Let?s Make a Strategic Deal: 1996?s Top 10

The deal.

For expansion-minded firms, it?s the alpha and omega of economic enterprise, the rocket fuel of business growth.

Good deals deliver: capacity, jobs, profits and prosperity.

Every day, development projects evolve into good deals for both the company and the community, and thousands are sealed every year. Some of the best, though, are object lessons in patience and professionalism for economic developers.

For expanding firms, some development projects drive traditional growth in capacity or efficiencies; others fuel strategic initiatives to derive new competitive advantages, with infinite possible combinations of expansion modes. The top deals among hundreds of development projects announced in 1996 — as judged by the editors of Site Selection — offer insights into cutting-edge strategic management practices.

AK Steel Rockport, Ind.; $1.1 bill.; 410 jobs

Industry analysts say AK Steel?s Rockport, Ind., complex represents a strategic departure for the integrated steel maker: The Rockport Works will not create additional raw steel capacity (the project lacks steel melting and refining facilities). Instead, it will create additional finishing capacity and produce the widest rolls of steel in the world, enhancing mill productivity.

With up to $72 million in combined state and local incentives, the plant?s per-job cost could reach $175,000, making the project the most expensive economic development effort in Indiana history, observers say.

American Iron Reduction; Convent, La.; $200 mill.; 70 jobs

Though ultimately the site selection process was fairly typical, the first decision — ?how are we going to make the product?? — would drive all that followed, says American Iron Reduction Senior Vice President David Yarbrough.

When the process technology for the joint venture between Birmingham Steel and GS Industries was decided, it didn?t take a lot of hard thinking to turn away from Venezuela and toward the U.S. Gulf Coast.
The company looked to the Mississippi River for low-cost shipping, and found a willing transportation partner in Illinois Central Corp. to jointly develop the site.

Fidelity Investments; Merrimack, N.H.; $50 mill.; 1,750 jobs

When financial services giant Fidelity Investments needed room to expand, the firm looked to the north side of the Boston commuting corridor to retain a majority of its teleservice work force. In Merrimack, N.H., Fidelity lucked into a bargain facility that required minimum work to install a state-of-the-art data center.

Price, performance and location were the key criteria for Fidelity?s decision to locate in Merrimack, with a planned work force of 1,750 by the end of 1997, explains Ronald C. Duff, president of Fidelity Corporate Real Estate.

Harley-Davidson; Kansas City, Mo.; $100 mill.; 350 jobs

For motorcycle maker Harley-Davidson, choosing a location for its first new factory also offered an opportunity to elevate labor relations to unheard-of levels of collaboration. Harley?s historically good relations with two unions at its plants accelerated significantly with the decision to shift from cooperation to joint leadership.

?This facility is a once-in-a-century catch for Kansas City,? Mayor Emanuel Cleaver bragged to reporters. The plant also is expected to bring 20 new suppliers to town once Harley begins making Sportster bikes.

Intel; Fort Worth, Texas; $1.3 bill.; 1,200 jobs

Every time the world?s leading computer-chip maker builds another plant, Intel?s site selectors hold a de-briefing and refine the process for the next project. That?s because there?s always a medium-to-short list of locations in line for Intel?s seemingly insatiable production needs. ?It?s what we do to stay on a fast track,? says Intel Vice President for Corporate Real Estate/Site Selection Charles ?Chuck? Pawlak.

Latest to bubble to the top of the short list is Fort Worth. ?We?d been considering Texas for many years,? says Pawlak.

MSNBC, Secaucus, N.J.; $550 mill.; 490 jobs

The way New Jersey saw the deal, 800 existing jobs hung in the balance, not to mention the promise of 400 more plus $500 million in new capital investments.

To 24-hour cable news channel MSNBC, New Jersey?s generous economic incentive plan ?made it easy for us to make a final decision,? network President Robert Wright announced. In the end, the deal was structured to allow NBC parent GE Capital to purchase $150 million in state-issued, low-interest bonds to finance new equipment and other expenses.

Sun Microsystems, Inc.

Broomfield, Colo.; $150 mill.; 2,000+ jobs

Burlington, Mass.; $150 mill.; 2,000+ jobs

Santa Clara, Calif.; $160 mill.; 2,000+ jobs

Sun?s three-pronged expansion solved a problem most firms would love to have: Extremely rapid growth demanded added capacity — and not necessarily in Sun?s Silicon Valley eipcenter, where 9,000 employees work in some 40 buildings.

The expansion triple play meets many needs: access to essential brainpower and harmony of internal infrastructure, including workplace design.

Toyota, Buffalo, W. Va.; $400 mill.; 300 jobs

Toyota?s fifth auto parts plant in the United States raises the firm?s total U.S. investment to $6 billion. Site preparation is under way, with the plant expected to be operating by the fall of 1998.
Toyota plans to begin producing engines for use in the North American-made Corollas.

WaferTech, Camas, Wash.; $1.2 bill.; 800 jobs

A joint venture with long-time, key customers to build a semiconductor foundry in the United States marks a departure from business-as-usual for Taiwan Semiconductor Manufacturing Co. (TSMC). TSMC?s Ron Norris, office of the president, says the WaferTech deal gives three minority partners — Altera, Analog Devices and Integrated Silicon Solution — ?some dedicated capability and also lets them share in the profits related to this venture and see a lower net cost to their products.?

The location decision was driven as much by strategy as by the location of the partners, Norris explains. ?Half our customer base is in the United States. This is the source of the technology evolution.? says.

White Oak, Richmond, Va.; $1.5 bill.; 1,000+ jobs

The joint venture between Siemens and Motorola reflects confidence in the continuing, long-range demand of DRAM (dynamic random access memory) chips. ?We believe the market is very strong and increasing, said Motorola spokesman Jeff Gorin in announcing the project.

The chips will primarily be used for personal computers, and is Siemens? first major semiconductor facility in the United States. The joint venture is Motorola?s second planned facility in Richmond. The first plant is expected to produce PowerPC chips by 1999.