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by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
HOUSTON – Citgo Petroleum Corp. is adding a huge tank-load of fuel to Texas' economy. The petroleum giant has decided not only to relocate its headquarters, along with 700 jobs, to Houston. It's also investing $828 million in an expansion of its refinery in Corpus Christi, adding 120 more jobs.
In August of last year, Citgo announced that it was considering relocating its Tulsa, Okla., headquarters to Houston. Nine months later, operational concerns were what convinced the company to actually decide to make the move, Citgo President and CEO Luis Marin said at the project announcement in Houston.
Relocating the company's headquarters, he said, will give Citgo stronger access to its Gulf Coast customers and its refineries in Corpus Christi and Lake Charles, La. In addition, a Houston base will provide Citgo with greater proximity to its parent firm, Caracas-based Petroleos de Venezuela.
Those issues, combined with Houston's mass of energy firms and expertise, will strengthen Citgo's growth potential, Marin explained.
"Our decision is based on the future," he said of the headquarters relocation. "We are making the decision looking to the future. The energy business is the cornerstone in the state of Texas and the city of Houston. When combined with Citgo's people, resources and assets, I feel confident that this relocation will propel the company to the next level of success."
Greater Houston Partnership Chairman Rob Mosbacher also trumpeted Houston's energy strengths as a major draw for the project.
"Good business climate, coupled with critical mass in terms of oil and gas presence, makes this the right place to be," said Mosbacher, president of Mosbacher Energy Company. "And it's really the most important place to be if you're in the oil and gas business."
Bowl, $35 Million in State Subsidies
The headquarters relocation to Houston, he added, "enhances this city's reputation as the energy capital of the world, and sends one more strong signal that Texas is at the forefront of new jobs and opportunities as the national economy begins to recover."
Perry's wooing of Citgo included having Marin and other top company executives as guests at February's Super Bowl in Houston.
"It's not every day that a refiner and a marketer of petroleum products with annual revenues of $25 billion comes knocking at your door," said the governor.
Another part of Texas' answer to Citgo's knock was a $35-million incentive package. That package includes a $5-million grant from the Texas Enterprise Fund (TEF). Texas lawmakers last year approved the $295-million TEF, which Perry had requested to encourage expansions and recruit new companies to the state.
Texas' subsidies also include $15-million low-interest loans from both Houston and Corpus Christi through the state Economic Development Bank's bond program. The interest rates on the loans are less than 1 percent, state officials said.
Citgo is securing the loans. Economic Development Bank regulations, however, require that public entities sponsor such loans.
of its Corpus Christi refinery (pictured) will pay average
annual salaries of $88,000.
But one of the properties that the company looked at earlier is off the market. ChevronTexaco two months ago decided to buy a 40-story, 1.2-million-sq.-ft. (108,000-sq.-m.) downtown Houston office tower, which was built but never occupied by disgraced energy giant Enron. ChevronTexaco is relocating its international upstream business from California to Houston. The move will bring 500 relocated jobs to the downtown tower, which will also house 3,200 ChevronTexaco employees who already work in Houston.
ChevronTexaco bought the building for $102 million, reportedly less than half of what Enron planned to invest in the structure. Company officials cited competition from other buyers like Citgo as a major rationale for going ahead with the buy.
Downtown Houston may present Citgo with its most attractive options for its new headquarters home. Vacancy rates in downtown are near 22 percent, compared to the city's 16-percent overall rate.
West Houston, however, may exert a stronger pull for Citgo. That section of the city is home to the operations of a large cluster of energy-related concerns, including BP, ConocoPhillips, Exxon Mobil Chemicals, Shell Oil Exploration and Production, and Transocean.
The 700 Houston-bound jobs from Citgo, Houston's latest energy catch, will be a mix of transfers and new hires, said Marin. Citgo is keeping 300 positions in accounting, information technology, pipelines and research in Tulsa.
Citgo's investment in expanding its Corpus Christi refinery will include adding capacity and retooling the operation to produce two new lines of low-sulfur fuels. The refinery's 120 new jobs will have average annual salaries of about $88,000, company officials said.
Citgo hasn't released any estimates on the salary levels of the headquarters jobs that will be relocated.
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by JACK LYNE, Site Selection Executive Editor
of Interactive Publishing
DETROIT – Shifting their groundbreaking partnership into high gear, General Motors Corp. and Ford Motor Co. have announced that they'll invest US$720 million at three plants. That capital will be used to retool significant parts of those facilities, two in Michigan and one in Ohio, to begin building a new, jointly designed six-speed automatic transmission in 2006.
The huge outlay won't create any new jobs. But it certainly does mean a much smoother ride in the lives of some 1,100 existing workers. Those employees - who work at Ford's plants in Sterling Heights, Mich., and Sharonville, Ohio, and at GM's plant in Warren, Mich. - will assemble and build components for the new transmission.
Securing the future for 1,100 jobs is definitely no small potatoes, given the sharp cost-cutting ax that the Big Three are wielding these days. Ford, for example, announced in 2002 that it was going to close seven existing plants as part of its "Revival Plan." GM, on the other hand, announced in late 2000 that it was cutting 10 per cent of its U.S. and European work force.
The two companies' joint announcement in Detroit will start the wheels spinning on three major retoolings.
GM will invest $350 million in its Warren transmission plant, preserving some 500 jobs. Ford's total investment in the project is $370 million, which will secure 400 jobs at the Sterling Heights plant and 200 jobs at the Sharonville facility.
The three transmission plants, however, contain much more than the 1,100 jobs that will be retained. Ford's 2.4-million-sq.-ft. (216,000-sq.-m.) Sharonville, facility for example, employs more than 2,200 people, while its two-million-sq.-ft. (180,000-sq.-m.) Sterling Heights plant employs more than 1,900 workers. GM's two-million-sq.-ft. (180,000-sq.-m.) Warren facility has 1,700 workers.
Indeed, the project says a lot about the future in more ways than one.
Market demand is one. Currently, six-speed transmissions make up only a tiny fraction of the cars rolling on U.S. roads. Less than 1 percent of all vehicles that are now sold in North America come with six-speeds installed.
That, though, is getting ready to change, and fast. Auto-industry analysts are projecting that six-speeds will be installed in 15 percent of the North American vehicles that are sold in 2010, with the percentage jumping to almost 50 by 2015.
"They help to optimize power, smooth operation and increase fuel economy," Szczupak said of Ford and GM's new six-speeds.
"This is why they are going to become more prevalent," he continued. "Twenty-five years ago, the average American was driving a car with a three-speed automatic, so this is a trend worth noting."
The two companies are projecting that their new six-speeds will provide 4 percent higher fuel economy than the four-speed automatics that come standard on most vehicles sold today. The six-speeds will be built to boost fuel efficiency through their wider gear-ratio span and between-gear intervals that are optimized for economy, Ford and GM officials said.
In addition, the compactly designed transmissions will provide higher torque capacity than most existing front-wheel-drive systems. The new transmissions will be used in both cars and sport-utility vehicles.
It Re-Make the Auto-Industry Mold?
The companies first entered into the partnership in October of 2002. The two inked a memorandum of understanding to cooperate on the new transmission's design, engineering and testing and to collaboratively work with suppliers in developing and buying the new components. Prior to that, cross-corporate cooperation between the two had been minimal, including selling each other's parts. GM North America President Gary Cowger called the pact "a historic announcement."
But what will likely make the most compelling sense to other rival automakers are the dollars saved by the partnership. If either company had gone it alone on the transmission, its capital outlay would've been as much as $1 billion, GM's Group Vice President for Powertrains Tom Stephens said in Detroit.
"This could be the start of a new era in the world of automatic transmissions," Stephens noted. "First, this new six-speed transmission will have a simple but elegant design that improves overall transmission operation at a cost competitive with today's automatics. Second, it showcases the benefits of collaboration with other companies on major components, which are extremely costly to bring to market."
Compete Once They Hit the Road
While using the same transmission, the two companies' six-speed models will be distinct in feel and performance because the transmissions will be mated to different engines.
Ford's Sterling Heights plant will build major components and assemble the company's transmission. Its Sharonville plant, the company's new center of excellence for gear machining, will manufacture the gears for Ford's transmissions. GM's Warren plant will build major components and assemble GM's six-speeds.
With 900 of the 1,100 retained jobs, Michigan was a big winner with the project. Gov. Jennifer Granholm (D), called the partnership "the kind of visionary cooperation that will truly drive Michigan's 21st-century economy."
Dick Shoemaker, vice president of the United Auto Workers, said that the project demonstrates that automakers don't have to locate new projects in the U.S. South or offshore. The UAW, he added, supports the Ford-GM arrangement, and it required no concessions.
"The more ways that automakers can find to reduce the amount of capital that each one of them has to spend, the better off everybody is," Shoemaker said.
Ford's Sterling Heights plant currently builds four-speed front-wheel-drive automatic transmissions for the Ford Focus, Taurus, and Freestar, and for the Mercury Sable. Its Sharonville plant builds four and five-speed automatic transmissions for rear-drive sedans and SUVs sold under the Ford, Lincoln, Mercury and Jaguar names.
GM's Warren plant currently builds four-speed front-wheel-drive automatic transmissions, transmission stampings and torque converters for the company's cars and trucks.
Continues America-Only Call Center Strategy
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
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Lenexa, Kan. – Don't count T-Mobile USA Inc. among the fast-growing ranks of firms that are off-shoring their call centers.
The fifth-largest U.S. wireless telephone carrier is adding 110 workers in its new and expanded facility in Lenexa, Kan. T-Mobile USA is building a $25-million, 77,000-sq.-ft. (6,930-sq.-m.) center in the 75-acre (30-hectare) Renner Ridge Corporate Park in Lenexa, part of the Kansas City metro. The new facility will house some 750 employees, said Sue Nokes, the company's senior vice president of customer service.
The expansion continues the USA-only policy for T-Mobile USA's call centers. The subsidiary of Germany's Deutsche Telekom has located all 14 of its call centers in the U.S., including the new 600-employee facility that will open this summer in Meridian, Idaho.
That strategy is at odds with the increasingly popular strategy of cutting labor costs by selecting offshore locations for corporate call centers serving the U.S. But the larger location driver for T-Mobile USA, said Nokes, is to have its reps working in the same regions as the customers who call the facilities for assistance.
"The strong employment base here, along with our Lenexa team's strong performance and professionalism, were clear indicators that this is the right place for expanding our customer service operations," said Nokes.
The area's labor pool has gotten an extra boost from another telecom concern, Sprint Corp., which is headquartered in Overland Park, Kan. Sprint, which still employs 20,000 in the Kansas City area, has laid off 21,000 workers in the last two years.
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The Lenexa operation was actually one of T-Mobile USA's smaller call centers. The company likes to have its call centers big enough to house about 700 employees, increasing economies of scale, Nokes noted.
"We're very pleased that T-Mobile USA has chosen to expand its Kansas customer service presence," said Lt. Gov. John Moore, who's also the state's Secretary of Commerce and Housing. "Their choosing a Kansas location from locations throughout the country confirms the quality work force and outstanding business climate which Kansas offers for new facilities."
Kansas is also offering incentives for the new facility. Nokes said that state subsidies were one factor in deciding to expand in Lenexa.
Final details on Kansas' incentives, however, haven't yet been disclosed. State officials anticipate that the assistance will likely include tax credits and employee-training grants.
T-Mobile USA, however, turned down Lenexa's proposed incentives. The city offered a 10-year, $2.3-million tax abatement. But T-Mobile USA declined, because it wanted to avoid the cost obligations it would've incurred by accepting the subsidy, company officials explained.
Earlier Corporate Incarnations
The company's existing 50,000-sq.-ft. (4,500-sq.-m.) facility in Pine Ridge Business Park dates back to T-Mobile USA's earlier corporate incarnations. Aerial Communications first opened the center in 1998. VoiceStream acquired Aerial Communications two years later, and then merged with Deutsche Telekom in 2001. A year later, VoiceStream was renamed T-Mobile.
The company's neighbors in Renner Ridge Corporate Park will include the headquarters of Community America, GBA Inc., the Sisters of Charity and US Central Corp.
The expanded facility will also further enlarge the Kansas City area's sizable cluster of customer-service and data-center operations. Companies that are part of that cluster include ADT Security Services, Inc., Aerial Communications, American Century, the Associated Press, Bank of America, Black & Veatch, Citi Cards, Commerce Bancshares, EDS, Hallmark Cards, Honeywell, Liberty Mutual Group, MasterCard International, Sprint, Transamerica Life, and UMB Financial Corp.
"Kansas City is one of the nation's top customer service and data center locations." said Robert Marcusse, president and CEO of Kansas City Area Development Council.
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