Recruiting strategy pays off for Tennessee

Business partnerships, TVA efforts help Tennessee land projects
By G. Chambers Williams III • THE TENNESSEAN • December 20, 2008

What makes a German automaker and a Michigan-based solar energy company interested in spending, collectively, more than $2 billion expanding major operations into Tennessee?

Beyond the millions of dollars in incentives, state officials said the key to landing two major projects in the past six months has been the result of a years-long effort to position the state among businesses as having an inventory of TVA-powered industrial sites, combined with an available work force and a company-friendly climate.

Hemlock Semiconductor Corp.'s decision this week to build a $1.2 billion polysilicon plant in Clarksville, following Volkswagen's announcement in July that it would spend $1 billion on a new auto-assembly plant in Chattanooga, brings new, much-needed jobs to Tennessee at a time when companies here and across the nation have been cutting their work forces.

"Since Governor Bredesen came on board in 2003, he and I have been very serious about improving the state's business climate and competitiveness," said Matt Kisber, the state's commissioner of economic and community development.

Bredesen's approach to economic development was to create a "jobs cabinet," comprising officials from different state departments to work together in the recruitment of new industry, Kisber said.

That included a close working relationship between the economic-development and revenue departments, something Kisber said is lacking in most other states, so that business prospects could be assured that state incentives promised in the recruitment effort would eventually be funded.

Tennessee's recent successes show that the state is doing something right, said Mark Arend, editor of Site Selection magazine, a publication that rates available industrial sites and state economic-development efforts.

This year, the magazine named Tennessee the "most competitive" state in terms of attracting economic development, leading an annual ranking by the magazine that rates all of the states on their successes in bringing new jobs and industry, Arend said.

"These new projects that Tennessee has attracted certainly validate that they are competitive," he said Friday.

Partners are crucial
The state would not have succeeded in its efforts to attract these two new projects without the efforts of TVA and others that Kisber considers partners in the development process, including local governments and the state's congressional delegation.

TVA's own Nashville-based economic-development team, led by John J. Bradley, conceived the idea five years ago to create a bank of ready plant sites in the seven-state Tennessee Valley, and market them to large industries that could bring clean, high-paying manufacturing jobs to the region.

In creating these eight so-called megasites, certified by a South Carolina site-selection consulting firm as being ready for large manufacturing facilities, TVA set the stage for massive new developments throughout the region.

Of the eight sites, five have been taken, and two of those are in Tennessee — the Enterprise South Industrial Park in northeast Chattanooga, where the Volkswagen plant is under construction, and the Commerce Park site in Clarksville, where Hemlock will build its plant.

A third Tennessee site is still available, along Interstate 40 in Haywood County between Jackson and Memphis.

"We conceived a strategy of going after multistate and regional-impact companies, and we felt like the first step was to create an inventory of credible sites," said Bradley, TVA's senior vice president for economic development.

The sites were developed with much of the initial groundwork already done in the development process, so that any industry choosing one of the locations would have "a six- to seven-month head start" in getting a plant up and running, Bradley said.

That advantage worked well in recruiting Volkswagen and Michigan-based Hemlock, both of which wanted to get their new factories into production as quickly as possible.

Volkswagen plans to begin assembling a new midsize sedan for the U.S. market at the Chattanooga facility in early 2011, and Hemlock will start construction immediately on a plant to make polysilicon, the key material in solar-energy cells, beginning in 2012.

The Volkswagen plant will have an initial work force of about 2,000 people, while Hemlock will hire about 900, the companies said. But both have the potential of attracting associated industries that could bring thousands more jobs, the companies have said.

Of the five TVA megasites already sold, including the Chattanooga and Clarksville locations, the program has induced $5 billion worth of investment and eventually will bring at least 5,500 direct jobs, Bradley said.

Firms seek reliable power
TVA's strengths as a power provider helped land both of the Tennessee projects, Bradley said.

But it wasn't just the lower costs associated with TVA's electricity compared with other utilities nationwide, he said.

"Cost is always important, but it's not the most critical issue," Bradley said. "These companies are more concerned about reliability and capacity. If they had to shut down temporarily because of a blip, that would be very expensive to them."

TVA's reliability has been at "99.999 percent for nine years in a row," he said. "We sell that. Capacity is also important. We're building for the future and keeping up with our capacity, and there are not a lot of other utilities doing that."

Another key to Tennessee's success has been how well it takes care of existing business, Kisber said.

"Prospects talk to the people already here," he said. "The history of this department had been recruitment, but now we have put as much emphasis on existing industry. That pays off, because two-thirds of new jobs come from expansions by existing companies. We call it the customer-service attitude."

As for recruiting new industry, Kisber's team has a policy of listening to the company first to determine its needs, then tailoring the state's approach to the needs of that particular prospect.

The companies tell Kisber that such an approach is unique, because most states just say, "Here's what we have to offer," he said.