Week of October 28, 2002
  Project Watch
Dieter Zetsche
"IF" WRIT LARGE: The Windsor plant, which could create 3,000 jobs, "is not a final, done deal as long as we don't have the viability proven," Chrysler Group President Dieter Zetsche (pictured) allowed.
Union Pact Inked, DC Announces
1,000-Employee Canadian Plant -
But with Big Ifs
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

WINDSOR, CanadaDaimlerChrysler plans to bring a new 1,000-employee plant to Windsor, Ontario, Canada - a striking sea change from a few weeks ago, when the automaker's existing Canadian operations seemed hell bound for a fractious shutdown.
        As reported in our Project Watch for the week of Oct. 14, 2002 ("New Union Pacts with Big Three Spawning Multiple Canadian Expansions"), DaimlerChrysler was edging perilously close to a crackup in negotiating with the 47,000-member Canadian Auto Workers (CAW).
        It almost came to that. The CAW was only 25 minutes from hitting the picket lines. The action would've clamped down operations at DaimlerChrysler's five major Canadian operations, all in Ontario - two assembly plants in Windsor; an assembly plant in Brampton; an engine parts plant in Toronto; and a seating facility in Ajax.
        But with the 11th-hour CAW pact, the Stuttgart, Germany-based automaker committed, at least tentatively, to invest between US$383 million and $639 million in a new Windsor assembly plant, company officials said.
        The new Canadian plant, however, shares a significant similarity with DaimlerChrysler's recently disclosed plans for the Savannah, Ga., area (for the full story on the Savannah project, see this week's Blockbuster Deal). Like the Georgia plant, the Windsor project's future is shadowed by substantial doubts.
        The Big If for the Windsor plant revolves around federal and provincial project support. Thus far, no government official has publicly backed such support. But without that aid, the project may not proceed, DaimlerChrysler officials have said.

Jim Flaherty
"I will repeat that our policy consistently in Ontario has been we don't give cash subsidies picking winners and losers in any particular business," said Ontario Enterprise Minister Jim Flaherty (pictured).
CAW Pact Breaks New Ground
Ground-breaking support, however, was what DaimlerChrysler ultimately got from the CAW. The new labor contract contains several unique elements, including:
        Implementing a two-tiered wage system: The new agreement generally followed the wage-increase pattern reached in the CAW's earlier agreements with Ford Motor Company of Canada and General Motors of Canada. As with Ford and GM, DaimlerChrysler agreed to increase wages for existing workers by 3 percent in each of the contract's first two years and by 2 percent in the third.
        But new employees at the Windsor plant will earn only 75 percent of CAW's base wages during their first 18 months on the job. During their next 18 months of employment, those workers' pay will rise to 87.5 percent of the CAW's base.
        That wage-rate concession - which will only apply to the new Windsor assembly plant - will enable DaimlerChrysler to save $50 million-plus in the plant's first three years of operations, said Phil Bezaire, the automaker's chief Canadian negotiator.
        Cutting suppliers in on the action: Like most automotive plants, the Windsor facility will pull in a good-size army of suppliers - between 1,500 and 2,000 workers, according to DaimlerChrysler officials. The Windsor plant's suppliers, however, will work in a strikingly different mode from the automaker's other North American operations.
        That difference will reflect DaimlerChrysler's efforts to make the Windsor operation resemble its European and South American factories. Suppliers, company officials say, may get equity participation in the Windsor plant; some may even own some parts of the plant (e.g., paint and body shops).
        Those issues are still on the table. DaimlerChrysler is currently negotiating with suppliers to determine the specifics of their relationships with the Windsor plant, Chrysler Group President Dieter Zetsche said.
        Exactly where suppliers will set up operations is part of that discussion. Some will locate in the nearby supplier park that DaimlerChrysler will establish, while some may locate inside the Windsor plant, Zetsche said.
        DaimlerChrysler COO Wolfgang Bernhard reportedly wants the Windsor plant to resemble the automaker's operation in Hambach, France, which makes the Mercedes-Benz Smart subcompact. Nearby suppliers provide most parts for the Hambach plant on conveyor belts that run directly to the assembly line.
        Including suppliers in the final agreement: Windsor plant suppliers' pay was also part of the final agreement that the CAW and DaimlerChrysler hammered out. Those suppliers will be paid "wages and benefits competitive with other firms in the area supplying such products or services," explained DaimlerChrysler Canada Vice President of Human Resources Phil Bezaire.
        The final agreement also stipulates that any suppliers that own any part of the Windsor operation will also be covered under the CAW-DaimlerChrysler pact.
Allan Rock
"We haven't ruled out any options," Canadian Industry Minister Allan Rock (pictured) said of support for DaimlerChrysler's proposed Windsor plant.

        "That plant will open in Windsor, and there will be 3,000 jobs there, and they will line up 10 miles deep to be part of the Canadian Auto Workers union and DaimlerChrysler," predicted Ken Lewenza, chairman of the CAW's bargaining committee with DaimlerChrysler.
        The new contract, however, will have no effect on the scheduled July 2003 shutdown of DaimlerChrysler's 1,200-employee Dodge Ram plant in Windsor.

Government Grants Still in Doubt
The CAW pact is one of three "innovative agreements" necessary to make the Windsor plant economically viable, Zetsche said.
        The remaining two agreements must be forged with suppliers and the government. Zetsche, in fact, refers to the union, the suppliers and the government alike as "partners."
        The problem there, it seems, is that no one told federal and provincial governments that they were to be partners in the project. DaimlerChrysler hasn't yet discussed financial aid with the government, Zetsche allowed last week. "We're looking forward to the discussions with the government about the framework for support," he said.
        Canada, however, hasn't heretofore participated in the incentive wars that characterize U.S. site searches. (Georgia, for example, ponied up a reported $325 million to secure DaimlerChrysler's tentative pick of Savannah.) Government officials seem wary of setting a precedent for big-bucks incentives.
        "I will repeat that our policy consistently in Ontario has been we don't give cash subsidies picking winners and losers in any particular business," Ontario Enterprise Minister Jim Flaherty told The Globe and Mail.
        Federal officials have sounded slightly more flexible. The government was already looking at strategies to attract and retain auto-industry projects. In addition, CAW officials are pressuring the government to boost support for Canada's auto sector.
        "We haven't ruled out any options," Canadian Industry Minister Allan Rock said.
        The Windsor operation is scheduled to go online in late 2005, company officials said.
        "We have done our job," CAW President Basil Hargrove said with the signing of the DaimlerChrysler agreement, which includes the automaker's commitment to spend $2.56 billion in Canada by 2007. But what job will the government and suppliers decide to take on? That will likely determine when - or whether - the Windsor project moves forward.
        "I'm very confident and optimistic, but it's not a final, done deal," Zetsche said. "But it was clear to the union from the very beginning that we cannot make a final commitment . . . as long as we don't have the viability proven."

Highland Oak business park
Computer Associates' 400-employee call center will locate in Tampa's 88-acre (35.6-hectare) Highland Oak business park (pictured), retaining enough space to rapidly add 200 more employees if business demands dictate.

Computer Associates Dials Up Tampa for Call Center Consolidation, Expansion
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

TAMPA, Fla. – Ending a site search that spanned the U.S. Southeast, Southwest and Midwest, as well as Canada, Computer Associates (CA) has picked Tampa, Fla., for a 400-employee national Client Interaction Center.
        "This is a win for Florida because of the jobs we are bringing to the area; a win for CA because of the talent pool we are going to be able to tap into; and a win for our employees, who will enjoy the excellent quality of life offered by Hillsborough County," said Gary Quinn, CA's executive vice president of sales and field operations.
        The project could also turn out to be a badly needed voting-booth boost for Florida Gov. Jeb Bush (R), who's locked in a very tight gubernatorial race with surprisingly strong Democratic challenger Bill McBride.
        "As a result of our targeted, sustained effort to recruit and retain high-skilled, high-wage workers, Florida now ranks fifth in the nation in the number of high-tech jobs," Bush noted in welcoming the project to Tampa.
        In addition to the Governor's Office of Tourism, Trade and Economic Development, the team that successfully recruited the CA project included Enterprise Florida, Hillsborough County and the Tampa Chamber of Commerce Committee of 100.

CA's Gary Quinn
JUST WIN, BABY: "This is a win for Florida because of the jobs we are bringing to the area; a win for CA because of the talent pool we are going to be able to tap into; and a win for our employees, who will enjoy the excellent quality of life offered by Hillsborough County," said Gary Quinn, CA's executive vice president of sales and field operations.
Project Consolidates, Expands Telemarketing Operations
The new center represents both a consolidation and an expansion. Islandia, N.Y.-based CA, which develops software and services that enable corporate users to protect and manage their computer networks, has existing telemarketing centers in New Jersey, New York and Virginia. Collectively, those three operations employ some 160 workers.
        Those centers will now close with the consolidation in Tampa. All 160 existing workers at the three operations will have the opportunity to transfer to the Tampa site. All of the Tampa center's 400 positions that are not filled by CA transfers will be filled with local hires, company officials said.
        CA's new Florida jobs will include positions for management, engineering, sales and support. Salary levels will range between $20,000 and $70,000, CA officials said.
        The Tampa center's total employment, however, may ultimately exceed the 400 positions thus far announced. The company will locate its operation in an existing 55,000-sq.-ft. (5,109.5-sq.-m.) building in Highland Oaks office park, leaving 15,000 sq. ft. (1,393.5 sq. m.) vacant for future expansion. If business demands warrant, the center could rapidly staff up to 600 workers, said CA Senior Vice President Bryan Urquhart, who headed up the company's site search.

Short List Also Included Orlando, Plano, Toronto
In addition to Tampa, Orlando; Plano, Texas; and Toronto also had sites that were on the final short list for CA's center, Urquhart explained. Earlier in the search, the company also considered sites in Atlanta; Boise, Idaho; Omaha, Neb.; and several undisclosed Canadian cities, he added.
        CA plans to invest approximately $2.5 million in the design and construction of the Highland Oaks facility, company officials said. The company will spend another $3.5 million on computers, office equipment and telecommunications infrastructure.
        Florida officials were "very aggressive" in pursuing the project, CA officials said. The company will receive an incentive package, said state officials, who didn't disclose the total value of the incentives.
        CA will definitely qualify for the state's Quality Target Industry program if it meets its goals for hiring and retention. The QTI program provides a $3,000 tax refund for each new employee. CA already had a presence in Tampa Bay, but not in call-center operations. The company has about 35 sales and service representatives working in the area.

Hitching Its Wagon to the Ground

BULKING UP THE GROUND GAME: FedEx Ground's $1.8-billion expansion program over the next six years will double daily package-shipping capacity.
$1.8B FedEx Expansion Blitz
Will Include 10 New Hubs,
23 Hub Expansions
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

MEMPHIS, Tenn. – A lot of U.S. cities are going to be hoping for a multimillion-dollar bricks-and-mortar package from FedEx: The Memphis, Tenn.-based company has just announced a six-year $1.8-billion expansion program for FedEx Ground. The centerpieces of the expansion will be the creation of 10 new FedEx Ground central distribution hubs and the expansion of 23 existing central hubs.
        Four sites have already been picked for the new hubs. FedEx will build central hubs in Cincinnati; Dallas; Hagerstown, Md.; and Memphis, all opening by 2006, company officials said in announcing the expansion program. FedEx hasn't disclosed locations for the six other new hubs, but did note that those operations would open by 2009.
        The expansion agenda will also extend beyond the 10 new and 23 expanded central distribution hubs. FedEx will also expand or relocate more than 300 other existing facilities over the next six years, the company announced.
        FedEx hasn't estimated how many jobs will be created by the expansion program.
        The expansion blitz will nearly double FedEx Ground's daily package volume capacity, increasing from the current 2.5 million to 4.8 million by the end of fiscal year 2009, said FedEx Ground President and Chief Executive Officer Daniel Sullivan.
        "FedEx Ground operates the only fully automated hub network in the ground package industry," Sullivan said. "With the addition of these facilities - each featuring the most advanced material handling and scanning technology in the world - we will further strengthen our competitive advantage by providing customers with more information faster and by enhancing the productivity and efficiency of our sorting operations."

Grounding Out High Margins
The ambitious expansion program continues the remaking of FedEx, which is now hitching its profit wagon to the ground.
        The company initially based its business in its niche (albeit a huge one) in overnight shipping, aiming its services primarily at large companies. In recent years, however, FedEx has added a host of new facilities to broaden both its services and the size of the companies it serves.
        Driving that strategy is the company's desire to become less susceptible to economic cycles. The current economic slowdown, for example, has triggered a sharp decline in overnight shipping volume.
        FedEx Express, the overnight air-express operation, still accounts for some three-fourths of FedEx's total earnings. FedEx Express, however, has seen its total domestic package deliveries drop for seven consecutive quarters.
        The $1.8-billion expansion will bolster FedEx's ground network, which the company began developing in 1997 by buying Caliber Systems. FedEx has invested $650 million in FedEx Ground over the past three years, but growth has already absorbed much of the added capacity, Sullivan explained.
        UPS still clearly dominates the U.S. ground-shipping market, holding a 79-percent share. FedEx, by comparison, holds an 11-percent share of the ground-shipping pie.
        But ground delivery, Sullivan explained, is where FedEx sees its current growth engine - as well as its meatiest profits. FedEx Ground's operating margins are more than 12 percent, nearly four times greater than the 3.3 percent operating margins for FedEx Express.


©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.