tv Road to the White House CSPAN February 22, 2016 1:29am-2:01am EST
i am trying still to decide which candidate to support. -- trying to decide behind between the governors with executive experience or some of the other candidates like ted cruz and marco rubio. >> the most important issue to me is national service. there are more than 5 million americans that need a step forward. our nation's governors gathered in washington this weekend for their annual winter meeting. this session focused on ways to into thenvestment states for the benefit of the states economies and workforces. ais is about an hour and half.
>> good morning. welcome to the nga winter meeting and to the session states tracking companies and investment, what the firm looks for. going to turn it over to our moderator. >> thank you and good morning and welcome to this panel, the national governors association on attracting companies and investment. what matters to firms. i'm a partner at mckinsey's public-sector practice and we have the privilege of working with governors and state leaders across the country on health care, infrastructure, higher education, public safety pension and i.t.'s. i have the privilege of meeting our economic development practice, which means i work with governors and their economic development teams on their most ambitious jobs and initiatives. the purpose of this morning's panel is quite simple -- states focused disproportionately on company attraction, retention
and expansion. governors spend a lot of their time doing this. what actually matters to companies as they decide where to locate and where to invest? what should states do to ensure they are as competitive as possible and attracting those companies? this discussion and debate is an age old one, but this is a conversation began a few months ago in october at the nga trilateral summit in colorado springs. it was there that my colleague led a discussion with several governors, starting with a fairly provocative proposition. he stated the incentive is dead, long live the incentive. the thinking behind that notion is a conversation we have been having based on some observations we've been seeing across the country. there has been a move away from an overreliance on subsidies and
incentives and attracting companies. instead, many states have been building more broad and deep -- economic ecosystems and their states. incentives have not gone away but they have been up -- and employed more strategically to support more sustainable growth and job growth. which brings us back to our big questions for this panel. what actually matters to companies when they are deciding to locate and what should states due to meet their needs or what can states due to maximize the return on investment when they are trying to attract companies? to help answer these questions, we have a stellar set of panelists this morning. we have the senior director for governor affairs at magna international, the vice president for governor relations at calix usa, the manager for the international trade and investment office for the
missouri department of economic development, the director of global resource management group for the north dakota trade office, and last but not least, leslie alexander, international director for the tennessee department of economic and community development. i want to frame this discussion a little bit more. i'm a consultant and i can't help but some data on some powerpoint slides. i want to share with you some research we have done. a few years ago, we did a survey of over 2900 global executives. we asked the reasons why these executives and their companies were seeking new locations. the number one reason was to reach new markets or customers, as you can see on this chart. no other answer came close, including seeking locations that had a lower cost profile.
we also asked these executives what criteria they used to pick specific locations. the most important by far was the size and growth potential of a local economy. that is what executives care about. half the executive also cared about two components like talent and the availability of an industry cluster, supply chain customers need to be nearby. rounding out the top five were infrastructure and local politics. this is what matters to companies. what is not on this slide is 14% of respondents said the lack of incentives were a reason they'd did not choose a location. it did not make the list. how are states providing the features executives are looking for? one imperfect indicator is what statesmen their budgets on to
promote economic competitiveness. we pulled together some state expenditure data from a number of sources, including the national association of state budget officers. as you can see, states spend a lot of per capita on higher education and transportation, exactly what executives are looking for. far behind is how much they spend on census and research and development. where there is the largest growth in spending, are indeed leads the pack. transportation is in second place and finally, you have incentives and higher education. it would seem we could conclude states are aligning their investments with what companies seem to be wanting. however, i would say these numbers show incentives are not
good. they are growing in size. anecdotally, i would also say what we have seen is much more of a strategic deployment of incentives as a tool to build out the broader economic ecosystems that drive growth and that companies are attracted to. i would like to turn it over to my private sector colleagues to say a few words about what they are doing. first is the senior director for governor affairs at magna international. >> good morning, everybody. i'm glad to be here. i'm the senior director of government affairs at magna international. before we start the conversation, i want to give you a couple of facts to create a little credibility about what we are going to talk about. i always come to washington dc and talk about magna. i think it's the largest company nobody knows anything about.
we have 59 years of growth and ranked as the largest automotive supplier in north america, the second largest in the world, the most diversified automotive supplier in the world and we supply every automaker in the world some kind of parts and some of what a do in the automobile sector. our global presence, we are in 29 countries with 139,000 employees and 305 manufacturing plants around the world. more importantly, in the united states, we employ 21,000 people and have 53 manufacturing plants in the united states spread out over 12 states including tennessee and missouri. we are happy to be there. the key is the 14 to 16 r&d centers we have, are expenditure in the united states last year
was about $300 million in our total expenditure around the world. r&d is very important. our global capacities are engineering and services, product systems, different product systems and vehicle assembly. we assemble vehicles in austria, we assemble 200,000 vehicles a year for bmw, chrysler, and porsche. our core competencies are varied and diversified. we are in metalforming, we have driver assistance products for safety, closures, mirrors, power trains, plastic interiors, seating and we do contract manufacturing and we are number one global in just about every sector except for seating, where we are number four. that is a little bit about magna.
i will turn it over to jim. >> it is also a pleasure to be here this morning. i am jim fraser. i handle our relationships at the federal, state and local level, so do you diversity of what i get to look at on a day-to-day basis varies dramatically. first, a snapshot of tell us globally -- we are all over the world. you see a lot of growth over the past number of years and that is going to continue. one of the things that hard to see on the bottom is we invest a tremendous amount of revenues back into r&d. we are a very high-tech company, said the investment we put in is significant. we have a footprint of 3000 in the u.s. the interesting part is we've been here for over 100 years.
only in 2000 in the name come into being through a series of acquisitions, mergers and business ventures. though the footprint has been here for some time. i think we are on the leading edge of some real growth attentional in the u.s. the diversity of what we do is quite interesting. you can see the five business activities -- ground transportation, security, which goes into the cyber world, defense, aerospace and space. globally, we are very active and in the u.s., our operations mirror each one of those. each one of those goes into a little more depth, we're big on connectivity, staying connected, it is all about data and sharing and data protection as well. that's a big issue when it goes into the cyber world. you can see the diversity of who
we are in what we do in the u.s. probably very similar for last year. we are a good solid percentage of annual revenues. just a couple of quick thoughts -- i think when we look at how we are trying to grow in the u.s. and the factors that matter , i don't think anything is surprising on the factors he put in. not just nearterm but over the next five or 10 years, everything we do is driven by our strategy. where does it make sense for us to grow? also a workforce, we have highly skilled jobs, lot of engineering talent and having available workforce working through the
state, we have an intensive internal training as well and that really matters to us. proximity to a supply chain in the aerospace world where we are grouped together for aerospace companies, that is important to be part of that community. like so many other companies do, we want to be invested. engagement for us is very important and relationships with local economic development agencies, that all matters. we hope to grow and it's important to establish that baseline first and grow into the opportunities as they come forward. it's a vitally important topic for all of us in the room and i'm pleased to be part of the discussion. >> thank you for that introduction. jim, thank you for the thoughts on what criteria matter for you. frank, can you say more about what magna looks at and what you
look at in terms of what criteria pops out for you? >> one of the things that we have to be cognizant of is the oem. we have to make sure, because we sell to the oem, we are a consumer driven company. we have to with the equipment manufacturers are. at sometimes, it is very sticky because depending on the commodity or the part supply at that time to that vehicle, you are required to be in two different circles of what we call just in time circle. if it is a really urgent requirement such as a seat, we are required to be in a 25 mile circle, so you have to draw the circle around and we have to be inside that circle. if it is not a critical component that can be
inventoried to a point of three days to a week, you have to be in a 125 mile circle of the plant. if not, the oem will charge a logistics penalty for not being inside that circle. then you look at the state and we do a demographic study of where we want to be. within that circle and sometimes outside, we look at the state and do the demographics. the first thing we look at is the standard of living for our employees. making sure we can get the talent we need and that we can get the workers we need and make sure that talent is educated to a point where we can bring them into the plant, train them and make sure they stay there. our turnover is less than 1% and we do that because we take good care of our employees. we look at the economic part of
where we are going to be and look at how the state can help us mitigate the huge capital investment we have to make. when we invest in a plant, the lowest we do is $100 million. we have to be careful where we are with it. >> that makes a lot of sense. both of you talked about r&d in your business and use throughout some very large numbers. do you work with states on r&d and think about the r&d agenda for your company? >> we work closely with the states. on the automotive side, you have got to start working with states because of where the technology in the automotive business is
going. autonomous vehicles, connected vehicles and you have to have remission to test autonomous vehicles in most states and have some place to test them. some people look at the autonomous vehicle and say is that the driverless vehicle? they are not necessarily 100% driverless. a will move to them and we are probably 10 or 15 years away from driverless vehicles, but we have vehicles where if the vehicle senses a vehicle close to you, it stops on its own. those systems are coming into play. there are many new technologies coming into play. the other thing that gets us is we have to be someplace where we can do this r&d because the federal government is requiring we go to 50 miles a gallon by 2025.
both industry and department of energy have stated you are only going to get their three ways. number one is transmission. number two is light waiting the vehicles -- that's the only way you can get technology to get to 54 miles gallon, so r&d is very important because we can see that technology going forward and we need to do it here in the united states. >> i agree.
r&d is at the core of all we do. we opened that the media lab in boston and we have a team of five there, but their mandate is to work with all of our businesses to try to drive this innovation forward. how does r&d come into play here. we invest heavily in that relationship at the local level. it's very important. one aspect i will mention in addition is globally, we have relationships with universities. we love to bring in the best and brightest from the universities to help us move our initiatives forward. in the u.s., that's very true as well. a lot of us are centered around where our current locations are, but where else do they have centers of excellence that we can create these relationships that establishes a presence for us or interest in an area we might not have been focused on that can help grow the relationship as well? r&d is core to what we do. >> we've heard about regulatory relief for r&d. you also mentioned the importance of talent and relationships with universities. can you speak about the relationships you have with
universities, particularly universities and far as making sure the talent has the skills you as a company need? >> we have a lot of relationships with universities but i think you have to go further. you have to get back into the high school and junior high school and start people off from that point and engage and articulate to them that this manufacturing industry is not bad anymore. it is not where you go in and you come out with a greasy shirt. if you look at a body stamping plant, you have presses that are 12 stories high that we have to dig trenches to hold the press in the floor and you look at all of this body worked going around and i looked at chrysler a long
time ago and i was in the spot welding jungle where yours. welding vehicles coming down from the ceiling. that is not done by humans anymore. it's a million-square-foot plant where we pump out bodies, there are 1750 robots in that plant and all the people the do who worked there is controlled robots. you've got to have people who control the robots. you have to go back and create programs for high school and even junior high. moving into the college area to show them this is the expertise and core competencies they need to get into that and being an engineer or operator, a robot operator is a good living and
you can make a lot of money and live comfortably with the. we go that way and create university programs where we do a lot of apprenticeship programs and bring in young people from college every year to work in all of our facilities. >> we do the same thing. first, the university side, we have those relationships where we sponsor robotics competitions and give the opportunity to work with college students and further their projects. globally, we have an organization called the talus foundation, several years in the making. one of their primary focus areas is on stem education. there are examples of those in the u.s.
we go and try to get them excited about science, technology and math. it is giving back to the community as well. if i had to characterize what we do in the communities, we want to be part of the communities and be involved. giving back to the communities, we do a lot of charitable work, but we also do a lot locally that focuses on issues that matter to those communities. we think it is important not only to be good citizens but that is where we live and work. it's a big area for talus. >>, do quality of life factors matter to you as you think about the communities you choose? obviously, you will be investing as a large employer went forward, but even before you choose a community to move into, how much does quality of life
matter >> i think quality of life is very important. the work life allen's we hope to have for all of our employees, the opportunity is there. it is a partnership with the local community. the one thing i want to mention is incentives are still important and still matter in the biggest picture of what we look for when we invest or grow in an area. a lot of growth has come from locations where we currently exist. that doesn't mean we won't be growing elsewhere, but it grows -- it goes back to the quality of life -- is it an area supportive of foreign direct investment? being a global company, we bring in employees from all over the world and higher in the local
communities. it has to be a community that is welcoming and a community that is receptive and supportive of that foreign direct investment. >> i agree. quality of life is very important. when we do the demographics, we look at what the cost of living as because most employees we put into the facility come from the local area. but to expound upon the incentives, i always come back and talk about incentives in a way that i think is positive. it is about the return on the investment that the state is going to get from what we put in their. we have one state and we are large in the state and have 26 manufacturing plants. i will go back to 2009 when the automotive industry went down.
since 2009, that state has granted us $26 million in incentives. if you go back from 2009 to today, our capital investment is $780 million. so i went back and said what are you really getting from this. one of the key parts, what people sometimes don't understand is what goods and services that come from putting that plan in that city or state goes for. so in 2014 in the same state, we went back and looked at all the goods and services purchased by 29 plants in that one state from that state costs vendors. it was $1.6 billion in one year.
anybody can talk about incentives as far you want. understanding the intense capital investment, when you are investing a hundred million dollars, you are investing that within four years because it takes two years to put the building up and you have this start of production. it is not a corporate giveaway. it's helping someone mitigate the capital expense plus get the employees in, plus get them trained and ready to go and also making sure the vendor base you buy goods or services from our right there. >> i want to move on to our state colleagues. i'm going to put you on the hot seat. what are one or two top pieces of advice you give to state economic developers and their roles as folks try to attract your companies and your dollars? >> i think the biggest thing is to bring all facets of what you need for infrastructure together. make sure the state economic
development people are there at the table, but also make sure the utilities are there. the one biggest problem we may have an sometimes face is that we like what we see and we are ready to go and we've find out utility doesn't have the electric power to that area and all of a sudden, you find out you have to build a substation. the advice i would bring is to bring everybody together, come out with a plan and a program and let's not negotiate. you do this, i'm going to do this and that's the way it's going to be. >> similar to that, i think getting the highest levels of your state involved, working
with local partners, when we see a team that has a lot of focus from top to bottom and looking to how do we help you come in and grow, we are looking short-term and longer-term. having that top level engagement which i have seen in so many great examples, that is very important. take a look at the companies you are talking to and understand where they are and whether it's potential may come from. that little bit of homework comes in. we can really get into the substance of the meeting -- this is how we can work together and help you grow. a lot of economic development agencies have an economic office as well. they come to our headquarters in usually, it gets sent back to us.
understanding we have a u.s. presence that exists in working that level all the way through is helpful to make the discussions when we get a chance to meet, really productive. a common theme around doing your homework and being prepared and knowing the full range of the needs of companies is really important. i want to turned over to the manager for the international trade investment office for the missouri department of economics to give us a few comments. >> it is a pleasure to be here today. if you would allow me just one thing -- i would like to thank mark brady and his team not only for the extended relationship we have had but for convening this fantastic and informational, important panel. very well done and we appreciate your partnership about the year.
i want to take this opportunity to familiarize those of you who may not be all too familiar with missouri. i am from missouri, even though there are some people from missouri as well. nonetheless, we are the show me state. the show me state throughout the years, people in missouri have been defined by their stalwart, non-flinching, mostly conservative, usually incredulous character. we like to call that common sense. one of the things i want to talk to you about is how we approach for an direct investment, even a mistake investment expansions in the state and how important that