Signs of the Times

On January 18, 2013, in News 2013, by Mark Norris

Electrolux plant shows shift in economic development strategies

By Bill Dries,
January 18, 2013

Memphis Mayor A C Wharton Jr. called the Electrolux Memphis manufacturing plant a “monster plant” this week after a tour of the $266 million manufacturing center in Frank C. Pidgeon Industrial Park.

The tour, Tuesday, Jan. 15, led by Electrolux Major Appliances North America CEO Jack Truong, came before the first ovens and ranges roll off the line in May.

That’s the second $116 million phase of a plant Truong repeatedly likened to an automobile plant in its economic impact as well as its approach to manufacturing.

For every one of the estimated 1,200 jobs in the plan, three to four are created for suppliers in the surrounding area, by Truong’s math. The economic impact of suppliers has been part of the gospel of auto manufacturing since a new car line that came to be called Saturn was weighing incentive offers from a number of states in the early 1980s.

In the case of Electrolux, the plant has already meant a $60 million contract with Memphis-based Integrated Solutions for the assembly line construction beginning to take shape.

Truong said the plant allows Electrolux to “control our own destiny” and change what it does. There is precedent for that in the history of Memphis manufacturing with the Sharp Manufacturing plant’s conversion in the last 10 years from making televisions to making solar panels.

“It’s very important for us to standardize and modulize our processes so that we can have the flexibility to produce the innovative product not only for today but for tomorrow,” Truong said of Electrolux.

The ovens and other cooking appliances to be made at Electrolux go through larger ovens that can reach a temperature of 1,600 degrees and even transfer that level of heat to other ovens for greater efficiency.

The reliability laboratory tests sample products from the assembly line at 380 stations that simulate different conditions. Those products picked for the lab are tested for 20 weeks to simulate a 10-year product life.

The assembly line can paint one oven blue and the next oven red depending on what is needed.

And the manufacturing process includes more chances to correct problems along the assembly line before the product reaches the end.

“It’s important for us to manage and have vertical integration where we have the flexibility and ability to control the quality along the way,” Truong said.

The Electrolux milestone reflected an interesting transition in economic development strategies.

It came the day after executives at one of the state’s other economic plums announced they were laying off 300 workers.

The layoffs at the Hemlock Semiconductor plant in Clarksville, Tenn., are the result of an oversupply of the processed poly silicon the plant produces.

Hemlock was one of three plant construction projects touted during the administration of former Gov. Phil Bredesen during the global recession.

The day after the Electrolux tour, state economic development officials announced New Breed Logistics would expand its Memphis operation, creating nearly 500 jobs in a $23 million expansion.

The state incentives come with different terms than those offered by the Bredesen administration. Gov. Bill Haslam, in his first two years in office, has moved the state to “statutory incentives” that do not come with a contractual agreement.

Companies instead qualify for what are called “FastTrack” grants from the state.

Electrolux was at the tail end of the Bredesen administration. Bredesen and his economic development team pledged $97 million in the last year of his second term of office as the state’s share of the project, the largest state commitment ever to an economic development project in Shelby County.

But it wasn’t in the budget when Haslam took office in 2011 along with Republican majorities in the Tennessee House and Senate.

“We sort of received the wet baby when this thing was born,” was how state Senate Republican leader Mark Norris of Collierville put it. “We did a lot on faith.”

The local government incentives for the plant were $22 million in bond financing each from city and county governments as well as a 15-year tax break through a payment-in-lieu-of-taxes agreement. The Memphis City Council and Shelby County Commission questioned all extensively before they approved them.

And members of both bodies were critical of Wharton in particular for agreements that included no specific percentages for minority business participation or local hiring. There were suggested goals and commitments. But the deal included no requirements.

As he toured the plant Tuesday, Wharton said the reality of the plant is vindication of a deliberate strategy.

“In a place like Memphis in an urban environment, where things are often contentious – everybody says you’ve got to have it in writing. Well, we did not have it in writing but we had good faith,” Wharton said. “What we’re going to show to the world … is that you can come into this big urban area – get a deal done and get it done on time and everybody walks away winning.”

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