Tennessee Officials Sorting Out Nissan Deal Fallout

Tennessee's top economic development official is defending the nearly $200 million in incentives offered to Nissan Motor Co. to relocate its North American headquarters to the state.

Economic and Community Development Commissioner Matt Kisber also denied news reports that Nissan's relocation consultant, Mark Sweeney of Greenville, S.C.-based McCallum Sweeney Consulting, held direct influence over legislation passed earlier this year to encourage the move.

Read more about this situation here.

Read my earlier post on this situation here.

Biloxi Casino Deal Wavering

A $400 million casino project, the first major investment for the Coast since Hurricane Katrina, could fall through because Biloxi and the developer have not agreed on a price for city-owned waterfront.

Biloxi Mayor A.J. Holloway said he is committed to achieving the best deal for the city and will not rush into important decisions. Read more here.

Frankly, this situation does not surprise me. It is not easy to do deals in the rebuilding environment that faces many Gulf Coast communities. Patience is the word, and be very clear about setting expectations about return on investment (ROI). That is my advice to both the public and private sector on deals like this.

NE Mississipi Looks at Its Regional ED System

A new study seeks to find out if Northeast Mississippi economic development groups are working together or in competition against each other. The study by Mississippi State University's Stennis Institute of Government will determine if groups are providing the same services.

Read more here.

I will ask my Dad to track this one for me since he lives in Tupelo.

Japan and Malaysia Expand Trade Ties

Here is one to watch.

Japan and Malaysia will sign a free-trade agreement, phasing out tariffs on 97 percent of oil, machinery and agricultural products traded between the two countries, the Japanese government said.

This could help both countries in their efforts to out-do the US in the world market.

More here.

Chrysler Looking at New Investment in St. Louis Area

The state of Missouri and the Chrysler Group of DaimlerChrysler AG have supposedly reached a deal on a multimillion-dollar incentives package needed to attract a $1 billion investment at the automaker's Fenton assembly plants, according to a recent news article.

Though details weren't available, Missouri Gov. Matt Blunt plans to hold a news conference this coming Monday to unveil the package.

The Chrysler investment would be a boon to the St. Louis region's economy. Chrysler had earlier told Fenton city officials that the two assembly plants would be at risk of closure in the future without a significant investment.

My advice to Missouri economic developers working this deal is to look at the "big picture" when it comes to automotive and be certain that the long term payoff from the multimillion dollar incentive package is going to pay off.

Branson's Building Boom

The value of new construction in the Live Entertainment Capital of Branson, Missouri through November 2005 totals $121.5 million, a new one-year record according to city officials.

Projects like Branson Landing, the Branson Convention Center and Hilton convention center hotel, and Branson Hills Plaza have contributed significantly to the record-breaking year.

Branson's a hot ticket right now for new development," said Michael Rankin, the city's economic development director. "And it was the Branson Landing and convention center project that really started it."

The $420 million Branson Landing retail and entertainment development along Lake Taneycomo is scheduled to open next summer, and the convention center and convention center hotel will begin hosting meetings in the summer of 2007.

Read more here.

I know this growth "feels" like good news for Branson folks, but as I look at the economy, and the entertainment sector in particular, I would urge caution in investing in too much capacity too quickly in the convention and visitor sector. Where is the future business and spending power going to come from given the serious declines in many of our driving industry sectors (automotive, aerospace, machinery, finance, others) that generate the real income across the nation?

Ford: Maybe Another 30,000 Jobs Gone

I hate to depress everyone with the news coming out of the automotive industry, but it is important that all of us have the facts. This is an industry in SERIOUS trouble. As I have written before, this is an industry where one company or area's gains will most definitely be at another company and area's expense.

Ford began one of its hardest board meetings in the company's history this week as speculation mounted that the company is poised to slash 30,000 jobs in an attempt to revive its declining revenues and profits.

Ford is expected to follow GM with massive lay-offs in an attempt to shed overcapacity after a dramatic loss in market share to foreign rivals such as Toyota and Honda. It posted a $1.2 billion pre-tax loss in its North American automotive operations in the third quarter alone.

Over the next five years, Ford plans on closing 10 auto plants in North America and layoff between 25,000 and 30,000 of its hourly workforce.

Ford's restructuring plan followed in the wake of General Motors plan and is quite similar to it in the breadth of plant closures and layoffs in North America.

GM said that it would be closing 9 plants in North America and laying off as many as 30,000 auto workers.

Most likely the St. Louis and Louisville KY plants are on the chopping block. Ford's Explorer SUV is built at those plants and lagging sales of the gas-guzzling Ford SUV model is going to affect the board's decision.

Read more here and here.

Tennessee Gets More Good Auto News

Automotive electronics supplier DENSO Manufacturing Tennessee announced a $185 million expansion of its Maryville assembly operations that is expected to add about 500 jobs by 2010.

Construction of the 220,000-square-foot addition to the company's 1.5 million square feet of existing manufacturing space should begin in early 2007, with hiring to start in late 2007 and production to begin in early 2008.

This will mark the largest expansion in the 15-year history of Denso Manufacturing Tennessee, which supplies components to all major automakers and employs about 2,500 workers in Maryville and another 900 at a sister plant in Athens.

Click here to read more.

Texas Tech Gets Alternative Energy Grant

U.S. Sen. Kay Bailey Hutchison wants the U.S. to aim for energy independence, and came to this West Texas city to announce $1.5 million in funding for Texas Tech to study wind energy. The research money for the school’s Center for Wind Science comes from appropriations Congress included in an energy bill passed earlier this year that made alternative energy sources a priority. Click here to read more.

Greater Rochester Enterprise

Greater Rochester Enterprise (GRE) is a regional economic development organization supported by a team of private and public sector leaders dedicated to improving economic performance in the Rochester/Finger Lakes region in New York state.

Click here to read several of the organization's recent publications.

New Kauffman Foundation Website

To help entrepreneurs start and manage businesses, the Kauffman Foundation recently launched Kauffman eVenturing™ ( www.eVenturing.org). This is a great resource if you area is working to increase local entrepreneurship.

Retail Investors Sweating It

Retail investors greeted the third week before Christmas with caution as the mix of heavy discounting in stores and cash-strapped consumers escalated concerns of a challenging December shopping season.

The Standard & Poor's Retailing Index and the Dow Jones Retail Index both fell just under 1 percent. Both indices have dropped just over 2 percent since "Black Friday," the day after Thanksgiving considered to be the traditional start of the holiday shopping season.

Shares of Target Corp. (TGT.N: Quote, Profile, Research), Sears Holding Corp. (SHLD.O: Quote, Profile, Research) and Office Depot Inc. (ODP.N: Quote, Profile, Research) fell more than 2 percent, with Gap Inc. (GPS.N: Quote, Profile, Research) and Kohl's Corp. (KSS.N: Quote, Profile, Research) dipping nearly 2 percent and trendy apparel retailers like Bebe Stores Inc. (BEBE.O: Quote, Profile, Research) and Aeropostale Inc.(ARO.N: Quote, Profile, Research) down 2.6 percent and 4.2 percent, respectively.

Department store stocks, also, started the week sluggishly, with Federated Department Stores Inc. (FD.N: Quote, Profile, Research) falling more than 2 percent and Nordstrom Inc. (JWN.N: Quote, Profile, Research) down 1.8 percent.

Read more at Reuters.com.

Without strong sales performance during the Holiday season, look for a new wave of consolidations and shakeouts in the retail sector. What does this say about your local Target. Wal-Mart, or Kohl's store in 2006? Think about it.

Verizon Plans Pension Cuts to Managers

Here is another case where employee loyalty just doesn't pay off.

Verizon Communications, the second-biggest U.S. telecoms firm, said it was restructuring retirement benefits for 50,000 managers in a bid to save $3 billion over the next 10 years.

Under the plan — for which Verizon will take an estimated fourth-quarter pre-tax charge of $97 million — managers will no longer earn pension benefits or receive service credits toward healthcare benefits from next July.

Employees currently covered by a defined-benefit plan — which typically has a fixed payout at retirement based on earnings and years of service — will keep pension benefits already earned, and on June 30 will receive an 18-month enhancement to the value of their pension and retiree medical benefits.

Pay attention to these trends fellow economic developers. This is happening in automotive and many other industries. We are losing our wealth base every time a company starts chopping away at employee pension benefits.

Read more here.

Airbus to China

Airbus and Chinese officials announced an order worth 7.7 billion euros for 150 single-aisle A320 jets, and said they would also consider building an assembly line for the aircraft in China.

An assembly line in China would give Airbus an important edge. Airbus, whose headquarters are in Toulouse, France, and the Chinese government signed a cooperation pact Sunday that commits Airbus to buy at least $60 million in parts a year from China by 2007, rising to $120 million a year by 2010. In July, Airbus also set up the Airbus Engineering Center in Beijing, which has so far recruited 54 of a planned 200 Chinese engineers.

The question is where does this leave Boeing, which has been rivaling with Airbus for market in China and the rest of the world.

China is in the plane-making business. What impact will this have on US-based plane manufacturing operations? If commercial aircraft are built in your community, I would be paying serious attention to all these moves.

Read more here and read my earlier post on commercial airlines here.

Boston Scientific Corp.Makes Bid for Guidant Corp.

Boston Scientific Corp. took its rivalry with Johnson & Johnson to a whole new level yesterday.
BSC offered to buy cardiac device maker Guidant Corp. for $25 billion. The offer comes three weeks after Guidant accepted a $21.5 billion offer from Johnson & Johnson.

With either deal, where does this leave Indianapolis? Indianapolis economic developers should be concerned about this deal.

Read more here.

IT Departments Likely to Change

At its Symposium events, Gartner's senior analysts like to stun the delegates with bold five-year predictions. But in setting out his vision for enterprise computing circa 2011 at Gartner's Florida Symposium in October, Mahoney went further than most.

By 2011, he says, three-quarters of IT departments will have changed their role. In many cases, that will entail a much greater involvement in running the business. But for 10% companies, it will mean disbanding the IT department entirely; at another 10%, IT will have been reduced to a commodity.

What do these changes mean for economic development and our focus on targeting IT functions and operations? Think about it.

Read more here.

Hot Business Ideas for 2006

Here is one to make you think.

Check out what Entrepreneur Magazine says will be hot in 2006.

Nissan/Tennessee: Working Both Sides of the Fence

Nissan stands to receive a great deal of money to move its California headquarters to Tennessee, including a great deal of cash to move employees from California to Tennessee. While this development is surely good news for Tennessee, it is most assuredly bad news for California.

This is not an easy article to write. It is easier to "stay out of it," so to speak. Yet some times, we need to speak to important issues that challenge us professionally and personally.

Here is a story pointing up the "possible" dangers of the same consulting firm working both sides of the fence on a particular issue--that is working for a geographic area in creating new advantages for economic development and helping a specific company take advantage of those new advantages. The case in point concerns the fact that Mark Sweeney of McCallum-Sweeney helped to create the new Tennessee law creating additional incentives for relocating companies, and then he represented a company (Nissan) as its site consultant in a project that resulted in Nissan locating in Tennessee and taking advantage of the new incentive program. I will add that from my standpoint, Mark is one of the better professionals working in both economic development and business site selection.

According to a recent Tennessee newspaper article, "Altogether, the moving-expenses law, written at the request of Mark Sweeney, Nissan's paid site-selection consultant, gives the company a $64 million bonus above what the state's standard incentives packages had been in the past."

See other versions of the story here, and here, and here.

As a consultant serving the economic development industry, I made a conscious choice several years ago to only work "one side of the fence." The potential for a conflict appeared quite strong to me. I chose to work only for geographic areas and not companies. Working for both was "uncomfortable" for me.

Admittedly, the details must be looked at here to ascertain whether any wrong doing occurred by McCallum-Sweeney, Nissan, or the State of Tennessee. By its nature, news is reported as it evolves over time. We must be careful about drawing premature conclusions about what is true. Please do not misunderstand my point. I am not opposed to consultants that in general do work for both geographic areas and companies. My concern is more specific in terms of a consultant working on a project or situation that could pit an area's interest against those of a company.

Situations like this can help fan the flames of debate surrounding economic development incentives. We already have a very volatile situation on our hands with Cumo versus DaimlerChrysler. How much more heat can we really stand in this area? We need to be more careful in the future; much more careful than we have been to date.

Personally, I do not favor the type of relocation incentive being offered by Tennessee. In my view, the company should be bearing these moving costs. But that is only my view. The only reason why the public sector is getting stuck with this cost is because we (the economic development community) have allowed this cost to become a matter for consideration in competing for deals.

We should stop and reflect upon what we are doing in the incentive arena before the golden goose is killed for good.