Week of January 5, 2004
  Project Watch
 
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Nissan in Smyrna, Tenn.
Cinram has picked a site in Rutherford County, whose prominent corporate citizens include Nissan, which has a huge plant in Smyrna (pictured).
DVD-Maker Cinram Setting Up in Nashville, May Employ Up to 600

by JACK LYNE, Site Selection
Executive Editor of Interactive Publishing


LAVERGNE, Tenn. – Major DVD manufacturer and distributor Cinram International is beginning to imprint its sizable presence on the Nashville metro.
        Cinram, which ships directly to major retailers that include Best Buy, Target and Wal-Mart, is setting up a Music City operation that reportedly may create as many as 600 new jobs. The Canadian-based company has signed a five-year lease on a 518,000-sq.-ft. (46,620-sq.-m.) facility in the city of Lavergne, southeast of Nashville's city limits.
        The building will be used to distribute prerecorded DVDs, videocassettes, audiocassettes and CD-ROMs; Cinram ranks as the second-largest replicator of those products in North America and Europe.
        The company has been a veritable blank disk, however, in terms of providing project information. Cinram officials have declined to make any comment on the project, and the Lavergne facility isn't yet listed as one of its U.S. sites.
        Quite literally, though, the signs of Cinram's expansion are undeniable, report officials with the Nashville Area Chamber of Commerce.
Cinram' DVD and VHS-tape manufacturing operation (pictured) in Huntsville, Ala.
Cinram's other U.S. operations include a DVD and VHS-tape manufacturing operation (pictured) in Huntsville, Ala.

        The Lavergne building that the Canadian company will occupy formerly housed a leased distribution center for Nashville-based Cumberland Swan, a 105-year-old company that makes personal-care products. The company last year relocated its distribution operation to nearby Murfreesboro.
        But the vacant building continued to bear Cumberland Swan's logo. Until recently, at least. Now, Cumberland Swan's signage has been recorded over, so to speak. The sign in front of the building is covered by the DVD maker's identification and simply reads, "Cinram, 400 Sanford Road."
        Moreover, the $10-million leasing deal has been confirmed by Ray Hensler, the Nashville division president for Ft. Lauderdale, Fla.-based Stiles Corp., which owns the distribution facility. Cinram, he said, also considered sites in Louisville, Ky., and Memphis, Tenn.

Site in Tennessee's Fastest-Growing County
Cinram will spend some $14 million retrofitting the leased facility to its needs, Hensler estimated. The company has some 9,000 worldwide employees, with major U.S. operations in Huntsville, Ala.; and Richmond, Ind. (the latter also home to its American headquarters).
        Though Cinram isn't offering any specifics on its rationale for picking the Nashville metro, some of the area's strengths seem obvious.
        One is Rutherford County's large and growing work force. Rutherford ranks as Tennessee's fastest-growing county, with its population leapfrogging by some 54 percent between 1990 and 2000, according to U.S. Census Bureau data.
        In addition, more than one-third of the county's 190,000 residents are between 25 and 44 years of age. And an estimated 40,000 workers currently commute to jobs outside the county, according to economic development officials with the Rutherford County Chamber of Commerce.
        Lavergne, a city of some 19,000, also offers strong surface infrastructure for Cinram's distribution center. I-24 runs through the city, and I-65 and I-40 are only 15 miles (24 kilometers) away. Add to that the area's location within a one-day drive of 75 percent of the U.S. population.
        Those strengths have similarly attracted more than 155 manufacturing and distribution facilities to the county, including operations for Bridgestone/Firestone, Nissan, Pillsbury, Square D and Whirlpool.

Cinram Forked Over $1.05 Billion To
Buy AOL Time Warner's DVD, CD Business
Cinram's reticence could conceivably reflect the fact that its industry is likely facing a major transition.
        The Canadian company last year completed a major $1.05-billion acquisition, buying AOL Time Warner's DVD- and CD-making business.
        That purchase clearly has some strong up sides. For one thing, it gives Cinram AOL Time Warner's manufacturing plants in Alsdorf, Germany; Commerce, Calif.; and Olyphant, Pa.
        More significantly, the deal gives Cinram exclusive long-term agreements with New Line Cinema, Warner Home Video and Warner Music Group to manufacture and distribute their DVDs and CDs in North America and Europe. In addition, the businesses acquired from AOL Time Warner are, alone, expected to generate some $1.1 billion in revenues during their first full fiscal year.

Will On-Demand Do In CDs, DVDs?
But the acquisition's one major down side is a big one: the uncertainties facing the CD and DVD industries.
        CDs have their own well-publicized problems with online downloads. Forrester Research, for one, is projecting that digital downloads will grow into a $3.2-billion business by 2008.
DVD
DVDs: Will on-demand services eventually be
the death of them?

        As for DVDs, Cinram reported that its DVD shipments were up by more than 100 percent for 2003's first nine months. And the company is predicting that its 2003 DVD shipments will top one billion units when the final figures are tallied.
        "Consumers' appetite for DVDs is by far outpacing the demand for video-cassette products," Cinram CEO Isidore Philosophe said last month in reporting the company's third-quarter results. "The Time Warner acquisition gives us the opportunity to capitalize on this growth throughout North America and Europe."
        But will DVD growth continue in the face of on-demand Internet video delivery?
        Forrester Research analyst Josh Bernhoff is among the industry watchers who think that on-demand services will eventually supplant both traditional DVDs and CDs. Bernhoff predicts that on-demand movie distribution will rack up $1.4 billion in sales worldwide by 2005. In comparison, DVD and videotape sales by then will have gradually declined by some 8 percent from 1999 levels, he says.
        Other analysts, however, don't see on-demand video as an idea whose time has come. Not yet, at least.
        "While the notion of online formats for video is compelling," Merrill Lynch analyst Richard Tse wrote in a recent report, "the reality is that this medium currently lacks image quality, is cumbersome, and is extremely time consuming, even with broadband."
        Cinram is betting on the latter assessment, as its quiet but big Nashville move demonstrates.



Idaho Gov. Dirk Kempthorne
"T-Mobile is the kind of business we want to see expand and relocate throughout all of Idaho," said Idaho Gov. Dirk Kempthorne (pictured at a press conference after being named chairman of the National Governors Association).

T-Mobile's New Idaho Call Center
Will Create 600-Plus Jobs

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing


MERIDIAN, Idaho – Idaho's fertile Treasure Valley region is spouting a new economic treasure: T-Mobile USA's new call center, which will employ more than 600 workers in Meridian, part of the Boise metro.
        The project comes at an opportune time for the Southwest Idaho area. Boise-based Micron Technology earlier this year laid off 1,000 of its workers in Treasure Valley, which lies between the Snake River and the Rocky Mountain foothills.
        "Over 600 new jobs is great news for the Treasure Valley," said Idaho Gov. Dirk Kempthorne (R). "T-Mobile is a progressive, futuristic company that pays good wages and benefits. That's the kind of business we want to see expand and relocate throughout all of Idaho."
        Typical for call centers, wages at the new Gem State facility certainly won't be exorbitant. T-Mobile USA will pay the operation's customer service representatives, employee "coaches" and team managers between $9.50 and $11 an hour, according to a spokesman at the company's Bellevue, Wash., headquarters.
Meridian
Part of the Boise metro, the suburban city of Meridian (pictured) has seen its population grow by almost 400 percent in the last 10 years.

        Importantly, though, T-Mobile's Meridian employees will receive full benefits, including health insurance. And another aspect of the operation strengthens job stability in today's Do-Not-Call U.S. environment: The 77,000-sq.-ft. (6,930-sq.-m.) Meridian facility will handle incoming calls from T-Mobile USA's 12 million existing U.S. customers.

Second Chance: Area Earlier
Lost T-Mobile Center to Washington
The Meridian call center represents a second chance of sorts for the area. The Boise metro was reportedly one of last year's finalists for another T-Mobile center that would employ 700 workers. But that project went instead to Redmond, Wash., in the summer of 2003.
        T-Mobile, however, was sufficiently impressed that it came back for a second look after it decided to expand yet again. The Meridian center will join the company's 13 other U.S. customer service operations.
        Fast growth is the current norm for T-Mobile USA, which increased its 2002 sales by a whopping 48 percent to just over $5 billion. The company since 2001 has increased its work force by more than 13 percent.
        T-Mobile's call centers have reflected that growth. The company earlier this year announced that it's adding as many as 700 new jobs at its existing Albuquerque, N.M., call center as well as opening a new 680-worker operation in Mission, Texas. (For more details on the latter, see "T-Mobile Plugs into Bilingual Texas Border Town for 680-Worker Center," from our May 19, 2003 Project Watch.)

Holder Properties Will Construct Facility
T-Mobile USA has hired Atlanta-based Holder Properties to build the new Idaho facility. The company plans to open the Meridian center in the 88-acre (35-hectare) SilverStone Corporate Center sometime during the summer of 2004. The operation will initially go online with 100 to 150 employees, then gradually staff up to 600-plus workers, the company said.
Micron Technology
With its headquarters in Boise (pictured), Micron Technology is Treasure Valley's largest employer, with 9,500 area workers. Photo: Rutherford & Chekene

        T-Mobile chose Meridian because of the area's strong labor force and high quality of life, corporate officials explained. Aggressive recruiting by state and local officials and developers was also a factor in the decision, they added.
        Meridian offers a fast-growing work force. Located some 12 miles (19 kilometers) west of Boise, the city's current population of some 40,000 marks an almost 400 percent increase from 1990.
        In addition, 92 percent of residents are high school graduates, 12 percent above the national average.
        T-Mobile's projected 600-plus workers will make the company one of Treasure Valley's 30 largest employers. Even after its layoffs, Micron Technology still ranks No. 1, with 9,500 employees, followed by the Mountain Home Air Force Base's 5,250 workers.
        T-Mobile USA was known as VoiceStream Wireless until Germany's Deutsche Telekom acquired the company in 2001.



Macon, Ga.
A city of some 100,000 residents at the intersection of I-75 and I-16, Macon (pictured) is an increasingly popular location for distribution operations.


Kohl's Picks Central Georgia for
300-Worker Distribution Center

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing


MACON, Ga. – "Project Downstream" has come up for air, bringing with it some 300 new jobs to Macon, Ga.
        Kohl's Corp. has chosen the central Georgia city for a new 520,000-sq.-ft. (46,800-sq.-m.) distribution center, the first distribution operation that the Fortune 500 retailer has located in the deeper reaches of the southeastern U.S.
        "It's a great early present for Middle Georgia," Gov. Sonny Perdue (R) said in downtown Macon at the project announcement, made only a few days before Christmas. "For those who haven't finished your Christmas shopping," Perdue joked, "now you know where to go."
        Located in south Bibb County near the intersection of I-75 and I-16, the operation will serve Kohl's 75 department stores in the Southeast, company officials said.
        "Macon offered a small, growing community, proximity to other Southeast markets and a qualified work force," Ken Bonning, Kohl's senior vice president of logistics, said at the announcement inside the city's Grand Opera House. "We're very, very excited to be here."
Gov. Sonny Perdue
"For those who haven't finished your Christmas shopping," Gov. Sonny Perdue (pictured) said in announcing the project, "now you know where to go."

        Macon provides particularly strong proximity to one of Kohl's biggest Southeast concentrations. The Georgia center will be situated only 84 miles (134 kilometers) southeast of Atlanta, where the company has 18 metro-area stores.
        Kohl's, whose stores offer moderately priced apparel and housewares, has registered particularly strong results in recent years. That success prompted the company's initial sally into Atlanta in early 2001, when it opened its first 12 metro-area retail operations.

City and County Issuing $46 Million in Bonds
The Macon center will employ some 300 workers, Bonning said.
        And another 100 jobs could possibly be in the offing. Kohl's distribution center is being built to accommodate expanding to a 600,000-sq.-ft. (54,000-sq.-m.) operation that would employ 400, Bonning explained. The facility will stand on an 80-acre (32-hectare) site in the 200-acre (80-hectare) Airport East Industrial Park, which is owned by the city and the county.
        The Macon operation will be the ninth distribution center for Kohl's, which is headquartered in Menomonee Falls, Wis. The company's current distribution operations are located in California, Missouri, New York, Ohio, Texas, Virginia and Wisconsin.
        Local recruiters had been working on the project - code-named "Downstream" - since April, said Macon Economic Development Commission Senior Vice President Pat Topping.
        By November, the Macon-Bibb County Industrial Authority (IA) had firmed up an incentive package for a then-unnamed firm, contingent upon the company's choosing the local area for its new facility. The IA voted to issue up to $46 million in industrial revenue bonds for the project. Those bonds, backed by the company's credit, will fund the cost of the distribution center's land, building and equipment. The bond issue involves no tax money, local officials said, and it doesn't entail any city or county financial obligations.
        In addition, Macon economic development officials pushed through a small but significant infrastructure improvement. In November, they gained state Department of Transportation approval to erect a new traffic signal at the Airport East Industrial Park's primary intersection: the crossroads of Ga. 247 and Airport East Drive.
        Kohl's new jobs were particularly good local-area news in light of the looming shutdown by Brown & Williamson (B&W). B&W is merging its U.S. operations with rival R.J. Reynolds Tobacco (RJR) to form a new entity, Reynolds America.
Kohl's
The Macon center will serve Kohl's 75 current stores
in the Southeast.

        As part of the merger, B&W is closing its 1,200-employee cigarette plant in Macon. Those Georgia-based jobs will be transferred to North Carolina. (For more details on the B&W/RJR merger, see this month's Incentives Deal, "North Carolina's $36M Incentives Injection Catches Merck's $300M Vaccine Plant.")

Kohl's Planning More
Rapid Expansion in '04
The Georgia distribution center comes as part of Kohl's growth roll.
        The company registered a 21-percent increase in annual sales in its 2003 fiscal year (which ended Nov. 1). Kohl's fiscal-year sales totaled some $9.1 billion, which upped the company's 2003 Fortune 500 ranking to No. 204. Similarly, the company's current 75,000 employees represent a 25-percent fiscal-year increase.
        Kohl's retail footprint has expanded correspondingly, with 85 department stores added during its 2003 fiscal year. Those additions have upped the total of the company's retail operations to 542.
        And Kohl's is looking for more rapid growth in 2004. The company plans to open about 95 new stores in this fiscal year, CEO Larry Montgomery said in announcing Kohl's fourth-quarter results.
        The Macon center will break ground in the spring of 2004, completing construction in about a year, said Bonning. In addition to its Atlanta-area retail footprint, Kohl's current Southeast stores include three operations in Alabama, six in Arkansas, five in South Carolina, 10 in Tennessee, 16 in North Carolina and 17 in Virginia.

Company Also Mounting $30-Million HQ Expansion
Kohl's expansion-mindedness has extended to its headquarters operation. The company earlier in December had announced that it will begin work this spring on a $30-million addition to its Menomonee Falls operations base.
        Kohl's however, has declined thus far to say whether the 340,000-sq.-ft. (30,600-sq.-m.) expansion will spur the creation of any new permanent company jobs.


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