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Regional Review: Midwest States Actively Diversify Their Economies

Mali R. Schantz-Feld (August 2012)
Rail car producer Nippon Sharyo is slated to begin manufacturing in Rochelle, Illinois. Rail car producer Nippon Sharyo is slated to begin manufacturing in Rochelle, Illinois.
States in the Midwest are taking an active part to build their own destiny. While manufacturing has always been a part of the region's history, a report entitled "Midwest Destiny" - by the Federal Reserve Bank of Chicago's Bill Testa, vice president and director of regional research, and Norman Wang, associate economist - noted that diversification has spurred other sectors, such as tourism, business services, and finance. With non-manufacturing clusters centered around state government and universities in cities such as Ann Arbor, Michigan; Madison, Wisconsin; and Columbus, Ohio; manufacturing retains a formidable part of this region's future economic recovery.

The Federal Reserve Bank of Chicago cites that The Seventh District, which includes all of Iowa, and most of Illinois, Indiana, Michigan, and Wisconsin, is 50 percent more concentrated in overall manufacturing than the nation, produces 30 percent of the nation's light vehicles, and also specializes in construction and farm machinery, medical equipment, and steel products. The area typically produces more than 40 percent of the nation's corn, soybeans, and hogs, and is a major dairy and egg producer.

Automotive Hub
In "Auto Sales and the Seventh District," Paul Traub, business economist at the Federal Reserve Bank of Chicago, cited that between December 2009 and March 2012, the District saw a 9.1 percent increase in manufacturing jobs, accounting for 38 percent of the entire nation's manufacturing jobs added during this time frame. He noted that Ohio and the Seventh District together house approximately 50 percent of total U.S. automotive production, so last year's 10.2 percent increase in light vehicle sales was welcome news.

Auto projects are in motion across the region. Mitsubishi Motors plans to move production of its 2013 Mitsubishi Outlander Sport to Normal, Illinois, from Japan. About half of the cars will be exported. The Illinois Department of Commerce and Economic Opportunity says that this project "follows Chrysler's growth from 200 jobs in 2009 to more than 4,000 jobs this summer, and Ford's addition of a third shift of workers in Chicago." In July, Japanese manufacturer Nippon Sharyo opened a new U.S. headquarters and passenger railcar production facility in Rochelle, Illinois, slated to create at least 250 new jobs.

Sandra Jones, communications director for the Illinois Department of Commerce and Economic Opportunity says, "The pace of manufacturing growth has accelerated in 2012. This is no longer the Rust Belt. Illinois factories are expanding, and the state is doing what it can to fuel that growth by supporting strong and innovative manufacturing companies such as Mitsubishi and Nippon Sharyo. Illinois added 2,400 manufacturing jobs in June and has added 42,900 manufacturing jobs since the recession in Illinois ended in January 2010. The manufacturing renaissance is under way in Illinois and is putting people back to work."

Michigan a state that is synonymous with the automotive industry, houses 12 vehicle assembly plants, is responsible for 20 percent of U.S. car production and 21 percent of U.S. truck production, manufactures more cars and light trucks than any other state, and is home to 78 of the top 150 North American automotive suppliers, according to the Michigan Economic Development Corp. In Detroit, Sakthi Automotive Group, supplier of safety-critical automotive components, is establishing its first North American facility that is expected to add up to 183 new jobs. MAHLE Industries, automotive and engine component manufacturer, is expanding its technical headquarters in Farmington Hills, with the expectation of more than 350 employees by early 2013. Roland Zitt, president, of the company notes that the move allows the firm to consolidate sales, accounting, finance, legal, human resources, and IT functions on one campus. The firm employs approximately 850 people in Farmington Hills, Novi, Grand Rapids, Lansing, Muskegon, St. Johns, Troy, and Ann Arbor.

In Ohio, Chrysler Group is investing approximately $600 million at its Toledo assembly complex to produce the new model Jeep, and adding 1,100 jobs by late 2013. A skilled work force and tax credits were the lures for Ford Motor Company's planned relocation of a truck-assembly operation from Mexico to Avon Lake in 2013.

In Indiana, Advanced Metal Technologies of Indiana, Inc. (AMT), manufacturer of complex metal and plastic parts for the automotive and industrial markets, announced plans to locate in Jeffersonville, creating up to 350 new jobs by 2015.

Diversification

While the automotive industry is fueling much of the growth, states are prudently diversifying. Indiana's economy also depends on the life sciences, energy, defense, ICT, logistics, and advanced manufacturing. On Feb. 1, 2012 Indiana became the 23rd state in the nation and the first state in the industrial Midwest to pass right-to-work legislation, in an effort to better compete for new projects and jobs, according to the Indiana Economic Development Corp. More than 1,000 new jobs will be created by Amazon.com, Inc.'s new fulfillment center in Jeffersonville by 2015. The Jeffersonville facility will be Amazon's fifth fulfillment center in Indiana, with other facilities in Indianapolis, Whitestown, and Plainfield.

According to the latest U.S. Bureau of Labor Statistics jobs data, Missouri employers added 27,500 jobs in the first quarter of 2012 - "more than all of our neighboring states," the Missouri Department of Economic Development reported. Donaldson Aerospace & Defense, a division of Donaldson Company, relocated its Saint Louis office and manufacturing plant to a 35,000-square-foot facility to expand its product line. Michael Scimone, president of Donaldson's St. Louis office, credits St. Louis' high-density aerospace work force and supplier base as a reason for selecting this location.

Iowa's targeted industries include biosciences, financial services/IT (including insurance), advanced manufacturing, and renewable energy. Of the 74 projects undertaken from January 2011 to April 2012, 16 were in the food processing category and 14 involved chemicals and petroleum products.

Following the Governor's trade missions to Korea, South Korean-based CJ CheilJedang Corp. chose Ft. Dodge, Iowa, for a project to produce amino acids by fermentation technology. Amino acids are essential ingredients in feed additives for livestock. The CJ BIO America project represents a $324 million investment and is expected to create 180 jobs. Also in the food sector, Valent, an Illinois-based company that makes biological pesticides and plant growth regulators, is developing a 130,000-square-foot manufacturing facility in Osage, Iowa, which is expected to create 89 permanent jobs.

Wisconsin's improved business climate was again recognized when CNBC released its rankings of the "Top States For Business." Climbing eight spots to come in at #17, this is the highest Wisconsin has ranked since the study started in 2007.

The Wisconsin Economic Development Corp. (WEDC) is creating an Enterprise Zone to provide up to $62.5 million in tax credits from the state over 12 years to support the long-term growth of retailer Kohl's in Menomonee Falls. The agreement requires Kohl's to retain 4,500 jobs, create 3,000 jobs, and invest $250 million in new and existing facilities. Kohl's is eligible for up to $47.5 million in tax benefits and an additional $15 million in job tax credits if the company continues to hire new full-time employees after Kohl's has been certified for the $47.5 million.

Minnesota is making a steady recovery from the recession, adding more than 35,000 jobs in the past year and boasting one of the country's lowest unemployment rates at 5.6 percent in June. Minnesota has concentrated its economic developments efforts in advanced manufacturing, thanks to a skilled work force that has enabled the state to attract high-tech manufacturers.

Chart Industries - an Ohio-based manufacturer of products and services for the energy, industrial gas, and healthcare industries - plans to open a manufacturing facility that will bring 100 jobs to Owatonna, Minnesota. Another firm, Goodrich Corp., opened an expanded high-tech manufacturing facility in the Twin Cities suburb of Burnsville in late July. The facility, which is a part of the company's Sensors and Integrated Systems division, will bring at least 50 new high-paying jobs to the city.

"We are positive about our industry, our company, and the capability of our team here in Minnesota to develop the most advanced aerospace products in the world that enhance flight safety and reduce operating costs," notes Marshall Larsen, chairman, president, and CEO of Goodrich Corp. "Goodrich was attracted by our strong work force and the commitment of the state and local partners to work with the company to make the expansion possible," added Kevin McKinnon of the Minnesota Department of Employment and Economic Development.
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