Week of July 31, 2006
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Google's Location Logic
Ranks Michigan Site Top Result
for 1,000-Worker Sales HQ
by JACK LYNE, Site Selection
Google, the king of Internet searches, has found a new home in Ann Arbor, Mich., for a 1,000-employee sales headquarters. The Mountain View, Calif.-based company announced on July 11th that it had chosen the Michigan college town as the base for its AdWords division. A central element in Google's business model, AdWords sells the online advertising that's the company's primary revenue source.
Ostensibly, the Midwest site seems like a departure for fast-growing Google, which historically has clustered most core operations in its Silicon Valley birthplace.
"We don't get caught up in the conventional wisdom," he explained at the project announcement inside the state capital in Lansing. "[We] try to look at things with fresh eyes."
The major attraction that Google saw in Ann Arbor was a deep pool of talent, Fischer asserted. The city is the home of the University of Michigan. One of the largest U.S. universities, UM has more than 55,000 students.
"We see Michigan as an ideal location to recruit the best and brightest workers," Fischer said.
A city of some 113,000 residents, Ann Arbor has attracted a number of high-tech operations, including the new US$150-million, 400-employee R&D center that Toyota announced last year. Even so, the Washtenaw County area's work force can't come remotely close to matching the Silicon Valley's dense concentration of skilled tech workers. For its AdWords unit, however, Google wasn't looking for such a high-tech cluster, Fischer said.
"We worry less about experience than raw talent," he noted. "We've had tremendous success hiring people straight out of universities, with majors from engineering to art history."
Google Grappling with Growth
Google, however, reportedly began looking at locations outside the Silicon Valley in early 2005. In addition to Ann Arbor, the company was said to be considering Boston; Boulder, Colo.; and Phoenix. Commercial real estate executives in Grand Rapids reported that Google also evinced some interest in that Michigan city.
Google's extremely rapid growth was the overarching driver in the AdWords site search. Of the 6,790 company employees as of March 31 in Google's first-quarter 2006 filing, 1,000 had been added since the start of 2006. The organization is currently averaging 10 new hires every day. Google has already maxed out space inside its five-building headquarters complex, known as "the Googleplex." The company is currently renting nearby buildings to accommodate its burgeoning work force. Google also announced in September of 2005 that it's adding a second Mountain View campus a few miles from its headquarters as part of a collaborative agreement with NASA Ames Research Center.
Michigan Choice: 'An Ego Project,'Ann Arbor's bid to help ease Google's space crunch may've gotten a boost from company co-founder Larry Page. Page graduated from UM in 1995 with an engineering degree, and he grew up in East Lansing, 66 miles (106 km.) from Ann Arbor. "We hope to establish as wonderful a home in Michigan for Google as I enjoyed while growing up," Page said in a statement from the company's headquarters.
Or Getting the Most Bang for the Buck?
Some observers have questioned whether Google's Michigan expansion amounts to an ego project for Page. The Wolverine State venture, however, seems very much in keeping with the company's modus operandi of getting maximum value out of its capital.
Google, for example, uses relatively inexpensive servers that only cost about $1,000 apiece, but are prone to failure. The company's fabled technological innovation comes into play in how Google interconnects the estimated 450,000 servers it now has worldwide. When any server fails, for instance, automated systems that Google created seamlessly adapt with no impact on site functioning. Consequently, the company's system is highly reliable, highly redundant and extremely fast all essential prerequisites in processing more than 200 million searches per day.
Similarly, the company has reduced its energy costs by locating some of its large server farms near low-cost hydroelectric power. At one of those sites in The Dalles, Ore., Google is quietly working on a computer that industry analysts expect will be the world's largest.
In like fashion, Ann Arbor could possibly provide a significant payoff for a comparatively small investment. While Google has released few details on its Ann Arbor operation, it has said that it expects to spend between $20 million and $50 million on the facility. That would be a very inexpensive real estate proposition compared to Silicon Valley costs. Michigan's incentives further improve Google's cost/benefit equation. The state is providing a 20-year credit on Michigan's Single Business Tax that will be worth $38 million.
Labor costs may've played a similar role in aiding Ann Arbor's case. Company officials say that annual salaries for the 1,000 AdWords employees in Michigan will average about $47,000 which will go considerably farther in southeast Michigan than in the legendarily pricey Silicon Valley.
A 'Tipping-Point' Project for Michigan?Landing Google's project is a major boost for Michigan's image. The state's recent economic news has been dominated by ongoing automotive downsizings and the exits of long-time corporate citizens like Electrolux, which relocated its 2,700-worker refrigerator plant to a lower-cost Mexican site. Michigan's unemployment rate was 6.0 percent in May, well above the U.S. average of 4.6 percent, and it's one of the states losing the most college graduates to other states.
"This is a huge, huge, huge, huge thing," Michigan Gov. Jennifer Granholm said at Google's announcement. "It's a tremendous statement about Michigan having a cutting-edge work force."
"Whether you are a business building engines or a search engine, Michigan is the place you want to be," she continued. "We are creating jobs that will allow our young people to stay in Michigan and raise families of their own."
Google's Michigan venture, Granholm added, could be "a tipping point" in the state's perception as a high-tech location.
The project is getting a lot of attention inside the techie community. E-Commerce Times, which covers e-business and technology news, went so far as to say, "Similar to the way Brad Pitt and Angelina Jolie put Namibia on the tourism map by retreating to the country to have a baby in relative privacy, Google is no doubt putting Michigan on the high-tech map."
Given Google's inordinately high profile, the company's Michigan project could play a role in the upcoming state gubernatorial race. Incumbent Democrat Granholm is in a tight race with Republican nominee Dick Devos.
Speaking at a campaign stop in Flint, Devos called the Google project "a positive step for Michigan . . . [but] it's a small step. . . . This is not automatically going to change things overnight, but I applaud all those involved, especially the University of Michigan."
Google hasn't yet settled on a permanent site in Ann Arbor. Local officials say that Google prefers a downtown location that offers many nearby quality-of-life amenities. Company officials hope to open an AdWords operation in temporary space by as early as this fall.
Google already has a small a small office in Ann Arbor. That operation is archiving the seven million volumes in UM's libraries in digital format.
The British MG Returns . . . Revived by a Chinese Firm and Built in an Oklahoma Plant
by JACK LYNE, Site Selection
Talk about your global economy: The MG, a once legendary British sports car that disappeared last year, is mounting a comeback. Only there's a Chinese company calling the shots this time around, and part of the redesigned MG line will be assembled in Oklahoma. A plant in eastern China will also manufacture the new-wave brand. And, oh yes, some MGs will be made in England, too.
MG had been looking at U.S. sites for about a year, Hale explained, starting soon after NAC bought bankrupt MG Rover Group Ltd. from its British owners. Oklahoma officials said they'd been working with the automaker for about nine and a half months. MG officials didn't disclose any competing sites.
CEO: ArdmoreAll told, MG Motors will create some 500 jobs in three Oklahoma cities, Hale said.
a 'Distribution Dream'
In Ardmore, the company will build a combined assembly plant/parts distribution center with 325 workers the first U.S. plant ever established by a Chinese automaker. The Oklahoma City headquarters will have 150 employees, while MG's R&D unit at the University of Oklahoma in Norman will have about 35 workers.
The project provides some welcome automotive news for Oklahoma, one of many U.S. states hit hard by Big Three cutbacks. Earlier this year General Motors closed an Oklahoma City plant that employed 2,400 workers.
Hale said that MG hadn't yet picked a specific headquarters site in Oklahoma City. That operation will be located in the downtown area, he explained.
The automaker's 300,000-sq.-ft. (27,870-sq.-m.) manufacturing/distribution operation will be located on a 117-acre (47-hectare) tract at the Ardmore Industrial Airpark. Ardmore is 90 miles (144 km.) equidistant from Oklahoma City and Dallas-Fort Worth.
"Ardmore and the airpark truly [are] a logistical, distribution dream," said Hale, who praised the park's multiple transportation modes.
A former U.S. Air Force base, the park has two runways and can handle large jets. The 2,955-acre (1,182-hectare) property has rail access as well, with a Burlington North Santa Fe (BNSF) main line running into the park. Only six miles (9.6 km.) to the east of the park is I-35, which intersects nearby with U.S. Route 70. One of the world's biggest and busiest ports, the Port of Houston, lies about 350 miles (560 km.) away down the Interstate.
MG will join other park tenants that include King Aerospace and Higgins Interiors, two firms that refurbish corporate jets. The Ardmore Development Authority (ADA), which owns the development,
Oklahoma Incentives Helped OK Final DealIncentives were a significant factor in the final location decision, MG officials said.
Oklahoma recruiters didn't venture an estimate on the value of state and local subsidies. The incentives are closely tied to the company's performance at its Oklahoma operations, according to MG executives. One subsidy initiative the automaker is sure to qualify for is the state's Quality Jobs Program. That program provides cash-back, performance-based incentives for employers that have a minimum $2.5 million annual payroll, match the county's average wage, and provide health insurance. MG anticipates that its Oklahoma payroll will total $30 million a year. The company will also qualify for Oklahoma's Training for Industry program, which provides a broad range of custom-tailed assistance.
State incentives also include $15 million for infrastructure improvements in and around MG's site. Part of that funding will be used in extending BNSF's line to the plant on the east side of Ardmore Airpark. The airpark will also add 1,800 feet (546 meters) to its longest runway, which is now 7,200 feet (2,184 meters) long.
"We would have been unable to land the company without a commitment to extend the runway," said ADA President Wes Stucky.
The funding for the runway extension will come from the Governor's Opportunity Fund, created by this year's session of the Oklahoma Legislature. The fund provides capital to close corporate expansion deals. Stucky praised state officials for creating the new program.
"Other states have such a fund, and it is needed in Oklahoma," Stucky said. "The MG project proves the point."
The Ardmore plant will manufacture the MG TF coupe, a new two-door mid-engine model, said Hale. The company plans to start building the Ardmore assembly facility in early 2007, he added, with production starting in the third quarter of 2008.
Plants in China and EnglandNAC will also manufacture the reborn MG on two other continents.
Will Also Assemble the New MG
The company plans to reopen the Longbridge MG assembly operation near Birmingham, England, hiring 600 workers. NAC has signed a 33-year lease with St. Modwen Properties that includes two assembly plants, a paint shop and an administrative building on a 105-acre (42-hectare) site. Lease costs are estimated at about $3.3 million a year.
The Longbridge facility employed 16,000 workers 10 years ago. It still had 6,000 employees in April of 2005 when MG Rover Group financially collapsed and closed the operation. At the peak of its popularity in the 1960s, MG was turning out 40 percent of the vehicles that were sold in Britain. NAC is reportedly seeking a British partner to join it in operating MG as a joint venture in the UK.
MG plans to bring the Longbridge plant back online in early 2007, and will also reopen an R&D center on the site to work on new models. The Longbridge plant will build the MG 7 sedan and a new model of the TF Roadster. A two-seater convertible, the Roadster was MG Rover's most popular and widely recognized model.
The company will also build front-wheel-drive MG sedans at a plant in NAC's headquarters city of Nanjing, the capital of Jiangsu province in East China. Located in the New Technology Economic Development Zone in Nanjing's new Pukou district, that plant is already under construction. Production is expected to get under way next year. The new MG facility in Nanjing will be NAC's fifth production operation in China.
NAC's total investment in re-launching the MG will total $2 billion, Hale said in Oklahoma City.
"To refresh the product line costs big bucks," he said. "Their commitment is there." Hale didn't estimate how much the company will invest in each facility.
MG Faces Rocky Competitive Road
Even with that experience behind it, though, MG won't have a smooth ride in trying to penetrate today's market. For one thing, NAC will be the first Chinese automaker to build its autos outside of the borders of its more familiar and far less costly homeland.
In addition, the MG's niche is highly competitive. The new model will be going up against moderately priced rivals like the Mazda Miata, which has become the best-selling roadster of all time.
Hale seemed undeterred by the challenges ahead.
''We want to be a global company,'' he explained in Oklahoma City. ''We don't want to be a company that simply exports out of China . . . [or] to be seen as just another Chinese car company. Our vision is to try to create a world-class car in a world-class company."
MG's challenge will be finding a way to differentiate itself in a crowded market sector. Costs could be where MG can set its products apart. The company says that it will source as many parts as possible from Chinese plants. The new Nanjing plant will make engines and gear boxes as well as autos, NAC officials said.
MG will begin by manufacturing only modest amounts of its new line. The company is estimating that it will make 20,000 units in 2007.
MG Loyalties Still Strong
On the other hand, the MG brand inspired a strong loyalty among some drivers that still continues.
The MG Owners' Club, which is based in an MG parts shop near Cambridge, England, still has 40,000 members, including many U.S. residents. Based in Clinton, N.J., an MG Drivers' Club of North America is also still up and running despite the auto's 26-year absence from that continent's market.
"The mere mention of MG is enough to make the eyes of motoring enthusiasts mist over," the home page of the MG Drivers' Club Web site rhapsodically observes. "To fans of cars and driving, the famous octagonal badge represents the definitive British sports car."
The new model MG TF, the site says, "is stunning, a state-of-the-art roadster inspired by the same passion for driving as the very first MGs all those years ago."
"Owners' clubs and enthusiasts are all about the brand," said Hale, a 25-year veteran of the auto industry with executive experience at Isuzu, Lotus, Mazda and Volvo. "They are all about driving an MG.
"This deal," Hale insisted, "will work."
Sister Act: Chris-Craft, Indian Motorcycle Cruising into Same North Carolina City with Expansions
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
Both companies separately announced on July 20th that they've selected Kings Mountain for their expansions. Together, they'll create more than 800 jobs in that Cleveland County city, which lies about 45 miles (72 km.) west of Charlotte. Chris-Craft will hire some 640 workers, while Indian Motorcycle plans to employ about 165.
Chris-Craft's project proved to be the catalyst for Indian Motorcycle's decision. Business is booming for the nation's oldest boat manufacturer so much so that Chris-Craft had maxed out its 180,000-sq.-ft. (16,722-sq.-m.) plant in its headquarters city of Sarasota, Fla. On top of that, the company plans to bring nine new models on the market over the next three years.
"This is an exciting time for our company," Chris-Craft President Steve Heese said at the project announcement held at the Shelby Municipal Airport. "Our sales growth has exceeded the capacity limits of our Sarasota plant, and the new facility will see the company through the next stage of its development."
Chris-Craft initially considered expanding in Florida, but ultimately looked farther afield. The company was facing some sizable costs if it enlarged its Sarasota operations, Heese explained. Expanding there would entail not just the capital for the costs of building new space: With a larger work force at the site, the company would have also needed to bankroll state-mandated upgrades of the highways near the Sarasota plant.
Another factor more substantially clouded the prospects of expanding in Florida. With the Sunshine State's 4.1 unemployment rate 20 percent below the U.S. average, labor had become a major concern at Chris-Craft's Sarasota plant. With a dearth of suitable applicants, the operation was often running with dozens of available jobs left unfilled.
Chris-Craft winnowed the contenders down to about 35. Heese and Vice President of Operations Bob Greenberg then visited each one. (North Carolina Gov. Mike Easley provided the two with his personal helicopter and a pilot to tour sites in the Tar Heel State.)
The search finally narrowed down to the Carolinas before Kings Mountain won out.
"Western North Carolina provides a big opportunity for Chris-Craft," Heese explained. "There are a significant number of potential employees available from the furniture and textile industries that are skilled craftsmen. Their skills will be ideal for building our premium quality yachts."
Chris-Craft gauged the area's labor availability before making its final decision. It ran a blind-box ad in a local paper. What came back were about 3,700 applications for the 640 jobs that the company plans to add over a five-year span.
Building, Transportation Fit the Bill
That structure met another of the company's requirements: It's near a large body of water for product testing. Man-made Moss Lake provides Kings Mountain with its supply of potable water.
The infrastructure in Kings Mountain also fits Chris-Craft's requirements for rapidly getting its products to market. I-85 runs near the city, and I-28, I-40 and I-77 all cross through the area.
Charlotte-Douglas International Airport further boosted Western Carolina's chances for the Chris-Craft project. The airport has direct flights not only to Sarasota, but also to London, the headquarters base of Stellican, [www.stellican.com] the investment firm that bought Chris-Craft out of bankruptcy in 2001.
The Kings Mountain site, said Heese, will be the new home of the company's yacht division, which makes vessels that are 33 to 40 feet (10.1 to 12.1 meters) long. That unit is now based in Sarasota. Chris-Craft, however, will maintain the Florida plant's current work force. The Sarasota facility will switch over to the making the company's new models, Heese explained.
North Carolina has been actively recruiting boat makers, officials said. More than 100 of those companies are now manufacturing vessels in the Tar Heel State, they said.
Motorcycles Join the RideBy chance, another Stellican company, Indian Motorcycle, America's oldest motorcycle brand, was itself looking for a site to re-launch its historic product line. In 2004, the English company, a specialist in acquiring and reviving famous brand names, had bought the dormant company. The original Indian Motorcycle went out of business in 1954.
As Chris-Craft got farther into its site search, Indian Motorcycle became increasingly convinced that western North Carolina also would fit its expansion bill. The two companies had many of the same location requirements particularly for labor, transportation and an expandable site. In addition, the area is already home to a cluster of companies that are similar to Indian, said Stephen Julius, a founding partner of Stellican and chairman of both Chris-Craft and Indian.
"We believe Cleveland County and the greater Charlotte area are a perfect fit for Indian Motorcycle Company, and we're proud to call this area home," Julius said. "We are in the heart of our nation's power-sports industry, with access to design, engineering and mechanical talent, world-class suppliers, motor-sport education centers and year-round motorcycle riding weather."
Indian Motorcycle has selected an existing building in Kings Mountain that now covers 40,000 sq. ft. (3,716 sq. m.).
Sellican's other acquired companies include Cantieri Riva, an Italian manufacturer of luxury yachts; La Casera, Spain's largest domestic producer of soft drinks; and Sweda Group and Sarema, Italy's respective largest and second-largest cash register makers.
"We will apply the same practical and long-term approach to Indian as we have employed successfully at Chris-Craft," Julius said.
Chris-Craft and Indian are both receiving grants from the state's One North Carolina Fund and Job Development Investment Grant (JDIG) program. Together, the two firms will receive up to $16.3 million in incentives over a decade.
"These companies offer proof that we have the skilled, knowledge-based workforce needed to support the growth and success of the boat and vehicle manufacturers in our state," said Gov. Easley.
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