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LOUISIANA
From Site Selection magazine, July 2013
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Next
Generation

Two projects showcase a state's twin penchants for tradition and innovation.

by ADAM BRUNS
LOUISIANA
Paul Elio is founder of Elio Motors, which plans to employ 1,500 people in making its unique three-wheeled vehicle in part of the former GM complex in Shreveport.
Photos courtesy of Elio Motors
I

n early January, automotive visionary and entrepreneur Paul Elio announced that his fledgling company Elio Motors would employ 1,500 people in producing Elio's cute, green and ultra-high-mileage three-wheeled car in the giant former General Motors facility in Shreveport that used to produce the intimidating and gas-guzzling Hummer.

Talk about a paradigm shift.

But Elio thinks the world is ready - not just for his 84-mpg, $6,800 vehicle with a 5-star safety rating, but for some good old American manufacturing.

"I became an engineer in part because America's trade deficit troubled me," he said on Jan. 4. "The headlines then were Japan, and now it's changed to China. For decades we've bought billions of dollars more goods than we sell. That has to change. We have to make things in this country again."

That's why his new project kicked off five years ago, from emotion as much as engineering.

"Oil prices were going through the roof, and I'd watch the news and just get pissed off. And my ex-wife said, ‘You ought to stop watching the news because it just makes you mad.' I took a walk after that comment, thought about it, and went in to work the next day and kicked off the project that became Elio Motors."

But that didn't mean the rest of the world had caught up to his reasoning.

"You'd be shocked at the number of city, state and county leaders who have asked me, ‘Why aren't you building this in China?' " he said in January. "I said, ‘Are you kidding me?' In all honesty, I never heard that in Louisiana. I swear to God, I heard it over and over again. We have the white flag up, and we don't need to. We are still the best engineers and the best manufacturers in the world."

Elio should know, after a career that's seen him work for such companies as Johnson Controls before starting ESG Engineering, which grew to 46 engineers working on their own entrepreneurial projects as well as those of clients. Not all of them worked out in the end, but "all of that experience has prepared me for this journey," he says in an interview. Meanwhile, he's put together a team of advisors that includes Stuart Lichter of Industrial Realty Group and former Chrysler executive Jim Holden.

Elio says everything about Shreveport is right, from the physical assets to the soft assets (a former GM work force of 3,200) to the ease of working with RACER Trust, which took over the marketing of the former GM property along with about 79 others in the past few years as a result of the GM bankruptcy. Local and state government responses have been right too.

"On a scale of one to 10, my experience in Louisiana is an 11," says Elio.

He described in the January announcement, for instance, the great support his team has received from the Caddo Parish Council.

"We had a similar opportunity several years ago in a different community, and we needed exactly half as much help as we needed from you," he told the audience, "and they said, ‘No, we can't do that, but we wish you luck.' Unfortunately, wishes don't create jobs. That site, they could not get under control. It went to a demo guy, it was torn down for the scrap value, and it's now a 3.3-million-square-foot empty slab. Because you guys were willing to help us out, this deal is possible and we can fill this place with jobs."

Capital Assembly Before Car Assembly

As the Elio team tours the country drumming up interest (and, they hope, investors) in their car, they have already drummed up an impressive array of talent in-house and suppliers, including Lear (which produces one of every three automotive seats in North Amerca), IAV Automotive Engineering (which just announced its own expansion in Michigan) and Comau, whose technology is behind one out of every three cars produced in the world.

"They are assisting us in figuring out where to move what," says Elio. "Our equipment budget went way down when we bought that facility. There was so much left there. They used a lot more space than we need, but in some instances it makes sense to leave it there, and in some instances move it."

Asked just how frequently he heard the comment from potential suitors about manufacturing in China, he says, "I heard it no less than 50 times. It wasn't just an occasional random comment. We view ourselves as not being competitive, and it's just not true. I am confident this vehicle built in Shreveport can compete globally. But we have to get one to come off the line and sell a few here first … we have to crawl before we can walk."

Helping pave the way is legislation in a growing number of states that exempts the vehicle - considered a motorcycle under federal and state safety regulations because of its three wheels - from helmet laws. Louisiana's exemption for such "autocycles" was signed into law by Gov. Jindal on May 30, and becomes effective next January 1. Elio says similar legislation is working its way through the process in his home state of Michigan, and that legislators from Tennessee contacted his firm in June to discuss a similar measure in their state. In the meantime, the company, while not bound to meet four-wheeled-vehicle safety standards, is planning to implement as many of them as possible, such as a roll rack and airbags.

"On a scale of one to 10, my experience in Louisiana is an 11."
— Paul Elio, Elio Motors

Asked about financing, Elio says, "We don't have all the money, but we're on track. A lot of people have looked at the capital stack and are comfortable with it. One thing folks can do to help is make reservations. That makes it easier to get the next event to happen."

Would he be interested in Chinese investment?

"It's good to have money coming back to the country," he says carefully, "but the problem is when you take somebody's money, you have to listen to their opinions. It's a double-edged sword there."

At the same time, Elio cites the new record $40-billion trade deficit reached in April.

"That is disturbing," he says. "At that rate, half a trillion dollars in wealth is going out of the country each year. This vehicle can make an impact in oil not imported, and exporting product."

So the road show continues, on the road to what Shreveport and Elio hope is a bright green future.

"We have proved to ourselves and our stakeholders, with data, that we can build a low-cost, high-quality, high-mileage vehicle in this city with 95 percent American content," Elio told his audience in January. "Over the next 18 months we're going to prove it to you by actually doing it."

Family Tradition

The metro area of Houma-Thibodaux, La., way down deep in the Bayou, is best known as a hub for offshore oil & gas and shipping/transport services. That reputation was reinforced in an April report from the Greater New Orleans Community Data Center that called for regional unification of economic development efforts from that area, New Orleans and Baton Rouge.

The report noted that Port Fourchon "services about half of all drilling rigs in the Gulf of Mexico and over 75 percent of deep water oil production in the Gulf - equating to about 18 percent of the nation's oil supply and 20 percent of the domestic natural gas supply. The port also serves as the land base for the Louisiana Offshore Oil Port (LOOP), which handles about 14 percent of foreign oil imports and connects to 50 percent of U.S. refining capacity."

Eric_Paul_Danos2010

Eric Danos (left) and his brother Paul both serve as executive vice presidents and third-generation owners of Danos Group, which has served the construction, fabrication and specialized work-force needs of the offshore oil and gas industry from its home base in Louisiana for more than 65 years.
Photo courtesy of Danos Group

Hmmm. Might be a good place for a growing third-generation Louisiana company in the offshore services sector to stay and prosper.

That was the decision announced in May by Danos, which will move its headquarters from nearby Larose to Gray, located halfway between Houma and Thibodaux along U.S. Highway 24. The construction and production services partner for major oil and gas companies will invest $10 million in the new HQ. It also is evaluating multiple Louisiana port locations for a new, $20-million manufacturing and fabrication facility. The company anticipates adding 426 jobs over the next five years to its 1,600-employee payroll (1,100 in Louisiana).

Founded by Allen Danos and Syriaque Curole as a crew boat company 66 years ago, Danos attracted Gulf Oil (now Chevron) in its first year of existence and still retains the company as a customer today. Danos evolved into one of the largest oilfield service companies in the Gulf of Mexico region.

"The Danos family business has deep roots in South Louisiana - the heritage and culture of this area are important to who we are as a company," CEO Hank Danos said in May. "We appreciate the commitment of our state's leadership," he said of Gov. Bobby Jindal and Louisiana Secretary of Economic Development Stephen Moret. "The Governor and the Secretary of Economic Development are shaping an environment that is beneficial to attracting and retaining companies who are creating good jobs in our state and region."

The state offered Danos a customized incentives package that includes a performance-based, $1.5-million Economic Development Award Program grant to provide infrastructure improvements for the new manufacturing location. The state also will provide assistance from LED FastStart, the state's work-force development training program. In addition, Danos is expected to utilize Louisiana's Quality Jobs and Industrial Tax Exemption programs.

A Complex for Complexity

Construction of the headquarters facility will begin by late summer, with the manufacturing site to be selected within three months and construction of that facility to begin before the end of 2013. Danos has begun the design process with renowned architect firm Gensler and has contracted Louisiana's own MAPP Construction as the general contractor. Both new facilities will be complete by the end of 2014.

"The Danos family, now in its third generation of service to our community and region, has not only survived both the natural and manmade challenges of the world, it has been doggedly defiant in its resiliency to prosper and grow," said Vic Lafont, president and CEO of the South Louisiana Economic Council, referencing the company's persistence and resourcefulness during past hurricanes, as well as its primary role in working to help clean up after the April 2010 Deepwater Horizon oil rig explosion and spill.

"We've done a tremendous amount of work related to BP and the cleanup," says Danos Executive Vice President Eric Danos, who directs the company's operations, financial planning, safety, accounting and human resources. "It continues to this day. BP hired thousands of contractors and personnel. Danos is one of the few remaining contractors that continues to work with them through today."

Until today, the relatively small site in Larose that houses both the HQ and manufacturing has supported offshore activity with piping fabrication, production skids and module manufacturing. But strong growth the past few years, combined with some ambitious growth plans for the next five years, signaled a need to expand the firm's manufacturing footprint in order to support that growth.

Danos_MetalWorker

Increasingly complex fabrication and other technical capabilities distinguish Danos in the global oilfield services sector.
Photo courtesy of Danos Group

"The business had the best year ever in terms of our manufacturing operation in 2012," Danos says. "From a capacity standpoint we were completely tapped out. Fabrication is integrated with construction. In rough numbers, we need to double the size of our manufacturing capabilities. We will continue to run two shops in parallel."

The site selection's scope ranged from Mobile, Ala., to South Texas. Danos says the most important factors were access to the right work force, support from the state, and proximity to existing customers and to existing Danos locations. A formal RFI process was pursued for the HQ, and will be for the manufacturing site as well. Danos says approximately three sites from Lafayette to New Orleans are under consideration, and Terrebonne Parish, where the HQ is going, is one of those.

Danos says as the scope and complexity of projects the company takes on has increased, "we need larger-capacity lifts and waterfront load-out. We can build anything you can put on a truck, but we're landlocked. Part of the decision was to secure a waterfront location."

One of the biggest issues for the Danos team is disaster planning and emergency response. "We need to be close to the water, but that comes with inherent risk with storms," he says. "We're doing pre-design work on creating a facility that can be storm-ready. We're anticipating that as part of our design specs."

The company is in the midst of firming up its engineering specs for that second RFI. Asked what changes will occur in the new location, Danos says, "We're envisioning the flow of work from delivery of material to offloading onto a barge. We're going through a process of whether we can eliminate touches and material lifts. There are multiple specialized shops that move the material. Process and orders are customized, but we're trying to standardize processes to reduce overall costs." The company is also developing new ways of applying coatings and doing testing.

"It's great for us because it's a blank slate," he says. "Like many companies, we've grown into a corner as we've grown. Now, end to end, we'll have a better product in a shorter time frame."

Clients are the biggest of the big: Chevron, Shell, BP and Exxon among them. Danos says as the industry moves farther offshore into deeper water and the higher pressures that come with it, "the size and scale and complexity increase in direct proportion. Specialized alloys are used more. Weight and dimensions are increasing. On all fronts, technology is increasing, which drives demand for different products." And clients pay for that high level of quality and service, whether it's in Gulf, the Bakken, Texas or West Africa.

Meanwhile, the company is allocating its resources earlier and earlier in projects, setting itself apart with its level of both technical sophistication and working relationships. "There's quite a bit of collaboration up the chain," Danos says of his team's integrative work with the big oil companies and third-party engineering firms. "An integrative approach produces a better outcome."

Louisiana's economic developers couldn't have put it better themselves.


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