Greener Pastures

Dec. 21, 2004
Manufacturers plant seeds for growth in rural U.S.

You'd think Larry Stangl would be ready for a new line of work. As plant manager he oversaw two manufacturing operations in Manning, Iowa. One produced aftermarket auto parts and the other wire harnesses for clothes washers and dryers. Both moved to Mexico. "Big companies look at the bottom line and the dollar sign. Whatever they can save money at, that's what they do," Stangl says matter-of-factly. In the past, rural economic development has been accused of selling poverty: low wages, nonunion labor, and low taxes. But in today's global economy rural America no longer offers the lowest costs. Those areas that do well in the future will focus on growth, not costs, and their No. 1 attraction will be people with the right skills and work attitude. "Around the world the issue is finding the skills you need," observes Gene Deprez, PricewaterhouseCoopers' Florham Park, N.J.-based national director, business location strategies group. "You need people you can really count on, who are going to be there, [make] what you need, and be productive." Despite the competition from low-wage countries, manufacturing still thrives in many rural areas. A list of exurban areas, which includes all U.S. counties not accounted for in the government's official metropolitan statistical areas, reveals many locations of significant manufacturing employment and high productivity outside the urban centers. These exurban counties account for almost 30% of total U.S. manufacturing employment and 18% of gross manufacturing product. With a population of about 1,440, Manning is located 100 miles from metropolitan Des Moines. Several years ago C&W Mfg. Inc., Jackson, Tenn., visited Manning in search of a new manufacturing site. When a month went by without any word, Larry Stangl and a representative from the Manning economic development office drove to Tennessee to meet with C&W. That willingness to go the extra mile paid off. Since September 1998, Stangl has been plant manager of FenceMaster, C&W's first manufacturing facility outside Tennessee. "Being a smaller company we really like finding a community we can belong to, where the community feels ownership in the business," says David Perkins, C&W president. "You get better productivity, better employees, and more community support." The plant, which produces chain-link-fenced dog kennels, has been profitable every month except the first month of production. The opportunity to forge a close relationship with a local community was a major consideration for Coventry, England-based Amtico Co., which chose rural Madison, Ga., for its first manufacturing operation outside the company's headquarters country. When an issue comes up the plant manager can call the city manager and the problem will be taken care of sooner rather than later, says Ken Peckett, Amtico's vice president of people and resource development. "We're a family type of business. It's part of our philosophy and style," he notes. The company, which designs and manufactures high-end vinyl flooring primarily for commercial customers, chose the location for its historic ambiance. The self-described "town that Sherman didn't burn" features a number of magnificent antebellum homes. "We take [customers] to see our factory. We also show them Madison. We're proud of the town," Peckett notes. To remain economically vital, rural communities must learn how to exploit such unique assets. In making site-selection decisions, plenty of manufacturers will continue to value the work ethic, simpler quality of life, proximity to local markets and raw materials, and relatively low labor costs of rural areas. At the same time, such communities must not become too reliant on manufacturing, says David Kolzow, chair of the department of economic development at the University of Southern Mississippi, Hattiesburg. "We're moving out of the manufacturing economy. Fewer and fewer manufacturing jobs are being [created] and those that are tend to be more high tech and [located in] areas where high tech can prosper," he observes. The competition among communities for a decreasing number of new factories actually benefits manufacturers. When an old-line cut-and-sew or assembly operation moves overseas in pursuit of cheaper labor, community leaders often roll out the red carpet for almost any company promising to replace those lost jobs. Plus, government incentives favor manufacturing over lower-paying operations. When Carraro SpA, Padua, Italy, chose a vacant 18-year-old plant in Calhoun, Ga., for a new axle and transmission assembly plant, it accepted a package that included tax incentives as well as training assistance, a major cost for any start-up. Representatives of Georgia's Quick Start program went to Italy and documented the company's assembly procedures. The state-developed training program, which covered safety procedures, forklift operation, metric system basics, and other skills, was ready to go when the company made its first hire. Offering above-average wages and the opportunity to work first shift in an air-conditioned plant, Carraro had no difficulty finding qualified job applicants. Tomaso Carraro, vice president and general manager of Carraro North America, believes the company's job fair attracted potential employees who were looking for jobs that differed from those offered in the carpet manufacturing industry that dominates the region. In addition to the incentives and training program, rural Georgia is a right-to-work state and has a low level of unionization. "We have nothing against unions in principle, but in the northern states they're sometimes difficult to deal with from a cost and flexibility standpoint," Carraro notes. Such union vs nonunion-labor distinctions, however, are becoming less important in siting decisions, says PricewaterhouseCoopers' Deprez. The gap is narrowing between the North and South in terms of cost differentials, labor-management relations, and education levels. "A lot of places that historically have been . . . heavily unionized are some of the places where the productivity may also be the highest. You have to look at the quality of labor-management relations," Deprez advises. Iowa's 2.5% unemployment rate was the lowest in the United States in 1999. Yet neither Barker Co. nor Winnebago Industries Inc. had any trouble finding the people they needed to staff new facilities there. "The loyalty of the people and the productivity that they are accomplishing" keeps Winnebago in Iowa and the Midwest in general, asserts Bruce Hertzke, president and CEO. Headquartered in Forest City, Iowa, Winnebago recently located two new manufacturing plants 60 miles east in Charles City. One is a production facility for motor homes and the other builds cabinets and doors. A decade and a half ago the company launched new manufacturing operations in Mexico, California, and North Carolina, all of which have since been closed because they weren't achieving productivity levels comparable to its Iowa plants. Similarly, when it decided to expand its operations, Barker, based in Keosauqua, Iowa, targeted rural areas specifically because of the work ethic of the population. "They don't feel like we owe them the job. They want to earn the job," observes Tom McMahon, vice president of operations. Barker's new plant in Centerville makes display cases for supermarkets and other food-service operations. When asked about Iowa's low unemployment rate, both manufacturers cited local underemployment. A few miles east of Charles City, Sara Lee Corp. is shutting down a 650-employee bakery, boosting the supply of skilled workers. Finding the right people is no easy task. Both urban and rural respondents to the Rural Manufacturing Survey, conducted by the U.S. Dept. of Agriculture in 1996, reported that they are struggling to find workers with the talent they need. Researchers at the USDA, which makes loans to rural towns for transportation, water, and sewer improvements, were surprised by how dominant labor concerns were, far outpacing infrastructure needs. "The major challenge facing rural America today is overcoming the human capital deficit. They have to get the education and skills of the people up to speed," notes Jesse L. White Jr., federal cochairman of the Washington-based Appalachian Regional Commission. He advocates an approach to vocational and technical training that is less industry and skill specific, but giving workers the tools to compete with the world based on talent and productivity, not just low cost.

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