Sunday, June 14, 2009

Southern States Poach Businesses Amid Downturn


When NCR Corp. started looking late last summer to move from its hometown of Dayton, Ohio, economic development agencies in the South pulled out all the stops in a bid to lure the 125-year-old company best known as a cash-register manufacturer.

Georgia quickly offered more than $100 million in tax and training incentives. State officials connected NCR with six Georgia research universities willing to license new technologies and train workers.
NCR and other companies are moving operations to the South. A Volkswagen plant is seen under construction in Chattanooga, Tenn., last month.

In addition to traditional incentives like tax abatements and fee waivers, local economic development leaders in the suburban Atlanta county where NCR's headquarters would be located negotiated discounts for the company with rental-car companies, airlines and landscapers. The city of Columbus, Ga., 100 miles from Atlanta, applied for $5.5 million in stimulus money to help pay for a new NCR factory. After deciding to build a customer-services center near Atlanta last year, the company last week said it would relocate its 1,250-employee headquarters to the area and open an ATM factory in Columbus.

Bill Nuti, NCR's chairman and chief executive officer, said the decision to move is a long-term strategic step, rather than simply cashing in on incentives. The move will cost millions upfront, but is "a decision that was made in the face of the recession to invest in the company's future."
Major companies have been relocating to the Southeast for decades -- lured by tax breaks, nonunion work forces, and, increasingly, ports, railroads and highway systems. But now Southern states are attempting to leverage the downturn to promote the region as more attractive during hard times -- especially compared to the Rust Belt and other regions where the economy is suffering most.

The Southeast has attracted an array of corporate facilities recently. In February, Asbury Automotive Group Inc., a major chain of national auto retailers, relocated to metro Atlanta from New York. In recent months, Tennessee announced three projects, all valued at more than $1 billion each, by units of Wacker Chemie AG, Volkswagen AG and Hemlock Semiconductor Group. North Carolina last week welcomed a new Apple Inc. data warehouse.

Meanwhile, state economic development officers say they are pursuing a higher number of relocation prospects. "The level of competition on retention, expansion and relocation projects has become more intense," said North Carolina Deputy Secretary of Commerce Dale Carroll.

Development agencies across the Southeast are therefore pushing their recruiting machines into overdrive. Gwinnett County, where NCR is moving its headquarters, revamped its development strategy in 2007 to prevent the slowing of the area's red-hot job growth. Nick Masino, the Gwinnett Chamber of Commerce's vice president for economic development, says the organization hired seven new staff and created national and global marketing teams.

Since then, the number of companies the agency is courting soared to 36 this year compared with seven in the first six months of 2007. The Gwinnett Chamber has won five projects this year—including a 75-job expansion of Habasit America, a Suwanee, Ga., belting company, and a 300-job unit of California's YesVideo Inc., which transfers VHS to DVD. The agency says it brought at least 5,000 jobs to the county in the past 24 months. Half the companies it is pursuing are based in the Midwest.

The current flow of companies southward signals a "new form of the migration of the manufacturing from the Midwest," said Ross DeVol, director of regional economics at the Milken Institute, an economic think tank. "If the Midwest can't retain more of the firms like NCR given all the downsizing that's going to occur in the auto industry and the suppliers, this could have devastating effects," he said.

Atlanta officials say they started recruiting NCR, which employs 22,000 people world-wide, in 2007. Negotiations first began around a customer-services center, which NCR announced last October it would build in Peachtree City, another Atlanta suburb.

Worried, executives from the Dayton Area Chamber of Commerce that month visited NCR, the area's only Fortune 500 corporation. But NCR provided little feedback, said Phillip L. Parker, president of the Dayton Area Chamber of Commerce. The only concern NCR expressed to him over the years, he said, was difficulty recruiting in Dayton, which was last year named by Forbes magazine as one of the nation's "10 fastest-dying cities."

Meanwhile, the Georgia Department of Economic Development was stepping up efforts to win not just the expansion of NCR's area operations—but the entire company. Officials invited NCR executives to tour the Atlanta area, including the Georgia Institute of Technology and a state job-training facility. Development officials also successfully lobbied the Georgia legislature to improve tax benefits available for projects yielding more than 1,800 jobs and either $450 million in capital investment or a $150 million annual payroll.

NCR's move is a huge blow to Dayton, coming after the closure of a General Motors Corp. plant and layoffs at Delphi Corp. facilities. Unemployment in the area jumped to 11.3% in April from 6.4% a year earlier, according to the Bureau of Labor Statistics. "We were not allowed to even compete for this opportunity to retain this company that had been started and had been very successful in our community for so many years," said Mr. Parker. "I hope they don't wake up in five years and can't even take showers in Georgia," he added, in a jab at Atlanta's recent water shortages.

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