First Person: How Daimler AG Affects Positive State and Local Economic Policy Change
The editor of Area Development magazine recently spoke with David Trebing, General Manager of State and Local Relations at Daimler AG, about his company's experience and his advice for working with economic developers.
Trebing: At Daimler, we regard the two as integral and inseparable, while most other companies segregate the two. For us, a key business objective is to ensure we have a competitive place to do business. That entails taking a long-term view of the economic, social, educational, and political structure of a state, region, or country. If reform measures are needed to make an area truly globally competitive, then the potential of economic investment can be the catalyst to drive that change. Essentially, then, we want to use economic investment to enact policy change that drives the creation of a competitive economy. That's a much broader agenda than simply coordinating economic development discussions.
AD: Can you give me an example of where policy changes were brought about through Daimler's efforts?
Trebing: Daimler participated in the legislative dialogue in South Carolina that helped bring about tort reform putting a cap on product liability claims. This helped make the state a more competitive place to do business.
AD: Can you tell us what general attributes auto and other transportation-related companies should look for in a community?
Trebing: The most important requirement is to have a well-trained, motivated work force available. Potential employees must have critical-thinking skills because continuous process-improvement initiatives take place right on the factory floor; technology skills are important, too, because the advanced equipment required for complex production processes is rapidly evolving. The community and state must be economically stable - we realize that's a challenge in these uncertain times, but certain city services must be sustainable.
AD: What types of community policies encourage company innovation? Any specific examples?
Trebing: Often, municipalities use policies and regulations as restrictive measures that frequently force innovation to comply with a static standard. The ability for communities to "think outside the box" to address and solve business problems is important - and it establishes the community as a true business partner. Another aspect - ongoing investment in education - is critical, for two reasons: first, because we often hire employees from the local schools, we need the best graduates. Second, our employees send their children to the local schools, so an effective school system provides an invaluable incentive to attract the best employees.
AD: Can you give us an example of a public/private think tank that has encouraged innovation in a community?
Trebing: It's not a "think tank" per se, but the South Carolina Manufacturers Alliance does a terrific job coordinating a proactive, progressive dialogue between all stakeholders: manufacturers, suppliers, policymakers, and the communities throughout the state. They listen, lead, and then follow through to completion. Too often, "think tanks" come up with grand ideas that are politically infeasible, technologically impossible, or economically impractical. So, a group like SCMA that balances the interests of all stakeholders truly ensures results. That implicitly drives innovation because the key is to keep the public policy ball rolling.
AD: What can companies expect from communities in the way of satisfying their work force needs?
Trebing: The global competition is intense, so companies need - and expect - a well-trained work force to be available that can hit the ground running. They generally don't have the time, resources, or inclination to have to train the work force themselves at the outset. Long-term, it's a different situation. For example, launching a European-type vocational training program in the U.S. would take time, primarily because the actual training period is about three years.
AD: What does the European type of program involve?
Trebing: Actually, the German training model, which is based on a 3 1/2-year commitment on the company's and students' part, was just rolled out in Alabama. It's a specific vocational training program financed by Daimler that, in the end, guarantees the company a well-trained work force and guarantees the students a job. The state of Michigan is also looking to replicate this type of public-private partnership.
AD: How would you define a "supportive" tax structure?
Trebing: "Supportive" is one that encourages research, development, and investment; i.e., it would allow the deduction of certain long-term expenses to ensure that development of new technology is done here, not elsewhere. Investment is dynamic and, too often, tax policy doesn't reflect the reality of current business structures.
AD: How important are tax incentives to the location decision in relation to other factors?
Trebing: Incentives are important, but they don't make a bad business decision good - they simply delay the pain associated with making that bad decision. It's much more important for us to identify non-value added elements - that is costs, regulations, etc. - and use economic investment as the catalyst to drive those permanently from the cost structure rather than simply trying to abate or offset them for a given period of time. Doing anything less is a race to the bottom: it reduces tax revenue without eliminating factors that prevent a city, state, or region from being truly globally competitive.
AD: How can a company determine the true value of incentives, monetary and otherwise?
Trebing: Daimler has a very complex corporate structure. Ensuring that the true value of incentives is realized by our consolidated taxpaying entity happens because we work very closely with Daimler's Office of Tax Affairs. Their expertise allows us to focus on those elements of an incentive package that offer true value to the corporation, rather than elements that can't be utilized but still represent exposure to a municipality or state. For instance, offering income tax credits to a company that has no liability in that regard is pointless. State representatives need to have a meaningful conversation with a prospective company to find out exactly what their tax obligations are and structure incentives accordingly.
AD: Once a company chooses a location, what types of continuing support should it expect from a community?
Trebing: For long-term mutual success, the company and the community really depend on each other. It's a two-way street: businesses should expect a supportive political environment that is responsive to their needs and challenges. At the same time, the community should expect a responsible business partner that contributes to the quality of life and economic welfare of the area. After the decision is made, both the business and the community should be happy they're there.
AD: In sum, can you describe what makes a community pro-business - or not?
Trebing: Very simply, two things: communication and action. If a community takes the time to talk with a business, to understand its concerns, risks, opportunities, and challenges, it will understand exactly what it takes to improve business. Then it needs to act on what it has heard. The company also has the responsibility and opportunity to engage stakeholders in a proactive dialogue. The best economic development tool is very simple: volume. That happens when all stakeholders focus on building a globally competitive product in a globally competitive location by a globally competitive work force.
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