Robert Hess, Executive Managing Director, Consulting, Newmark Grubb Knight Frank (Feb/Mar 08)
Why did ThyssenKrupp choose you and Cushman & Wakefield?
Hess: I've had a relationship with them since the late 1990s; we had completed a large manufacturing project in Asia in 2004 that was well received. We've been intensely tracking changes in the steel industry, as well as targeting this kind of opportunity with ThyssenKrupp executives for quite some time. Personally, I've probably been preparing for this for over two decades!
Over what time period did your team work on this project? How many people contributed?
Hess: We started the project February 7, 2006, and finished our scope of services in early June 2007 - so it spanned 16 months. I don't know if someone can check the record books, but a project of this size and complexity for a company that was learning U.S. cultural norms and business location dynamics - I would call that worthy of the Guinness Book of World Records!
Over 100 people total from ThyssenKrupp were involved in the project. Cushman & Wakefield, and our partner, St. Onge Company, had 10 full-time core consultants and often flexed up to 15 for peak analyses that needed to be completed. Another 20 professionals from MACTEC and the client's German conceptual design firm were involved.
Why did the company request your help in finding a U.S. location?
Hess: Since they had recently established a plant in Brazil that made this project more real and extremely time-sensitive. The steel slabs had to go somewhere now - no turning back - and the right supply chain and right site had to be found fast so the slabs could be received on time. A lot was at stake; something that could maybe make or break the company.
How does this mega-plant compare to other recent high-profile projects completed in the U.S. in the past 10 or 20 years in terms of its size and impact on the regional economy?
Hess: I believe the ThyssenKrupp project ranks up there as one of the largest private company capital investments in the United States in the last 20 years - and certainly one of the top-10 foreign direct investments. They don't get much bigger than this in terms of pure capital investment, and the jobs created are highly skilled and sustainable.
Even more important is the impact in the southern region of Alabama's economy, including Mississippi and Florida. ThyssenKrupp execs have publicly stated this is a long-term strategy. And steel mills are built for 100 years - not 10, 20, or even 50 years - so the economic impact is cumulative and life-changing for the Mobile region for decades to come.
Which states were first-round picks? How did you research them?
Hess: Being close to ports and barge-navigable waterways to satisfy the client's global supply chain management needs was key to us selecting 20 states east of the Mississippi. We then went from 20 states and 67 sites to 33 sites, and visited those in person over a two-week period, spending an hour or two at each site with utility service providers and economic developers. It was a logistical challenge extraordinaire getting our team to all of these locations while maintaining confidentiality.
We also evaluated compatible seaports parallel to the site search. That narrowed the field from 25 to six preliminary ports. All were critical to making sure ThyssenKrupp would have supply chain efficiency and flexibility. Next we narrowed the mill sites to 12 locations in about eight states. Visiting them with the client last summer quickly brought it down to five, and then the semi-finalists were sites in Arkansas, Alabama, and Louisiana. The key targeted ports that survived a robust port and logistics modeling effort were the Port of New Orleans and the Port of Mobile.
How did you handle the investigation of the semi-finalist sites?
Hess: We evaluated each semi-finalist with a decision tool using over 60 quantitative and qualitative data points rolled back into a decision matrix. As you can imagine, all sorts of things came up.regulatory issues, farmers who didn't want to sell their land in the middle of the proposed site, presentations by economic developers that ranged from outstanding to horrible, and especially timing issues around readiness. We saw some great sites and proposals, but many areas just couldn't handle the enormity of effort and utility infrastructure it would take to compete for the project.
I understand Alabama and Louisiana became the top contenders. How did each stack up in terms of the property and logistics?
Hess: It was very close! The decision matrix with further adjustments illustrated a dead heat. That was an advantageous position to begin with so much at stake. There were preferences internally in the company, especially as two steel segments had varied strategies for NAFTA. But I give them credit, especially the company's senior project managers. They wanted the facts to play out, and set aside emotions and perceptions that could not be supported with evidence.
How did the states compare in terms of incentives and similar financial considerations?
Hess: Everyone wants to focus on the reported $800 million Alabama put on the table and twice that amount plus more in Louisiana - but that's not the story! The story is who wanted to be a partner with ThyssenKrupp and who wanted to invest in a 100-year project that would transform their regional economies. In essence, they wanted a ready-to-go site that would meet their stated objectives to ship steel to customers beginning in 2011, period! In the end that became the differentiating factor in finding the better site.