New economy companies make a good fit for a traditional manufacturing base.

The Midwest has absorbed the greatest impact of the loss of nearly 5.4 million manufacturing jobs since 2000. Workers who for decades found gainful employment in manufacturing industries, most notably in the automotive sector, find themselves out of jobs, and states find that they have more than their share of idle factories and a substantial loss in their tax bases.

Faced with this unpleasant reality, states in the Midwest are trying to create an economic and business climate that is favorable to advanced manufacturing and green industry companies. They are using their community colleges and four-year universities to help retrain work forces, and they are using tax credits and other incentives to help these companies offset the cost of establishing or expanding their operations.

Instead of completely reinventing the wheel, states are using their traditional manufacturing strengths to create new clusters of industries.

Michigan, for example, where more than 1 million manufacturing jobs have been lost since 2000 thanks overwhelmingly to consolidation among the domestic Big Three automakers, is putting many resources behind advanced battery and solar development as part of its retooling efforts.

Minnesota is using its already substantial cluster of glass manufacturing companies to attract solar industry companies, while Indiana is using its historic place as a center of research into electric vehicles to grow the advanced battery industry.

Ohio is using what it calls its “natural strengths” to attract green industry companies, most notably in advanced energy such as wind.

Companies are attracted to Midwest states because they have a lot of capacity for manufacturing and have a work force where building objects is in its DNA.


 

Using a tradition of manufacturing

For the state of Michigan, converting to advanced manufacturing and green industry companies was a matter of survival as it watched General Motors, Ford, and DaimlerChrylser shutter plants and downsize their work forces, says Michael Shore, director of corporate communications for the Michigan Economic Development Corporation. 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 two years. Seventeen different advanced battery companies are either operating facilities in Michigan or are in the planning stages to do so. The state hopes to create more than 60,000 jobs in the sector during the next decade.

Michigan offers millions of dollars in tax credits to encourage companies to locate in the state to develop advanced battery technology. Originally, the state wanted to offer $330 million in tax credits, but in the nearly two years since the law took effect, Michigan has awarded about $800 million in tax credits.

Michigan also is 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 it 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.




 

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. Earlier this year, the company won a $72 million loan guarantee for the expansion project, in addition to the $31 million in clean energy manufacturing tax credit it received under 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.”




 

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 is 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.




 

Ohio targets advanced energy

The state of Ohio is attracting green industry companies as a result of its strengths, says Mark Barbash, chief economic development officer for the state’s Department of Development.

Its advanced energy cluster, particularly wind energy, has grown by 154 percent during the past several years, and the state continues to identify businesses that can be part of the industry supply chain.

General Electric will build turbines for a wind farm on Lake Erie, about 6 miles offshore, in partnership with the Lake Erie Energy Development Corp. of Northern Ohio.

The state has spent much of the past decade reconfiguring its corporate tax structure to make it advantageous for advanced-manufacturing companies to site projects in Ohio. Manufactured products sold outside of Ohio are not subject to sales tax, and the property tax on equipment and inventory has been eliminated.

“The tax climate at the state level is very positive,” Barbash notes.

The state also works to create strong partnerships between industry and academia to advance the commercialization of research.




 

Workforce training is critical

No matter the project or industry, states in the Midwest realize the importance of having a ready-to-go, well-trained workforce ready when a company sites a project.

Ohio works in partnership with its colleges and universities to identify the skills of the future. “Universities and colleges are asking businesses what their needs are today and tomorrow, with the goal of creating a curriculum that meets their needs,” Barbash says.

Indiana has a number of research universities dedicated to advanced manufacturing and workforce training. Notre Dame University and Purdue University both have substantial nanotechnology research programs.

Minnesota considers itself to be fortunate, according to McKinnon, because it has a prepared workforce. “We rank well in high school graduation and college participation,” he stresses. “We are a very educated state. That is a huge foundation on which to build.”

The state offers incentives to companies that work in collaboration with accredited training institutions. They are eligible for grants up to $400,000 to pay for curriculum to train workers.

Michigan has a program to help former automobile manufacturing workers transition to manufacturing wind turbines, solar energy equipment, and medical devices, Shore says.

“We had to rethink the way we approached making a living,” he points out. “It is not always a straight line, and it is not always easy. But we’re making headway.” wt



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