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Regional Review: Globalization Is Vital Part of Midwest States’ Economies

Location USA / April 2013
Chrysler will add 1,250 jobs in Kokomo, Indiana, to build its new 9-speed automatic transmission.
Chrysler will add 1,250 jobs in Kokomo, Indiana, to build its new 9-speed automatic transmission.
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 tourism, business services, and finance as well. With non-manufacturing clusters centered around state government and universities in cities such as Ann Arbor, Michigan; Madison, Wisconsin; and Columbus, Ohio; global manufacturing plays a formidable role in this region’s future economic recovery.

Globalization is an integral part of the region’s economics. FDI Intelligence, a subsidiary of The Financial Times, Ltd., noted that, Chinese projects are “making their presence increasingly felt in the region with a series of investments.” A large-scale case in point is the acquisition in September 2012 of the Kansas City, Missouri-based AMC Entertainment by Dalian Wanda Group, creating one of the world’s most formidable cinema operators.

Ramping Up FDI Efforts

Wisconsin recently took steps to ramp up FDI efforts. Scott Mosley, manager of foreign direct investments for the state, notes that the new Wisconsin Economic Development Corp., established in 2012, includes an FDI component for the first time. “Wisconsin has never proactively pursued FDI, says Mosley, “but at this point, we recognize what a major driver it is in terms of economic development and job creation. We are actively coming up with innovation.” He said that last year six FDI projects resulted in about 2,400 jobs at a total capital investment of $310 million.

One of those projects is Infosys, an India-based global leader in consulting and technology that is expanding with a new delivery center in Milwaukee, Wisconsin, that will provide technology, consulting, and systems integration services, and also will house a training center. Infosys, with 17 existing locations in the United States, is investing in the Midwest to support its clients in the area, such as Harley-Davidson, for which it is supplying applications management, infrastructure support, and hosting services. In the agricultural sector, recent FDI-related projects include Irish dairy firm the Kerry Group, and French cheese manufacturer Agripur from Quebec, Canada.

Manufacturing’s Role
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. The area typically produces more than 40 percent of the nation’s corn, soybeans, and hogs, and is a major dairy and egg producer. The region also produces 30 percent of the nation’s light vehicles and specializes in construction and farm machinery, medical equipment, and steel products.

Auto projects are in motion across the region. In “Auto Sales and the Seventh District,” Paul Traub, business economist at the Federal Reserve Bank of Chicago, noted that Ohio and the Seventh District together house approximately 50 percent of total U.S. automotive production. In Normal, Illinois, Mitsubishi Motors Corp. plans to move production of its 2013 Mitsubishi Outlander Sport to the U.S. market 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 [in the summer of 2012], and Ford’s addition of a third shift of workers in Chicago.” In Rochelle, Illinois, last July, Japanese manufacturer Nippon Sharyo opened a new U.S. headquarters and passenger railcar production facility, 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 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 2012 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 Corporation.

In Detroit, Michigan, India-based 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. Germany-based 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. The firm employs approximately 850 people throughout Michigan in Farmington Hills, Novi, Grand Rapids, Lansing, Muskegon, St. Johns, Troy, and Ann Arbor.

The U.S. Bureau of Economic Analysis noted that Indiana’s motor vehicle industry is the second-largest in the United States. More than 630 automotive companies call the Hoosier State home, including Chrysler, Honda, Toyota, and Subaru. Importantly, on February 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, according to the Indiana Economic Development Corporation. Early in 2013, Chrysler Group, LLC announced plans to invest $374 million to expand its operations in North-Central Indiana, creating up to 1,250 new jobs by 2015. The company will invest approximately $212 million to install additional tooling and equipment to produce eight- and nine-speed transmissions in three of its Kokomo plants, adding up to approximately 400 new jobs. The firm will also acquire the former Getrag facility in Tipton and invest $162 million to establish an additional assembly site for the nine-speed transmission. The site is scheduled to be operational by the end of 2014 and is expected to create up to 850 new positions.

In Iowa’s automotive news, DENSO Manufacturing Michigan, Inc. (DMMI) is planning an assembly and warehousing facility in Urbandale. Japan-based DENSO is a global automotive supplier of advanced technology, systems and components in the areas of thermal, powertrain control, electric, electronics, and information and safety systems. DMMI plans to assemble cooling modules for customers in the agriculture and construction industries among other products.

Networking Opportunities
States are on the move to create networking opportunities that could build a foundation for new projects. After Iowa’s Governor and Lt. Governor-led trade missions to Korea, South Korean-based CJ CheilJedang Corp. chose Ft. Dodge for a project to produce amino acids by fermentation technology. Amino acids are essential ingredients in feed additives for livestock. The project represents a $324 million investment and is expected to create 180 jobs.

Also in Iowa, Alfa Gomma America began its first and only U.S. facility in Burlington in 2003 and continues to grow its U.S production. The company assembles flexible hydraulic hoses for earth-moving equipment and agricultural uses and plans to take over the stainless steel tube production from its affiliate, located in Italy.

Governor Mark Dayton is shining the spotlight on Minnesota’s best attributes in Germany, Norway, and Sweden this June. Germany is already Minnesota’s fifth-largest trading partner and one of the state’s largest foreign investment partners. Delegates will travel to the business centers of Berlin, Dusseldorf/Cologne, Oslo, and Stockholm for networking opportunities that include meetings with business leaders and government officials, and presentations by market and industry experts.

Besides growing business inside the U.S., legislators are sowing the seeds for exports. Governor Jay Nixon of Missouri is leading a delegation of Missouri businesses, commodity groups, and higher education institutions to South Korea and the Republic of China (Taiwan). The Governor notes, "Missouri businesses recently set all-time records for exports, and our unemployment rate stands at a four-year low. This trade mission will help build on this momentum by identifying new opportunities to sell even more Missouri-made and Missouri-grown goods in these key and growing markets."

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