If You Build It…Dana Inc., Toledo and the Spec Building

October 17, 2016

Episode 2 of “The Project: Inside Corporate Location Decisions” 

 

 

This blog post is a full transcript of a podcast that was posted to iTunes on October 17, 2016. It explores the decision of Dana Incorporated, a large auto parts manufacturer, to build a new $70 million manufacturing facility in their hometown of Toledo, Ohio.

The Project’s co-hosts Andy Levine and Patience Fairbrother interviewed Ken Anders, Dana’s Global Director of Real Estate and Construction and Paul Toth, President and CEO of the Toledo/Lucas County Port Authority.

 

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Andy Levine (DCI):  If you’ve ever owned or admired a Jeep, you’re going to enjoy this podcast. It’s a story about Dana Incorporated, a huge auto parts manufacturer that employs about 23,000 people. The company was recently selected to supply axles for the new breed of Jeep Wranglers. And they decided to build a new manufacturing facility on the exact site where the first Jeeps were manufactured back in the 1940s.

These first Jeeps, about 300,000 of them, were built by a company called Willys Overland Motors, I love that name, between 1941 and 1945. And they were built in Toledo, Ohio which also happens to be Dana’s hometown. So welcome to episode two of The Project: Inside Corporate Location Decisions. I’m Andy Levine of Development Counsellors International.

Patience Fairbrother (DCI): And I’m Patience Fairbrother, also with DCI and Andy’s co-host of The Project. Every two weeks we bring you a new story of a corporate location decision. We’ll share an inside look from company execs, economic developers, real estate professionals and site selection consultants.

Andy: We’re going to start at the end of the story. James Kamsickas, he’s the president and CEO of Dana Incorporated, he takes the stage at the Toledo Rotary Club. Everyone’s expecting sort of a boring normal speech by a CEO. And to the surprise of 400 people in the audience, he announces that Dana is going to build a new $70 million manufacturing plant in Toledo and this plant is gonna employ 300 people.

Patience: This is a big deal. It’s the first time in 30 years this huge automotive supplier is going to build anything in its hometown. The crowd at the Rotary Club went absolutely wild and gave him multiple standing ovations. It was a feel good moment for the community, but the announcement was literally six years in the making.

Andy:  So our story starts with Paul Toth. Paul is the president and CEO of the Toledo-Lucas County Port Authority. Paul has worked at the Port Authority for 28 years. He talked about the Port Authority’s decision to purchase a piece of land, the exact site where Willys Overland Motors built the first Jeeps.

Paul Toth (Toledo-Lucas County Port Authority):  And then in 2010, as the auto industry was reeling and Chrysler and all the rest of the Big Three were looking to get rid of their distressed assets, we were able to purchase the former site of the original Jeep manufacturing facility, which is a 110 acre site that sits right on I-75, dates back really to the late 1800s when it was, I think, originally the site was used to manufacture bicycles.

But eventually, it was Willys Overland and then it became the Jeep manufacturing facility. And Chrysler had built a new Jeep manufacturing facility a few miles down the road and this was mostly an abandoned site which we were able to purchase through the distressed asset sales of Chrysler at the time.

Andy:  So in 2010, you acquired the site. It has been an automotive manufacturing site for over 100 years. I got to think among brown fields this is about as brown as they come.

Paul: Yeah, you know the scary thing is, is when you’ve got a site this big with this many years of manufacturing in its history, you’re always afraid of what you don’t know. We spent a lot of time and effort trying to characterize what the property…what the challenges on the property were.

We knew that there were going to be a lot of foundations and slabs. It was really the environmental issues that were the big question. And frankly, one of the things that my board was concerned about when we looked at buying this property is whether or not we truly understood what was below the slabs and the foundations and the basements and the tunnels and hundred years of challenges that we saw in that site.

Patience: So the Port Authority purchased the site, branded it as the Overland Industrial Park, and then spent 3 years and about $15 million getting it ready for tenants. We’ll come back to Paul in just a minute, but first let’s fast forward to Dana and their need to build a new manufacturing plant. We talked to Ken Andres who’s the global director of real estate and construction.

Ken Andres (Dana Inc.): Well if we start from the beginning, it…real estate and Dana as a service provider to the business units and what we would call our light vehicle business unit, which is the passenger cars and pickup trucks, has been growing fast in the last few years. And they had a need for some capacity to produce some product for Chrysler.

And with that, they came to me and said, “Hey Ken, what do we have?” And the first thing we always do is look at our existing facilities to see if they have the capacity or could be expanded and make some sense of that. We took a look at our closest plants to our target area. And our target area would be where our customer’s at: Lima, Ohio is close, Dry Ridge, Kentucky and Fort Wayne, Indiana.

And after a review of those facilities, we determined they just don’t have the capacity, they’re all very large facilities to start with, and it didn’t make any sense to add on to them any further. So that led to a site selection process.

Andy:  They couldn’t handle the new work in any existing facilities, so Dana decides it’s time to build a new plant.

Ken:  We start a site selection process which is meeting with the business unit to determine a target area, which is the utopia of the world. If we find that spot, that’s exactly where we want to be, but utopia is hard to find, so we put a ring around that utopia. And in this case, it was a 60 mile radius from Toledo, Ohio.

Patience: So with that 60 mile radius around Chrysler, Dana’s primary customer for the Jeep program, the company began the site search process. We asked Ken about the criteria behind that decision.

Ken: So as with any house finding expedition, you know, we have some criteria that we go by, but it’s a pretty refined process and obviously bigger scale. The first thing that comes into play for us is we’ve got to determine whether there’s acceptable labor in the market.

So, you know, we’re looking for a spot that has the labor for not only the production side but also for the plant management side. So those are both considerations that are critical. I can build a building or find a building in, you know, what might be the most beautiful area of the world, but if we don’t have anybody to staff it, it’s worthless to the company.

So labor is number one for us. And then we obviously go into existing buildings or build to suit opportunities that can meet our requirements. Third on the list for us is timing. There’s always, you know, a factor of when that customer needs that product and so the real estate has to match up to that. Fourth is cost for us. You know, obviously that’s important at some point, but if we don’t have those first three then, you know, cost doesn’t matter. So that comes in fourth. And then we start going into incentives, what is available for us to locate in that particular area.

Andy: It’s interesting that Ken placed incentives literally at the end of the process. Labor was number one, incentives was number five. So how did the Overland Industrial Park come into the picture?

Ken: So we evaluated our bullseye and that 60 mile radius around it for existing buildings. And we’re looking for 300,000 square feet or up to 300,000 square feet, which is a large building, so very limited supply of those. And there were a few. And so we did visits for those…on those facilities, but none of them really met our full criteria as well as we would’ve liked.

The Jeep plant on the first brush did not show up on our list because it wasn’t a 300,000 square feet facility, but on the second brush we went down to, “Hey, can anybody…you know, can we add on to a building? Can we…you know, is there somebody that’s starting to build a building that would be ready in our timing?”

So you start looking at that second level of the search. And that’s when…we knew about the Jeep building. I didn’t know if it had been…you know, the initial phase had been completed, but when we checked it, they had 100,000 square feet sitting there that could be expanded very quickly and meet, you know, our timeline. So it came into focus very quickly.

Patience: Ah, the Jeep building.

Andy: Yes, the Jeep building.

Patience: So here’s where our story gets really interesting. Paul Toth and the Toledo Port Authority decided that in order to get people interested in their new site they needed to build a 100,000 square foot spec building on the site they’d spent $15 million redeveloping.

Paul: We kept seeing opportunities for companies coming to our community looking for existing industrial buildings that meet today’s standards and us constantly having to turn them away.

And so we decided because we had this property, it’s in a great location, it’s part of a redevelopment effort for frankly one of our poorest census tracts in our entire community, we really felt like it was an opportunity for us to step up and take a risk, build a 100,000 square foot industrial spec building that could be used for either manufacturing or warehouse distribution and be able to market that for opportunities that may come around.

Andy: So Dana’s looking for an existing facility, and they find the 100,000 square foot spec building the Port Authority has just built. Let’s go back to Ken Andres for his perspective.

Ken: Yeah, it’s one of those risky moves to build a spec building, especially in the, you know, the times that the United States has had over the last 10 years, but I would say, you know, great foresight by the city of Toledo, the Port Authority.

Andy: If Toledo had not had this spec building, do you think you would’ve just looked elsewhere, the site wouldn’t have worked without the spec building?

Ken: Yeah, I won’t say that we wouldn’t have been in the Toledo area, but we wouldn’t have been at Overland Parkway because that would not have met our timing in any way, shape or form.

Andy: Gotcha, gotcha. So it sounds like the Overland site sort of quickly emerged. Once you got over the “we can build onto this existing building”, it quickly emerged as a favorite. Am I getting that correct, Ken?

Ken: You’re getting that exactly correct because that’s…all of the sudden it became that perfect location, now a site that, you know…and I would tell you the spec building wasn’t exactly what we were looking for, but we could retrofit that into what we wanted it to be fairly easily. Then I would say then it gets into that and, you know, the site’s good, timing’s good, you know, some of the cost…we’ve done some costing. It looks good.

Patience: We also asked Paul about the decision to build a spec building on the site.

Paul: You know, not every community has the wherewithal to go out, nor do they have the location and the other tangible and intangible assets necessary to go out and build a spec building.

We had done a study back in about 2009 or 2010 in which CBRE’s national site selection group was part of the consulting team. And we were really looking at northwest Ohio and our competitiveness, and one of the charts in there that really caught my attention showed that 85% of the companies coming into a community are looking for an existing building. Only about 15% are willing to build either on a brownfield, greenfield or in an industrial park their own facility or build to suit.

Andy: So at the start of this podcast, we told you about James Kamsickas, president and CEO of Dana, and his announcement at the Toledo Rotary Club. Both Ken Andres and Paul Toth were in the audience that day. We thought it might be nice to finish up with what they remember about the announcement.

And were you in the audience at that presentation?

Ken: I was.

Andy: Did the place go nuts?

Ken: Absolutely went nuts, and I would tell you it was a standing ovation for, you know, seemed like hours but I’m sure it was just, you know, a minute or so. But really, really nice announcement and great reception, and, you know, obviously the event, you know, couldn’t have went better for us.

And, you know, we’re proud of it. It’s not only a world class facility we’re going to put up that’ll be a landmark for the city for years to come, but it’s also 300 jobs and that’s, you know, that’s something to be proud of as well.

Paul: Well, I was invited to be Dana’s guest at the Toledo Rotary meeting and I think there were at least 3, maybe 5 standing ovations from a crowd of about 400 people there. So we’ve taken a piece of property that’s sat vacant in kind of a wasteland for much of the last 15 years and in the course of about 30 months have announced almost 600 jobs on the site. So obviously, the entire community’s taking note and very excited about us bringing more opportunities to northwest Ohio.

Patience: So that concludes our story. Let’s take a look at some of the main lessons here. Andy, for me the main takeaway is pretty clear, to have a building is critical. Paul mentioned earlier the results from a 2010 study that said that 85% of companies coming into a community are looking for an existing building.

Andy: And that’s hard for a lot of communities because it’s expensive to build a spec building, but if you don’t have that building, you’re just not in the game.

Patience: Exactly, it’s really a risk worth taking, especially in this case.

Andy: The second part of this, I’m going to go in a different direction on this one, Patience, and it’s about the value of emotion in a site location decision. So we heard from Ken, Ken walked through, you know, when we started looking at this project they looked at it from a data driven perspective. Here were the things we’re looking for. We’re looking for labor in particular was one of the key things he mentioned.

But at some point in the process, the company really fell in love with the idea of manufacturing in their hometown, something they hadn’t done in 30 years. So as it went deeper and deeper into this, I think that became a real driver of the decision.

Patience: That’s right. So that is a wrap on episode number two of The Project: Inside Corporate Location Decisions.

Andy: We’d like to thank Ken Andres of the Dana Corporation, we’d also like to thank Paul Toth of the Port Authority, and finally, we want to thank John Gibney of Toledo’s Regional Growth Partnership who helped facilitate our interviews in Toledo.

Patience: And a special shout-out goes to Evan Levine and his trio who recorded The Project’s theme song which you’re listening to right now.

Andy: The Project is sponsored by DCI. We are the leader in marketing places and have served over 450 cities, states, regions and countries. You can learn more about us at www.aboutdci.com.

Patience: We hope you’ve enjoyed this episode. We hope you will keep listening. There are many more projects to come.

Written by Andy Levine

Andy Levine is President/Chief Creative Officer of DCI. Since joining DCI in 1991, he has worked with a broad range of places from “A” (Alabama, Asheville, Australia) to “W” (Wales, Wichita Falls, Wyoming).

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