“Great news for Pike County!” Gov. Bob Taft exulted, raising clenched fists aloft after USEC announced plans in January 2004 for a US$1.5-billion uranium enrichment plant in tiny Piketon, Ohio (pop. 1,900).
USEC’s massive news, though, is a complex mix of both past and present, old and new.
“We are going back to the future,” U.S. Rep. Rob Portman aptly noted at the Piketon announcement, “back to a plant with a proud history and a proud work force.”
The sprawling 3,708-acre (1,501-hectare) tract was once home to a USEC uranium enrichment operation. Built in 1954, that facility employed almost 2,000 workers at its peak.
But the Bethesda, Md.-based company decided to shut down its Piketon plant in 2001. Citing cost pressures, financially wobbly USEC relocated the work to its other facility in Paducah, Ky.
Now, USEC’s latest decision has turned Kentucky’s good news of 2001 into old news. Reopening a new, radically different Piketon plant means that the 1,200-employee Paducah operation will shut down in 2010.
Piketon’s rebirth owes much to the plant’s centrifuge technology. Dubbed “the American Centrifuge,” the Piketon project will be the first-ever U.S. commercial operation utilizing centrifuge technology to enrich uranium fuel for commercial nuclear power plants.
European firms have used centrifuge processes for decades, enriching uranium by spinning it at high speeds in hundreds of large cylinders. In the U.S., though, gaseous diffusion has been the preferred technology for 50-plus years.
“The American Centrifuge’s new decade will bring Piketon a new deal – cutting-edge technology, world leadership in uranium enrichment and a new period of opportunities,” said William H. Timbers, president and CEO of USEC, privatized by the U.S. government in 1998.
USEC’s “new decade” will come 20-plus years after the DOE’s fitful centrifuge program. The agency spent $4.4 billion installing the Ohio plant’s infrastructure. Then, after briefly testing its operation in 1985, the DOE altogether abandoned centrifuge for another technology, which also never reached fruition.
That convoluted history, though, left behind a $300-million advantage – the cost in Paducah to install centrifuge infrastructure paralleling the Piketon plant’s.
The Piketon site also had an even older edge: enough distance from the New Madrid earthquake fault. USEC’s Paducah plant is located near the New Madrid, formed over millions of years by perhaps thousands of earthquakes.
Fortifying the Kentucky facility for centrifuge operations would have cost $75 million, USEC found. (Ironically, the company cited the Paducah plant’s “history of reliable operations” in earlier closing the Ohio operation.)
“The Ohio proposal,” Timbers said, “offered assurances concerning seismic conditions,” as well as “the right mix of economic benefits, existing infrastructure and scheduling advantages.”
One of those economic benefits is Ohio’s $125-million incentives package. The Ohio Legislature passed two bills specifically designed to bulk up its bid, expanding tax credits for job creation and manufacturing equipment purchases, and adding five years to local property-tax exemptions.
Kentucky’s incentives were actually “considerably larger,” Bluegrass State officials averred. But in the final analysis, state subsidies paled compared to $375 million: That’s what Piketon’s centrifuge technology and Paducah’s fault line together were worth.
Ohio officials also put on a far different face from the angry scowls many wore when USEC closed Piketon.
Then, for example, Taft had said, “I am going to press the U.S. Treasury to enforce this [privatization] contract, investigate if this company dealt in good faith and explore other legal options for protecting Piketon.”
But Taft led the recruiting team, even lunching at the governor’s mansion with Timbers and Portman. Local officials ran ads in five newspapers, and area businesses and residents sent USEC 8,000 letters of support. USEC’s 500 jobs, said Timbers, will pay $50,000 on average, very welcome news in an Appalachian area where poverty rates often top 25 percent.
Several major steps remain for the project. USEC must build a $150-million centrifuge test plant in Piketon. And the company must later this year secure the permanent plant’s Nuclear Regulatory Commission license.
“Increasingly,” said Timbers, “America is recognizing the need to boost nuclear power use to support our energy independence and to protect national security.”
Aerospace manufacturers like Boeing are certainly sought after by many communities, but it’s the real estate managed by the aircraft end users that’s also making headlines. A slew of facility decisions over the past year by airlines large and small is leaving many cities quaking with either panic or gratitude.
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Feel-good airline Southwest is closing three of its call centers, including a 60,000-sq.-ft. (5,574-sq.-m.) center in Little Rock, Ark., that employed 713. And in a major early 2003 pullout, United Airlines, soon to emerge from its Dec. 2002 bankruptcy, abandoned its $540-million, 1.7-million-sq.-ft. (157,930-sq.-m.) maintenance and overhaul facility in Indianapolis, leaving the city and thousands of workers holding the oversized bag.
While these facility battles continue, some communities are just fighting for the flights themselves, as airports and airlines push and pull to cut costs wherever they can. St. Louis has been hurt by American Airlines’ pullout of some 200 flights, and Pittsburgh is fighting off threats by US Airways to close or significantly shrink its hub there. Meanwhile, in Wisconsin, Minne-sota-based Northwest Airlines won a state court battle to invalidate a state tax break for airlines with headquarters or hubs in the state. The development will force struggling Mil-waukee-based Midwest Airlines to pay significantly more in property taxes.
But change is in the air. For one thing, according to numbers released in March 2004 by Airports Council International, passengers were up by 2 percent in 2003 and cargo was up by 3 percent. In the meantime, airlines large and small are opening major new hangar, terminal, training and customer service facilities. Little Pace Airlines is keeping its maintenance base in Winston-Salem, N.C. Fort Lauderdale-based Spirit Airlines will be using $125 million in new funding toward aircraft, facilities and technology. Fast-growing JetBlue is building big projects in the New York City area and Orlando (see p. 191 of the March issue of Site Selection). And Orlando-based AirTran has chosen Carrollton, Ga., for its third call center, where some 200 employees were due to start work by the end of March 2004.
Making the most news lately is American Airlines, whose corporate real estate executives re-evaluated a plan to close maintenance bases in Tulsa and Missouri.
In Tulsa, a county 1-cent sales tax plan that went into effect in January 2004 is helping fund incentives that include some $22.3 million toward capital improvements at the Tulsa Maintenance & Engineering Center. In Missouri, a combination of brownfield tax incentives and some potential financing arrangements between the state and the City of Kansas City are helping American stay put.
In addition, at the same time it’s pulling out of gate real estate in St. Louis, American has pledged to increase its departures out of Dallas/Fort Worth International Airport by 21 percent by 2007, in return for a larger share of the airport’s passenger facility charge of $4.50 per ticket.
The airport, home to the newly chartered Airport Facilities Council, is embarking on its own $2.7-billion expansion project, which will include 2.1 million new sq. ft. (195,090 sq. m.) in the airport’s central terminal. That will, of course, eventually add further to American’s costs.
The pushing and pulling continues.
In the midst of popular hysteria about outsourcing, it pays to recognize that it’s been going on for some time, and not just on a one-way street. A recent batch of corporate projects shows just how multilateral the capital investment can be.
Leading off is a traditional move: Michigan-based TI Automotive, a supplier of fluid storage and delivery systems, is building its seventh manufacturing plant in Mexico, a 60,000-sq.-ft. (5,574-sq.-m.), 400-job plant in the Villa Florida Industrial Park in Reynosa. Expected to open this summer, the facility will supply brake and fuel lines for OEMs throughout North America. TI Automotive operates 10 facilities in Mexico, just part of a portfolio that includes more than 130 facilities in 29 countries, with 33 in the U.S. and four in Canada.
Following on the large GM expansion in Lordstown, Ohio, Ontario, Canada-based Automodular Corporation plans to begin production in early 2005 at a new 70,000-sq.-ft. (6,503-sq.-m.) plant in that same Ohio township, after receiving contracts from GM and Delphi to sub-assemble and sequence components for GM’s new Cobalt vehicle. That makes up in some respects for the company’s loss of GM contracts in conjunction with assembly work in Wilmington, Del. and Oshawa, Ont. Automodular operates eight plants and employs more than 1,000 people.
Rounding out this chapter of global trade is Satyam Computer Services, which is opening its first Canadian development center in a 4,000-sq.-ft. (372-sq.-m.) facility in Mississauga, Ont., that could employ up to 50 people.
“With the opening of our new Canada Development Center, Satyam will be able to better facilitate near-shore services for our customers in the United States,” said Satyam’s President Ram Mynampati. Known for its SAP support, the India-based IT solutions provider operates similar centers in India, the U.S., the U.K., the Middle East, Malaysia, Singapore, China, Japan and Australia, and has facilities in 45 countries overall. The company’s Venture Engineering division recently announced it would operate a design center in Hyderabad, India, for Michigan-based Tier 1 automotive supplier Collins & Aikman.
Summing up sourcing trends past and present, Satyam Senior Vice President Raj G. Asava told attendees at a conference in Arizona in November 2003, “Cost, quality, time to market and continuous improvement are core business drivers for all businesses regardless of industry and geography.”