WHERE OTHERS FEAR TO TREAD: The making of these high-ticket earthmover tires has been backed by a high-ticket plant investment -- $100 million in Goodyear's North American Tire facility in Topeka, Kan.

Good Year for the Capital

Perhaps the biggest project news in Kansas, as in many states, did not involve the breaking of ground, but the maintenance of it. Then again, Goodyear's decision to invest more than $100 million over the next five years in the truck tire and earthmover tire operations at its 3 million-sq.-ft. (278,700-sq.-m.) North American Tire operation in Topeka could be viewed as groundbreaking in its own right.

John Loulan

        "I've been doing modernizations and expansions in North America and foreign countries for 34 years, and I have never seen states step up and clearly recognize that they have to figure out ways to hang on to these very high-value jobs," says says John Loulan, vice president of operations, manufacturing and supply chain for Goodyear's North American Tire business unit, based in Akron, Oh. He gives equal credit to state collaboration behind a consumer tire plant modernization currently under way in Lawton, Okla.
        "There just aren't a lot of companies around knocking on government doors wanting to build big new factories," he continues. "The question becomes how you keep these great big old factories we have in the United States viable in the economic environment we have and on the somewhat un-level playing field we compete on. I think these two states and the union in Topeka have really come together and looked for ways to find solutions. We don't need long-term tax incentives, we need cash in the short term."
        And cash is what they got, in the form of state bonds issued in increments of $10 million for every $50 million that Goodyear invests in the Topeka factory. The state will pay off the bonds over 15 years by using a portion of Goodyear employees' withholding taxes. In addition, United Steelworkers of America Local 307 voted to forego a raise in favor of stock options, in order to keep the 1,700 jobs the facility supports. Loulan says there were plenty of options for the company at the outset.
        "We could have made the investment overseas with a partner called Nippon Giant. We could have made the investment in our Danville plant, where we already have some of this technology. But what we needed to do was find a competitive solution for our plant in Topeka."
        A greenfield site in Medicine Hat, Alberta, was also considered, but the economics of the site were not in its favor, especially after Topeka synergy kicked in.
        "What's happened here that has been precedent-setting and creative and innovative on the parts of both these states is they have recognized the value of these high-caliber jobs that smokestack industry like Goodyear brings to their state," says Loulan. "They have begun to recognize the need to find a way to hang on to those jobs, and the only way they're going to do that is to help these businesses remain competitive globally. In smokestack industry, we're saddled with huge legacy costs, incredible double-digit rises in medical and drug costs that are generally taken care of by other social systems in other countries, and we're competing against that. So this synergy between labor, government and industry seems to be the only interim solution we can come to. It's probably not the entire answer to how we remain competitive in North America, but at least it's a beginning."
        The property tax burden of around $2 million is still the same for the plant, but tax exemptions were granted by the county. Asked about their value, Loulan says it's considerable, but "more important than that is the state's willingness to literally front money in cash."
        "States have issues with cash also, and what the best deal is for the state and for the companies," adds Roger Gadda, the manager of manufacturing accounting services for North American Tire who worked for six months on the project. "Through a lot of hard work and persistence, we managed to get an equitable, creative agreement."
        Like those other Plains corporate outposts, this plant was built by the federal government in 1944, and purchased by Goodyear in 1946. While huge, the facility is just one piece of the division's North American portfolio, which comprises 19 factories and 23 distribution centers, all with exceedingly large footprints. Topeka will be the third Goodyear plant to receive the company's Impact technology, which has already been installed at the plants in Danville and Lawton. Loulan says the technology will eventually be rolled out around the world. But for now, the sheen lingers brightest in Kansas.

Target Corp. hopes this site in Topeka, soon to be home to an $80-million distribution center, will prove to be fertile ground for company growth.

        "It was a good demonstration on the part of the whole organization out there that they understand they have to change, commit and cooperate in order to find ways to stay competitive," he says.
        The Goodyear project came directly on the heels of another Topeka peak moment: the announcement of Target Corp.'s $80-million, 650-job distribution center. Both projects got a boost from the city's quarter-cent economic development sales tax that voters approved in 2000. Target officials praised the flexibility of local officials, as well as the speed with which the project could be pursued – a key element when 100 new stores are popping up annually.
        "Topeka provided a perfect fit for our new distribution center," said Mitch Stover, senior vice president, distribution services, for Target. The 1.3-million-sq.-ft. (120,770-sq.-m.) building will sit on a 143-acre (57.2-hectare) site, and is the first occupant in the city's new 400-acre commerce park. Topeka is kicking in approximately $18 million in improvements and backing for the project, including $3-million for roads and land acquisition.