Episode 39: Going the Distance: How Rhea County Landed Nokian Tyres’ First North American PlantMarch 12, 2018
This week we bring you the story of Nokian Tyres, the world’s northernmost tire manufacturer. The Finland-based company announced plans last year to invest $360 million to build its first North American plant in Rhea County, Tennessee. The battle for the plant, which involved 20 different communities across the U.S., took the winning community from Tennessee all the way to Russia and Finland and even involved a major change in legislation. We spoke with Tommi Heinonen, Head of Nokian Tyres North America, and Dennis Tumlin, Executive Director for Rhea Economic and Community Development, to get the story behind the decision.
Patience Fairbrother (DCI): A selfie and a set of specialty tyres. These seemingly unrelated things are all part of what helped Rhea County, Tennessee win the first North American manufacturing plant of Finland-based Nokian Tyres.
Andy Levine (DCI): The battle for the plant, which represents the largest foreign direct investment in Rhea County’s history, took the community from Tennessee all the way to Russia and Finland, and even involved a major change in legislation. So welcome to episode 39 of “The Project: Inside Corporate Location Decisions.” I’m Andy Levine of Development Counsellors International.
Patience: And I’m Patience Fairbrother, also with DCI and Andy’s co-host of “The Project.” So, this week we bring you the story of Nokian Tyres, the world’s Northern-most tyre manufacturer.
Andy: So that’s a superlative we don’t often hear on this podcast.
Patience: No, we don’t. So the Finland-based company announced plans last year to invest $360 million to build its first North American plant in Rhea County, Tennessee.
Andy: We’re going to interview two key players today, Tommi Heinonen, who’s the head of Nokian Tyres North America, and Dennis Tumlin, Executive Director for Rhea Economic and Community Development.
Patience: Tommi has been with Nokian for 18 years. The first 12 and a half, he spent in Finland, and those last five-and-a-half he’s been in Colchester, Vermont, where the company maintains North American headquarters.
Tommi Heinonen (Nokian Tyres): Nokian Tyres is focused on the premium tyres. We’re a premium tyre manufacturer and we’re building the safest tyres on all conditions, meaning that our background is on winter tyres. And we’re s global leader on premium winter tyres.
Andy: So, not surprisingly, the northern-most manufacturer of tyres is also a leader in producing tyres for winter weather. Now, Nokian’s customers include your typical consumer cars and trucks, that sort of thing, but also large machine manufacturers.
Patience: Up until this past year, Nokian manufactured all of its products in Finland and Russia, but the company has seen major growth in the North American market and recently announced the goal to double sales in North America within five years.
Tommi: We have already remarkable markets here in Northern Europe and in Russia. And the company strategy has been focusing now on two growth areas, which are Central Europe and North America. We have been growing remarkable here in North America for the last couple of years, and definitely, the bottleneck is the local manufacturing.
Patience: So, since you have a presence in the Northeast U.S., as well as in Canada, was the thought with this expansion to cover more area of the U.S. you were talking about local manufacturing in terms of moving your product around?
Tommi: Yeah, for sure. Now we have a strong position in Canada and Northeast U.S. But definitely, we’re growing more in the west and the south. Of course, never forgetting the northeast and Canada. But definitely, the biggest growth is coming from central and the west.
Andy: Nokian looked at 20 different communities before landing on Tennessee. We asked Tommi what factors played into that decision.
Tommi: Well, of course, there are a lot of criteria for us as on the site selection, and logistics is one of those. Rail access was very important. Then availability of the labor, availability of the energy, meaning…our tyre cooling process needs a lot of energy. And, of course, the overall business environment. That’s very important.
Patience: So rail access, labor and energy costs and availability were central to this decision. Nokian gradually began to narrow the 20 communities based on these factors. As it turns out, eliminating sites that did not have the rail access Nokian was looking for in particular helped to move the process along.
Andy: According to Dennis Tumlin of Rhea Economic and Community Development, Nokian was incredibly efficient about the site selection process. Dennis is a Chattanooga native, who worked for Coca-Cola out of their headquarters in Atlanta for 16 years. When he was recruited by Rhea County, he saw a great opportunity to help his hometown.
Patience: So Dennis and his team first heard about the Nokian opportunity in April 2016. But as with many corporate site searches, Nokian did not reveal their identity to the bidding communities until the very end.
Dennis Tumlin (Rhea Economic and Community Development): Like most projects, these things are, you know, confidential. They’ve got a code name. This particular code name was Project 3F. And so, we had no idea who the end user was. You know, your initial site visit, you typically get them for anywhere from 30 minutes to two hours. So, you know, really, our first four or five site visits, we didn’t know who they were. And it was all confidential. No business cards exchanged. No names exchanged. So you’re working on a confidential unnamed project.
Patience: Rhea County had one very promising site in play, so all of their energy was focused on selling it to the company.
Dennis: It was a pretty cool site. It was new to the market. It had not been on the market before. It was a combination of seven individual parcels that I had worked on and my team had helped pull together. So it was a fairly new site and the consultants were trying to figure out where that site had came from. It had not been on anybody’s radar for, you know, from a site that was out there in inventory. So it rose to the top very quickly.
Andy: So let’s fast forward five months and a handful of site visits later, and Rhea County still has no idea who the mystery company is.
Dennis: We didn’t find out until we were down to the final two communities. They kept it confidential all the way to the, literally, seven days. We were invited overseas to go visit, and they came to us and said, “You need to be… At this point, we need to let you know who you’re fighting for.” And so, they gave us…brought us in the loop, but we had already bought…we were about to buy plane tickets to go to Finland and to visit their operation. So they invited the final two communities to go over and check out…learn a little bit more about them so it would help us to fight harder in the final negotiations.
Patience: In September 2016, the two finalist communities were invited on a two-stop trip to visit Nokian’s headquarters in Finland and their manufacturing operations in Russia. So this is where one of my favorite stories ever told during an interview for the project comes in. Dennis and his team had flown to Washington, D.C. to pick up last minute travel documents in advance of the trip. So it’s 4:30 p.m., around closing time at the Russian Consulate and their flight leaves the following morning out of Tennessee, and they ran into the competitor community.
Dennis: It was a very short timeline for us to get our travel visas and so forth. And I was with one of my colleagues in Washington, D.C. in a visa office, and a team from Georgia was in that office at the exact same time, working on their paperwork. And we just started…we put two and two together. And we actually took a selfie together with that team and sent it to the consultants.
Patience: Oh my goodness.
Andy: It was awesome.
Dennis: Yeah. We sent…we took a selfie with them and sent it to the consultants and said, “Hey, we know our competitors.” And so, yeah. We found out accidentally, and it was a pretty cool deal that we were both invited and met each other in Washington, D.C.
Andy: While sending a selfie to the consultant on the project may seem like a pretty confident move, Dennis and his team didn’t truly feel sure that the deal would come their way until the very end of the project.
Dennis: We never felt like we had it in the bag. We were probably always the underdog. And I think even when we were the final two communities, I think they’ll probably tell you that we were not in the lead. And we felt several times that we were not in the lead. So I don’t know if we ever had that feeling until we got the announcement that it was ours. So we fought all the way through like we were in last place.
Patience: According to Dennis, there were two major hurdles that Rhea County had to overcome to win the Nokian project. The first was at the state level.
Dennis: We had several things that had to get worked out, which kept us behind the eight ball most of the way through. We had some corporate tax structure that the state of Tennessee needed to get worked out. And Governor Haslam was able to get that legislation through in what’s called the IMPROVE Act, so there were some corporate tax reductions that Tennessee needed to make that had a huge impact on this project.
Andy: The new legislation leveled the playing field to allow Tennessee to be competitive against other states in the running. The second hurdle came at the local level in the area of waste water rates, which are important to Nokian’s manufacturing operation costs.
Dennis: During the selection, we realized that something like waste water…our waste water rates needed to be adjusted, so we had to do a rates study real quickly. We hired a consultant to evaluate our water and waste water rates to realize if we had the ability to adjust rates. And actually, we were able to adjust some rates, which every industry in the area will benefit from those adjustments of rates, which helped us be more competitive in the search.
Patience: The IMPROVE Act and the adjustment of waste water rates are both changes that not only helped Rhea County to win this project, but that Dennis and his team anticipate will help draw in additional investment.
Andy: There was one other amusing story that came about during these interviews. According to Tommi, Dennis and his team did a tremendous job responding to Nokian’s needs throughout the process. But Dennis really went above and beyond in one area in particular that really made Rhea County stand out.
Tommi: When we first visited on that site in Tennessee, Dennis has bought a set of our tyres on his truck. And it’s not easy on that area. We don’t have a distribution there. So that was kind of showing commitment to us because he was driving there with our tyres and proudly showing that, “Hey, look at my truck. They’re Nokian tyres.”
Patience: That’s wonderful. And it sounds like, you know, it wouldn’t have been necessarily easy for him to go out and get them, so it showed his commitment.
Tommi: No, definitely. It’s not that he goes to the nearest tire store in Dayton, Tennessee and just buy Nokian tyres. He has really done some work on that.
Andy: So there you have it. Dennis purchasing a set of Nokian specialty tyres for his truck went a long way towards impressing the company.
Patience: Nokian Tyres will break ground on the Dayton, Tennessee plant in early 2018, with production launching in 2020. The company plans to create at least 400 jobs in Rhea County.
Andy: So Patience, here we are. We’re at the takeaways portion of the episode. You did these interviews, so tell me what stood out to you about this episode?
Patience: One thing that struck me about my conversation with Dennis is that one of the things that really pushed this project along was actually this change in legislation at the state level. So this was already in the works, but this project not only helped to move it along, but it was a key factor in the project going to the county.
Andy: And this is really gonna make Tennessee just more competitive overall in the long term and not just the short term.
Patience: Exactly. So it’s gonna help bring in additional investments as well. And then, of course, I can’t not mention the fact that Dennis went out of his way to buy the tyres, buy this company’s product and put them on his truck. I just thought that was so brilliant.
Andy: I can’t say this, but that is effing brilliant. I mean, I have to say that that is just like, you know, genius in sort of economic development allure and just a really, really smart thing to do. So it sounds like…you know, we heard from the company about that, Tommi, and it just seems like that really impressed him.
Patience: It’s clear it had an impact on him.
Andy: Okay. So that is a wrap on episode 39 of “The Project: Inside Corporate Location Decisions.”
Patience: Special thanks to Tommi Heinonen of Nokian Tyres, and Dennis Tumlin of Rhea County. We also need to thank Charles Wood of the Chattanooga Chamber for helping to make these interviews happen.
Andy: Once again, if you’ll be attending the Site Selectors Guild Conference in Cincinnati on March 19 through 21st, keep your eyes out for Patience.
Patience: I’ll be the one with the digital recorder, collecting soundbites about site selection trends and what the future looks like for the industry. We’ll release a special episode recapping what I learn next month.
Andy: “The Project” is sponsored by DCI. We’re the leader in marketing places and have served over 450 different cities, states, regions and countries. You can learn more about us at our website, aboutdci.com.
Patience: We hope you’ll keep listening. There are many more projects to come.