A formidable manufacturing heritage is a draw for new economy industries.

The Midwest has a proud tradition of manufacturing. While the state of manufacturing in the U.S. has substantially changed during the past several decades, the pride remains. States in the Midwest are using their manufacturing expertise and logistical advantages to create clusters of new industry companies, including in automobile and power generation.

To help improve the chances of landing expansion projects, public agencies and private companies are combining to build intermodal facilities throughout the Midwest. The move means that large parcels of real estate designated for manufacturing facilities and warehouses will have access to highway, rail, and air cargo service to help keep logistics costs down.

An important part of intermodal facilities is access to Class I rail lines to get product to and from ports in the most efficient manner.

“If you look at current trends on how product is moved, rail infrastructure is becoming much more competitive for cost advantages, efficiencies, and the fact that rail can move more freight on a tank of gas [than trucks],” says Chris Gutierrez, president of KC SmartPort, an economic development organization of the Kansas City, Missouri metro area. “It’s much more efficient than truck or barge traffic. It is becoming the prevalent mode of transportation for imports and exports.”




 

Kansas City's transportation strengths

The Kansas City metro area has the distinction of having five of the seven Class I North American rail lines-Union Pacific, Burlington Northern Santa Fe, Kansas City Southern Railroad, Norfolk Southern, and Canadian Pacific-running through the region. That means companies can move their product from any port on any coast in North America to warehouses in the metro area, Gutierrez says.

The metro area’s rail attractiveness has been strengthened by a dedicated, intermodal service between Kansas City, Dallas, and several Mexico destinations operated by Kansas City Southern Railroad and Kansas City Southern de Mexico. The service is the beginning of a key lane within the growing KCS International Intermodal Corridor and an alternative to the more congested Chicago gateway for traffic between the Northeast U.S., Midwest, and Mexico.

Kansas City International Airport, with the largest air cargo facility in a six-state region, is also expanding with the development of its KCI Intermodal BusinessCentre, a $232 million, 800-acre development south of the airport’s main runways. The first phase calls for the construction of four buildings containing about 1.8 million square feet of multi-use space, and it is in one of the nation’s largest Foreign Trade Zones (FTZs) with easy access to four interstates.

Plans call for the project’s second phase to include an extension of roads and utilities to about 200 contiguous acres that has more than 4,000 linear feet of frontage along KCI’s main runways.

The logistical infrastructure and its location on the “edge of the wind belt”-Texas, Kansas, Nebraska, and Iowa-is giving the metro area an advantage in attracting companies looking for a site to manufacture and assemble wind towers.

In fact, Nordic WindPower USA last year selected the KCI Intermodal site for its corporate headquarters, R&D, and manufacturing complex. The company is moving its operation from the West Coast. Nordic is a technology developer and manufacturer of utility-scale, two-bladed wind turbines for the rapidly expanding community wind market. It will invest $15.8 million and create more than 200 skilled work force positions during the next six years.

Nordic chose Kansas City because of its proximity to the nation’s wind belt, meaning proximity to its customers, Gutierrez says.

The Kansas City metro area is aggressively recruiting green industry expansion projects. Nordic’s decision to site its operations in the region will likely entice other companies in the industry to follow suit. “We feel comfortable that there will be several more [expansion projects] this year,” Gutierrez emphasizes.

Berry Plastics earlier this year launched an expansion of its distribution center in Lawrence, Kansas, part of the Kansas City metro. It will build a 675,000 square-foot facility, freeing up 35,000 square feet in the company’s manufacturing operations.

Since the beginning of 2011, several distribution centers in the 50,000 to 100,000 square-foot range have announced plans to expand in the Kansas City metro area. “The commitment of these companies to expand in Kansas City shows the strength of our transportation advantage,” Gutierrez says.




 

A tradition of manufacturing

The state of Michigan has lost more than 1 million manufacturing jobs since 2000, thanks overwhelmingly to consolidation by General Motors, Ford, and DaimlerChrylser. It has attempted to retool its economy by putting many resources behind advanced battery and solar development.

Converting to advanced manufacturing and green industry companies was a matter of survival as automakers shuttered plants and downsized work forces, says Michael Shore, Director of Corporate Communications for the Michigan Economic Development Corp. The state is relying on its century-plus tradition of manufacturing to begin the road back.

One of the biggest successes the state has had is in the advanced battery industry, which is largely tied to the automotive industry. Michigan has attracted nearly $6 billion in new investment in the industry during the past several years. Seventeen different advanced battery companies are either operating facilities in Michigan or are planning to do so. The state hopes to create more than 60,000 jobs in the sector during the next decade.

In 2009, the U.S. Department of Energy awarded twelve Michigan projects more than $1.35 billion in grants to support advanced battery and electric vehicle manufacturing and development. “We collected more funding than all other states combined,” Shore points out.

Michigan is also attempting to grow an industry cluster in solar technology. It is developing a “solar Silicon Valley” in the region surrounding Saginaw, Midland (the corporate home of Dow Chemical Co.), and Bay City. The state has seen investments of more than $3 billion and anticipates more than 20,000 new jobs in the state as a result of a growing solar industry.

United Solar Ovonic has four of the largest thin-film PV laminate plants in the world in Michigan, and is planning a fifth. During the past five years, Hemlock Semiconductor Corp. has undertaken more than $2.5 billion in expansions of its solar manufacturing facility in Michigan.




 

Shining opportunities in solar

The state of Minnesota is using the fact that it is home to a group of glass manufacturing companies-including Marvin Windows, Anderson Windows, and Cardinal Glass-to create opportunities in the solar industry, says Kevin McKinnon, Director of Business Development for the Minnesota Department of Employment and Economic Development.

Sage Electrochromics, a cutting-edge glass company that hopes to revolutionize energy efficiency in buildings, is expanding its manufacturing operations in Faribault, thanks in part to more than $100 million in funding from the federal government, including a $72 million loan guarantee for the expansion project and $31 million in clean energy manufacturing tax credit from the 2009 economic stimulus package. The company produces electrochromic glass, which can change tint at the click of a button.

The state is also using one of its biggest natural advantages-some of the best wind in the country-to create a wind industry cluster. Suzlon, an India-based company with operations worldwide, operates a blade manufacturing facility in Southwest Minnesota.

The state recently launched an angel tax credit program for early-stage financing. It is a 25 percent tax credit for investors in early-stage companies, including start-up companies in the advanced manufacturing and green industries. “Capital is an issue for small businesses,” McKinnon says. “This will help jumpstart small business development in the state.”

Simultaneously, the state has increased its research and development tax credit from 5 percent to 10 percent on the first $2 million of qualified research expenditures. The tax credit is 2.5 percent after the first $2 million.




 

Continuing the research

About 20 to 30 years ago, Ford and General Motors were doing research into electric vehicles. When the automakers decided to scale back their research in the 1990s, many of the employees working directly on these projects continued to do research on their own. “Now that the [advanced battery] industry back up again, it is natural to locate a project in Indiana because this is where the technical skill is,” says E. Mitchell Roob, CEO of the Indiana Economic Development Corp. (IEDC).

To help commercialize advanced battery projects, as well as projects in other advanced technologies, the state offers the 21st Century Research and Technology Fund. The fund, a part of the IEDC’s Small Business and Entrepreneurship Division, encourages small businesses to explore their technological potential and commercialize their prototypes.

Indiana’s expertise helped convince electric car manufacturer THINK, based in Norway, to locate its North American production facility in Elkhart, creating more than 400 jobs by 2013. The company plans to invest more than $43 million in building improvements and equipment in Elkhart, and it is expected to begin assembling vehicles next year.

THINK’s investments in Elkhart will support manufacturing capacity for more than 20,000 vehicles a year.

And, THINK has already delivered a fleet of electric vehicles to the state of Indiana. wt



Contributing writer Ken Krizner is based in Cleveland, Ohio, where he writes often on economic development and technology issues.