V&M Star, the U.S. division of Paris-based Vallourec & Mannesmann, plans to invest US$650 million and create 350 jobs at a new steel rolling mill in Youngstown, Ohio. V&M is headed toward a rapid startup target of the fourth quarter of 2011. Ramp-up to full production will continue until the end of 2012.
V&M’s expansion is spurred by development of unconventional gas production, which increases demand for the steel pipes the company produces. Youngstown is just west of the Marcellus Shale Natural Gas Field Formation which covers much of Pennsylvania and stretches into eastern Ohio, New York, West Virginia, Maryland and Virginia.
Youngstown officials say the project will go a long way toward changing the city’s image as a Rust Belt city tarnished by political corruption in the late 1990s and early 2000s.
The deal, officially announced in mid-February, was the culmination of nearly 18 months of negotiations among V&M, Youngstown, the neighboring city of Girard, the State of Ohio and Norfolk Southern Railroad. It involves the use of federal stimulus funds and an agreement by Girard to cede about 191 acres (77 hectares) to Youngstown.
The new mill, covering more than 1 million sq. ft. (92,900 sq. m) of space, will initially produce 350,000 tons of steel tubing per year for the drilling of shale gas in the U.S., particularly in the states of Pennsylvania, West Virginia and Ohio. The annual rolling capacity of the new mill will reach 500,000 tons of seamless tubes. The mill will be in the Briar Wood Industrial Park, which is being developed for the project and which will also include V&M’s current mill. The first piles were driven for the project in April, launching what V&M describes as a fast start-up phase.
The annexation agreement will result in Youngstown and Girard sharing income tax revenues from V&M employees working in the new plant. The two cities also will share income tax revenues from the estimated 500 construction workers who will be working at the expansion site over the next two years. The Girard City School District will receive more than $1 million annually in new property tax revenues because of the expansion.
V&M’s existing plant in Youngstown bordered the city limits of Girard. Its targeted area of expansion included property within the Girard city limits. However, V&M wanted the entire complex to be in one political jurisdiction for tax considerations. That led to months of often tense negotiations between the two cities, which did not have a history of economic cooperation.
Roger Lindgren, president of V&M Star, says V&M focused its efforts on Youngstown because of its existing operations, but notes that the company could have gone to a number of other locations around the country with the expansion.
“We already have a mill in Youngtown. It offers significant logistical advantages,” Lindgren says. “We are very proud of our employees there and we have a skill base. It’s our center of competence for rolling in the U.S. for steel and pipe making, so it was a good idea for us to centralize it in that location.”
Lindgren says the significance of the expansion is further raised by its projected spurring of many additional investments to service the new mill.
“Our presence will encourage our suppliers to move here, but we are not demanding that,” Lindgren says. “Our requirements for just-in-time delivery for some items may encourage our suppliers to have a local presence. Another thing is that we will be finishing a lot of pipe in Youngstown. We won’t be sending pipe away to be finished elsewhere. It will be finished in the Mahoning Valley. A certain amount will be sold for shale gas drilling which is nearby.”
Strong community and state support was another factor, says Lindgren. He credits the efforts of Ohio Governor Ted Strickland and Lieutenant Governor Lee Fisher, Mayor Jay Williams of Youngstown and Mayor James Melfi of Girard, U.S. Rep. Tim Ryan and officials with the Youngstown/Warren Regional Chamber. V&M’s power supplier, Ohio Edison, was also cooperative, he says.
“I don’t want to underemphasize the city councils of both Youngstown and Girard, who both worked hard to represent their constituents and worked hard to come to a conclusion on the Briar Hill site. There were an immense number of people involved in this. I can’t name them all. There was a lot of spark there to get this done in a fairly short period of time. On the federal side, Tim Ryan has been tireless in his efforts to work with us, the railroad and the cities in order to get the agreements necessary to form the Briar Hill Industrial Park.”
Lindgren says V&M benefits from nearby Youngstown State University and from machining and mechanical programs offered at the Kent State University Trumbull Campus in Warren.
“We have been able to recruit a good level of employee in the area. Recruiting good employees is always difficult and we have been able to fulfill our requirements. There are good educational opportunities and support in the area.”
Another facet of the project that Lindgren considers to be transformational is the cooperation between Youngstown and its smaller neighbor Girard.
“I am an advocate of regionalism and I think the cooperation between Youngstown and Girard took very active involvement of both city councils and both mayors. Tim Ryan was in there as a facilitator. It was a strong step toward regional cooperation, and that could be one of the things that is transformational. To me, that is a great tribute to both mayors and their city councils that they would forget their parochial interests, shall we say, and cooperate to make something like this happen. It proves it can be done and it proves it can be done in the Mahoning Valley.”
Cities Overcome Past
Youngstown Mayor Jay Williams says the V&M expansion will revive a city that once had a strong and proud steel industry. Williams, who served as the city’s director of community development before being elected mayor in 2005, says the deal to land the project established a model for collaboration.
“V&M helps to establish our place not only as a relevant manufacturing area, but as an area that competes and connects with the global economy,” Williams says. “The first wave of hiring will be engineers. Graduates of the Youngstown State engineering program will only have to look 10 minutes from campus to find jobs as advanced as any place in the world. It also sends a message to the rest of Ohio. We like to remind Ohio that Youngstown and the Mahoning Valley are as relevant to the state’s economy as any other regions, even as much as the three Cs [Cleveland, Columbus and Cincinnati].
“On its face, the project made all the sense in the world, but there was a long history of political distrust between the communities,” says Williams. “It was sort of like fiefdoms getting in the way and parochial interests that derailed previous projects. The chamber and the congressman convened discussions. We were dealing with 50 years of difficult history and needed to pull this together in months.”
Williams says local disputes, which are common for municipalities, were magnified in the press and gave the impression to V&M that local officials were more interested in parochial issues than in a multimillion-dollar investment.
“Local political issues don’t play well on the international economic stage, and that was a concern to them,” Williams says. “They didn’t want to be seen as the company that was coming in and causing controversy. So we held marathon meetings into the wee hours in closed-door sessions to get the details ironed out. The effort was significant. All the while, I do believe there was an absolute commitment to get this done on the part of officials with the City of Girard.”
Williams says the successful culmination of the V&M project proves that the Youngtown region has the capacity to play on the international stage, which he says is essential. He says he can provide potential investors in the region with the cell phone numbers of a dozen CEOs who will speak on behalf of Youngstown.
“It is as important to do that as it is to facilitate local, homegrown economic development. Those two approaches can and should co-exist. To a certain extent, we have to be borderless, but we shouldn’t do it at the expense of other communities in the region. What’s good for Youngstown is good for the region and vice versa. We have tried to find regional projects also and send a message that Youngstown of all places is the place to do business. And when Entrepreneur Magazine listed Youngstown as one of the top 10 places to start a business, it helped validate that message.”
Girard Mayor James Melfi says the overriding priority during the negotiations was to win the project.
“For America, for the old Rust Belt, for Ohio, for Girard, the thought that steel expansion is going to happen here in 2010 is exciting,” Melfi says. “We have been involved in the project privately for a couple of years, and every now and then I had to pinch myself. Negotiations were difficult at times and obviously we are an area starving for jobs. Some people in the process made it look like we were trying to block it, but that was the furthest from the truth. All along, we knew it was an important deal.
“In the end, the project is coming, and that by far is the most important part of the process,” he says. “They did the largest project in North America this year and that is something to be proud of.”
Congressional Aid
Ryan, who represents Ohio‘s 17th Congressional District, was instrumental in helping obtain $20 million in stimulus funds for important site and rail work needed for the project and for helping to bring Youngstown and Girard together. He says the project has major implications for the region’s economy.
“It’s clearly a transformational project on a lot of levels,” Ryan says. “The jobs and the spin-off jobs are just transformational in that Youngstown and Girard needed a shot in the arm. For a French company to come into a community that has had a lot of bad luck for 30 years and make this kind of investment, that gives the community a lot of hope for things to come. Here’s an example of how the stimulus is working. Without it, we would have not been able to do this project. The local communities did not have the resources to pull this off. Stimulus funds are directly responsible for making this deal go down. Anyone who doubts it needs to come to Youngstown and Girard to see what is happening.”
Ryan says he encouraged the two cities to work things out when he felt that negotiations were starting to break down.He says the mayors and councils of the two cities did a good job of ironing out differences.
Ryan hopes to create a natural gas development cluster in Eastern Ohio with the Marcellus Natural Gas Shale field.
“We have an opportunity to do this because of V&M. Now we have another opportunity to use the natural resources we have with the natural gas shale and parlay that into development for a clean economy. Let this spur the green revolution that is coming and put traditional manufacturing back to work in this area due to our location.”
Another major project in this sector in the area is the specialty steel factory being built by Patriot Special Metals, formerly known as Republic Special Metals. The company is beginning production this spring after investing approximately $70 million in a 205,000-sq.-ft. (19,000-sq.-m.) complex in North Jackson.
Patriot expects to create about 60 jobs. The factory will produce high-strength metal products used by aviation, oil and gas exploration and energy production.
Healthcare Acts
A $37-million project will transform Cincinnati‘s former Vernon Manor hotel, where President John F. Kennedy and the Beatles once stayed, into office space for world-renowned Cincinnati Children’s Hospital’s continuing growth.The hotel sits in the heart of a central Cincinnati neighborhood called Avondale, which has struggled with revitalization efforts.
The new Vernon Manor offices will accommodate more than 600 employees from Cincinnati Children’s, creating new capacity for the medical center to expand at other locations, including its main campus. Cincinnati Children’s Hospital Medical Center has signed a 17-year lease.
“This project is a key economic development project that will both be an anchor in the Avondale community and expand the capabilities of Cincinnati Children’s Hospital, which means more jobs,” said Cincinnati Mayor Mark Mallory. “It also fits into our GO Cincinnati economic development strategy as an employment sector that will be growing over the next several years.”
Developer Al. Neyer was set to start renovation work on the 171,000 sq.-ft. (15,885-sq.-m.), seven-story building this spring. Work on a 440-car parking garage will begin in July.
City Manager Milton Dohoney, Jr., said the retained jobs from Cincinnati Children’s contribute $600,000 in annual earnings tax revenue, while the new jobs created from this expansion are likely to contribute over $800,000.
The City of Cincinnati and State of Ohio partnered on a financial assistance package worth $7.1 million to the redevelopment, including a $10.5-million public parking garage. This agreement has the city purchasing and owning the parking garage for 25 years, utilizing tax-increment financing through the Corryville neighborhood. State of Ohio has approved $7.5 million in loans that will be used to finance the garage construction as the city pays for the garage over the 25-year period. Al. Neyer will operate and manage the garage.
Caterpillar Chooses Clayton
Caterpillar Logistics Services is beginning construction this spring on its new parts facility in the Dayton suburb of Clayton. Clayco Inc. is the design builder for the more-than-1-million-sq.-ft. (92,900-sq.-m.) facility that will provide inbound receiving capability close to suppliers and align outbound shipments for improved delivery to dealers and customers. Once fully operational in 2011, the Clayton facility will replace Caterpillar’s Indianapolis Regional Distribution facility and will assume some of the work currently performed at Cat’s parts distribution center in Morton, Ill.
When fully staffed, and dependent on market demand, the Clayton Distribution Center will employ 500 to 600 people. The single-story facility will be constructed using a tilt-up concrete wall system and include a 30-foot clear height structure, skylights and clear story windows, paint lines and an extensive overhead crane system. The project is expected to be completed in early 2011.
