South Carolina needs a new nickname
AKRON (Jan. 20, 2015) — South Carolina needs a new nickname.
The Palmetto State now claims to be the tire manufacturing capital of the U.S., after attracting billions in investment from Group Michelin, Bridgestone Corp. and Continental A.G. over the past 15 years, supplemented by hundreds of millions more in spending from Giti Tire Group and Trelleborg A.B. in plants to open over the next few years.
With the start of production earlier this year by Continental at its plant in Sumter and expansions of capacity by Bridgestone and Michelin at multiple locations, estimated daily production in South Carolina has climbed to more than 100,000 units, according to Tire Business research, which surpasses Oklahoma by more than 10,000 units.
But just how has South Carolina been so successful in attracting these manufacturers? And what impact have they had on the state's overall economy?
First of all, Michelin, Bridgestone and Continental combine to employ about 11,000. The additions of Trelleborg, Giti and other expansion projects are projected to add about 3,000 jobs over the next 10 years.
Suppliers to the tire industry account for thousands more.
“They've had a remarkable impact,” said Bobby Hitt, South Carolina's secretary of commerce. “They pay good wages with good benefits. They're a very stable employer. They're great in their communities in terms of their impact. It's a big day in every county where we've announced every tire expansion.
“We think tire companies are just right for South Carolina in so many ways.”
But the impact goes beyond the direct jobs that the tire manufacturers create. With each new job, South Carolina estimates about 2.5 more get created in the community through other service industries, Mr. Hitt said.
“In every community where we have tire plants, we've seen growth in our retail economies and improvement in our housing because people have choices,” he said. “We want to build a middle class where our work force has choices. Choices of good jobs, choices for whether their sons and daughters can stay here in South Carolina and be part of a vibrant manufacturing system. And then have choices in life.”
Michelin led the way
Michelin was the first to arrive in 1975. The company now operates 10 facilities and employs about 9,000.
The firm was busy in 2014, first opening an OTR tire plant in Starr, S.C. The facility was built in 17 months, and it is one of three Michelin plants worldwide capable of producing 63-inch radials — the others are in Lexington, S.C., and Vitoria, Spain. The firm also expanded its earthmover facility in Lexington.
The earthmover expansions represent a $750 million investment and will create 500 new jobs combined. Michelin also invested $200 million to expand its rubber compounding plant adjacent to the Starr facility, which is projected to be complete in 2015.
Michelin recently opened its 10th facility in South Carolina, this one Piedmont dedicated to manufacturing its Tweel airless radial tire. The firm said it budgeted $50 million to convert an existing structure for the new plant; it did not disclose the projected employment count.
“The impact has been massive,” said Pete Selleck, president of Michelin North America Inc. “A manufacturing job generates a large number of service jobs. You build a plant, you employ 1,000 people, and the impact on the community is very, very significant.”
Bridgestone followed suit in 1998 with a passenger and light truck facility in Aiken — investing $683 million in multiple expansions since it opened. It recently added a new warehouse and is in the final stages of completing an expansion that will take its production volume to 37,750 tires per day and employment to 1,453 by year-end. It's rated at 33,000 tires per day and employs 1,340.
PSR Plant Manager Fran Jones said the expansion represents a $200 million investment and added 740,000 square feet to the building, expanding it to 2.4 million square feet.
In November, the firm opened a plant dedicated to radial OTR tires. The 1.6 million-sq.-ft. factory represents a $1.1 billion investment, processing 39.5 tons of raw rubber per day with 375 employees.
Plant Manager Ron Brooks said the facility is projected to expand to 130 tons per day by early 2017 and at that time is projected to employ 550.
Ms. Jones has seen the impact first-hand. When Bridgestone set up shop in Aiken County, the street where the plant is located was largely undeveloped. Now multiple gas stations have opened right off the highway.
There is also a Dollar General, a pet store, two more gas stations at the end of the street and a subdivision under construction. Ms. Jones said a McDonald's restaurant is scheduled to open in the near future and an elementary school opened nearby.
“All of those things support the people that live and work here,” Jones said. “Any time you have a large population of people in a high paying job, it automatically brings in retail.”
In the last two years, three other tire makers have either set up shop or announced plans to bring tire manufacturing to South Carolina, starting with Continental, which moved its Continental Tire the Americas Inc. headquarters to Fort Mill, S.C., in 2009 from nearby Charlotte, N.C.
The firm's 1 million-sq.-ft. facility in Sumter opened in October 2013 and employs about 570. It is projected to produce 2 million tires in 2015 with plans to reach 8 million tires annually by 2021. Once it reaches full capacity, employment is projected to reach about 1,600.
“We're building the foundation to set up a long-term partnership and employment opportunities for the people in the region,” said Ashton Elmore, training manager at the Sumter plant.
Giti and Trelleborg are in the process of establishing tire production in the state.
Giti will build in Richburg, S.C., where it plans to invest $560 million and create 1,700 jobs over a 10-year period. It is projected to produce 5 million tires per year by 2018 and is scheduled to begin production in the first quarter of 2016.
Trelleborg is renovating a coated fabrics plant in Spartanburg, S.C., to the production of agricultrual tires. The coated fabrics business will be relocates to Rutherfordton, N.C., Trelleborg said.
The Spartanburg renovation should be ready by spring 2015, with the first tire projected to be made by year-end.
The 430,000-sq.-ft. facility will employ 150 by 2018 and is projected to reach full capacity by 2021. The firm owns land around the building, allowing for future expansion should demand dictate it.
“Trelleborg Wheel Systems wants to establish a global manufacturing footprint,” said Andrea Masella, Trelleborg's marketing manager for agricultural and forestry tires. “To be global in the farming industry, you need to develop and manufacture the product close to your customers. Every market is different. Also you can provide a better service with manufacturing near to your customer.
“We selected South Carolina because we already have a Trelleborg facility here, and there is established tire expertise in the region. It's a nice industrial park. There's a possibility that the manufacturing facility will grow in the future, so the site will accommodate not just our recent expansion, but also allow us to keep producing tires here for many years to come.”
Infrastructure a key factor
South Carolina, like most other states trying to recruit businesses, offers incentives to firms interested in establishing jobs in the region. These include job development credits and tax incentives among other incentive packages.
Will Williams, president and CEO of the Economic Development Partnership of South Carolina — which covers Aiken, Edgefield and Saluda Counties — said the state sets limits on when counties can enter certain tax level agreements. His group works with manufacturers so they can take advantage of the credit if they've invested the appropriate amount.
Mr. Williams said when a company invests more than $2.5 million, it can enter into a fee in lieu of taxes. Manufacturing property is taxed at a rate of 10.5 percent; the fee reduces that from 10.5 percent to 6 percent through a negotiated contract with the county. Generally the agreement lasts for 20 years.
“Our job is to help our existing manufacturers grow by helping them navigate through some of the channels, like government interaction,” Mr. Williams said of the EDPSC. “Their job is to make their product and make it profitably. A lot of times, they don't have time to spend on other issues, so that's one of our roles.
“We also want to encourage expansions and recruit new manufacturers to come to the area.”
However, Mr. Hitt — who has first-hand experience from his time working for BMW, helping the firm establish its first South Carolina facility — said most firms will wind up with two to four sites in the same general region of a country that are each financially comparable. Then it comes down to logistics because after about 10 years, most front-end incentives have faded, and the plant must be profitable on its own.
“If you are a tire company looking for a location in the Southeast U.S., we're tailor-made for you because we've demonstrated it with two other tire companies,” Hitt said. “Logistics and training are the differentiators, and let me say our competitor states are good at both of those things. It's hard to keep just enough of an edge to be the one that you'd pick. We haven't won every one of them, but we've been highly successful.”
The state has some built-in advantages — it is centrally located along the Southeast Atlantic Coast with ready access to ocean commerce via the Port of Charleston — a port that Michelin, Bridgestone and Continental all use to import and export products and materials for their facilities.
Beyond that, the state has made sure it has a strong highway system, airports and rail system. Mr. Hitt said South Carolina has budgeted $2 billion in investments to build a port terminal and a rail line that will be online by the end of the decade.
The new rail line will represent about $250 million, while an intermodal yard and new terminal represent about an $800 million investment. The rest of the money will be used to update the state's road systems and deepen the harbor.
“Manufacturing pushes and forces communities to get better,” Mr. Selleck said. “We're very demanding, but generally we're demanding in a responsible way. That prepares the community for future growth as we move forward.”
South Carolina's technical college system also is a major selling point in recruiting business, Hitt said. The state operates a program called ReadySC through its 16 technical colleges, which specializes in establishing customized training programs for firms looking to locate in South Carolina. Hitt said the system can be catered to different cultural distinctions and technologies.
“I think there's just a pro-active attitude toward business,” Elmore said. “The government takes a really strong approach toward training. Without them, I don't think we could handle the volume. That was a big part for us.”
No union presence
South Carolina is one of 24 states with a right-to-work law, which gives employees the right to decide for themselves whether or not to join or financially support a union. It is not heavily unionized — if at all — and the absence of a collectively bargained agreement allows manufacturers to enjoy more flexibility with their work forces.
“One of the attributes of South Carolina is we are a state that has a very personal relationship with our employers,” Hitt said. “People like having that direct relationship.
“Historically, South Carolina has not been a state that has had high unionization. It's just not the fabric of our community. I think that is attractive to manufacturers because it offers flexibility in the work force.”
Michelin said none of the plants it has built has chosen to unionize, and the two unionized facilities it operates were plants it bought in the Uniroyal Goodrich deal. Mr. Selleck said in the modern age of manufacturing, the entire organization needs to focus on the evolving needs of customers.
One example he cited was the firm's recent decision to eliminate 500 positions at its Canadian plant in Granton, Nova Scotia. Mr. Selleck said Michelin tried to provide all of the affected workers a chance to continue with the firm in some other capacity and, according to the executive, the company was able to offer every affected employee an opportunity to work in another capacity, even offering relocation packages to migrate to other facilities if they chose.
“We put in place a large number of programs to help our employees make the transitions in that restructuring program. And almost to a person, everyone involved in this — inside and outside the company — said if we had had a collective bargaining agreement, we would not have had the flexibility to do what we needed to do in that particular case to truly treat our people respectfully and do everything that we could to ensure that they had continuous job security,” Mr. Selleck said.
“You've got to care about people, and we care deeply about our people.”
Mr. Selleck said employees generally choose whether or not to unionize based on the quality of management they receive. Those that are not well managed tend to look at a third party, but if management is good, they value direct contact with the company.
“It provides a better interaction between the employee and the company,” Mr. Williams said. “It allows the company to move people around to where they need to be to make sure production continues at a steady pace.”
Mr. Hitt said part of South Carolina's responsibility is to attract employers who will treat employees fairly.
“What people are looking for as employers is a trained, loyal work force,” he said. “We look for employers who are going to take good care of their employees and offer a good days wage for a good days work. We look for companies who share those same values as us and are going to be here for a long, long time. In order to be here for a long time you have to take good care of your work force.”
Beyond creating jobs and driving infrastructure improvement, once manufacturers set up shop, they generally give back to the community where they are located — and in a big way.
Ms. Jones said Bridgestone's passenger tire plant donates about $250,000 per year to various groups and organizations, not counting the employees' combined $319,000 in contributions to United Way. Employees log numerous volunteer hours within the community.
“Bridgestone is a very philanthropic corporation,” Mr. Williams said. “They've given several million dollars to different charitable organizations in the community. They are leaders in many things throughout the community, be it sports leagues, committees or boards. That kind of a thing doesn't always have a dollar impact, but it certainly helps the overall health of the community.”
On site, Ms. Jones said an environmental learning center is available to local civic groups such as the Boy Scouts of America. The plant is partnering with the University of South Carolina at Aiken for the Bridgestone Environmental Education Program, where children from kindergarten to 12th grade can do environmental science lessons at the facility, which is certified as an environmental habitat.
“If you went to any Bridgestone plant, they're heavily involved in the community,” Mr. Brooks said. “It wouldn't surprise me if we touched 20 to 30 agencies and groups or schools, whether it's United Way, senior citizens, Meals on Wheels, Habitat House or the Wounded Warriors Foundation. There is just a phenomenal outreach in this community.”
Michelin sponsors a program called Michelin Challenge Education. Mr. Selleck said the program sends 400 of the firm's employees into elementary schools weekly to help children in need have an adult engage with them in reading and math.
Mr. Elmore said shortly after the construction of Continental's plant began, the firm donated $25,000 to the Sumter County school board. He said the firm continues to be active in contributing to various local charitable organizations — such as the Tuomey Foundation through the Sumter County Hospitals, Operation Santa and the American Heart Association, among others.
But the manufacturers' partnership with the community isn't the only one that continues after their doors open. The state continues to support its companies in their efforts to expand business.
“That's why you see companies like Michelin 40 years later updating plants here and expanding plants here, because it works,” Mr. Hitt said.
“It doesn't matter who is sitting here in my job. It's an attitude here in the state. It's non-partisan; it crosses all lines. We're a pro business state, and we take care of our companies.
“We're good at making things here.”
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