 55.5 that analysts had expected.

Still, manufacturing employment continued to be weak, suggesting that factories still haven't absorbed excess capacity to the point where they are comfortable hiring.

The employment index registered 47.7 in October, up from 45.7 in September but still below the 50 that would signify growth. The report said it was the 37th consecutive month that the index reading was below 50.

Go here to read more.

Understanding the Retail-Manufacturing Connection

Retailers are all for producing products in China and elsewhere across the world. Why is that? Because it produces a cost savings for them, which they say benefits consumers. Look at Wal-Mart, which currently accounts for 12 percent of all U.S. imports from China. These imported products are produced in large part by...guess who? How about U.S. manufacturers producing under another name in China?

In a statement submitted today to a House Ways & Means Committee hearing to examine Chinese trade practices, the International Mass Retail Association (IMRA) emphasized the importance of keeping markets free and called on Congress to reject calls to “correct” trade imbalances or currency exchange rates. Only by free trade can retailers, as manufacturers’ customers, continue to move products effectively and efficiently within the United States and abroad, IMRA noted.

“Manufacturers are inherently linked to industries that create and serve the markets – distribution industries like retailing, wholesaling, warehousing, transportation and others,” stated IMRA Vice President of International Trade Policy Jonathan Gold. “Manufacturers depend on the retail sector. The manufacturers with the price, quality, style, features and responsiveness to their retail customers should have no reason to impose artificial restrictions on the market. Government regulation of this relationship between a customer and the source of supply will artificially disrupt the market, adding costs and inefficiencies to the system.”

Download the IMRA's testimony here.

Social Investment Funds Growing

Is your area taking advantage of socially responsible investment funds as a growth capital source for local businesses? Maybe this is an area you should explore in the future.

As stock prices were tumbling through the worst bear market in a generation, socially responsible investing continued a steady gain in popularity, according to a study released last week.

In 2002, $162 billion was invested in mutual funds that screen for one or more non-financial criteria, up 19 percent from two years earlier, according to a biennial study from the Social Investment Forum, a trade group. During the same two-year period total investments in mutual funds, excluding money market funds, fell more than 19 percent.

Socially responsible funds still represent only a tiny 3.9 percent of the total $4.1 trillion invested in stock and bond mutual funds. But when the impact of large institutional investors is included, socially responsible investing has moved far closer to the mainstream.

Many giant pension and trust funds that are run for the benefit of teachers, government workers, unions, religious institutions and foundations now routinely use social criteria to guide their investment decisions. All told, some $2.18 trillion in assets under professional management falls under the rubric of socially responsible investing, or about 11 percent of the nation’s total $19.2 trillion in managed money, according to the study.

Download the report here.

Business Mergers Could Take Their Toll

Being a place-based business, in economic development someone (some place) invariably wins and someone (some place) loses when facility and job consolidation occur as part of a business merger or acquisition.

Two recent big M&A deals remind us of this: Brown and Williamson/RJ Reynolds and FleetBank/Bank of America. Boston and Louisville could become the losers on these deals.

One reality to keep in mind is that more M&A deals will occur as the economy continues to grow and more foreign investors look for ways to buy their way into the U.S. market. 85 percent of all foreign direct investment (FDI) is accounted for my M&A activities and not new startups or greenfield investments.

Go here to read more about these two developments.

Local Development Permit Fast-Tracking:Learn From Yakima

Time is money. Ask any company undergoing a site search. There is nothing more frustrating or aggrevating for a business than getting caught up in the local development review process. Some cities and counties have found practical ways to cope with this problem. For one--look at what Yakima County, WA communities are doing with their new countywide permit fast-tracking process.

The City of Yakima, WA and Yakima County recently unveiled commercial and residential permitting service standards backed by a customer-service commitment that includes an application fee refund for failing to meet time constraints. According to the service standards adopted by both the city and county, commercial building permits should be issued within seven to eight weeks of receiving a complete application.

The initiative is an opt-in program, allowing developers who want to build projects in phases to choose to move through the process at their own pace. That flexibility allows the permitting process to be fast-paced for those that want it and still meet the needs of projects designed to be developed more slowly.

The Yakima County Development Association is a very effective economic development organization. Check out its "high yield growth program."

Update on Automotive Incentives

The auto industry has captured a major share of all incentives dollars handed out in the U.S. and abroad over the past many years. In large part, this is because of the size of the industry, the capital investment requirements of the industry and the jobs attached to those investments.

Most communities and states with large existing auto production facilities are being pressured now to give more incentives to keep existing manufacturing jobs--an issue that is creating some controversey in many city halls and statehouses. This has more often than not been the case in dealing with Big Three automakers--GM, Ford and Chrysler. A quick look across Ohio provides many case studies to learn from--Toledo (Jeep/Chrysler), Dayton (GM), Cleveland (GM and Ford), and Youngstown (GM).

It doesn't take a rocket scientist to see that local and state governments have serious fiscal constraints right now that govern their ability to belly up with large incentive packages. Some are doing it though. A quick look at recent automotive deals in Texas, Alabama and Mississippi indicates the public money can and will appear if the deal is siginificant enough.

For a good review of the current state of incentive investments in the automotive industry, go here.

Fuel Cells Technology: Implications for Future Automotive Production

Fuel cells anyone? Plenty of places are working to get the edge on fuel cell technology, hoping their efforts will pay future dividends in new business investment and jobs.

First,what is the fuel cell and what are the implications of this technology for future automotive production?

A fuel cell is an electrochemical device that combines hydrogen fuel and oxygen from the air to produce electric power. The technology has actually been around for a while. Because of their efficiency, reliability, and compactness, fuel cells were key players in the Apollo space program (and continue to be used today on Space Shuttle missions for both electricity and water production).

How will fuel cells impact the car of the future? Although it may look the same on the outside, the fuel-cell automobile will be a very different one from the internal-combustion vehicles we now drive. In addition to a totally different power source, fuel-cell automobiles will feature a drive train that has little in common with today's cars. And other parts of the car's systems which are currently mechanical in nature (e.g., steering, braking) will be more electronic in nature.

What are the production requirements of vehicles using fuel cell technology? It's actually a different vehicle than we see toay and it would likely need to be manufactured in a radically different way from today's cars. There is a real question of how relevant today's assembly and subassembly processes and plants will be to future automobile production. If existing plants (both final manufacturing and submanufacturing) cannot be easily retooled, there arises the issue of whether to scrap them and build close by or to pick up and start over elsewhere. This could impact many communities across the country and internationally for that matter.

Where are fuel cell companies located today? The fuel-cell industry is currently scattered. Globally, the industry has a more significant presence in the United States, Canada, Europe (notably Germany), and Japan. Fuel-cell developers and key suppliers to the industry are dispersed throughout most of the regions of the United States. This is largely due to the diverse historical roots of these companies (traditional automotive, chemical, aerospace, energy, and electronic industries, plus offshoots of research facilities, specialty players, etc.).

So, what are the implications of fuel cell technology on future automotive production?

Here is how the experts at Deloitte and Touche size the situatiion up.

Existing locations would be favored if:

• They are consistent with the optimal facilities network
• Existing plants can be effectively retooled
• The critical mass of industry skills and intellectual capital is deemed a strategic advantage
• These areas aggressively transition themselves to meet the industry's new needs

New locations would be favored if:

• They are consistent with the optimal facilities network
• They can prove their ability to meet the industry's critical location factors
• They build the required infrastructure (physical and intellectual) and aggressively court the industry

Economic developers are already chasing the fuel cell industry. What's being done? Industry-supporting programs are being established at a rapid pace, and include fuel-cell associations, research initiatives, education programs, demonstration projects, and incentives. Some states with existing or recently announced programs include Michigan, New York, Ohio, Connecticut, and California. In some instances, these programs are part of a larger interest in supporting alternative energy and a cleaner environment. But in the cases of Michigan and Ohio, the focus is more specific; both states' governors have cited their existing auto plants in supporting the new programs.

Go here to read more.