A PUBLICATION OF THE SOUTH CAROLINA MANUFACTURERS ALLIANCE • MADEINSC.ORG • JULY 2010
CLEMSON’S ICAR PROGRAM
A Model of Success for Public & Private Technology Partnerships
WORKFORCE EVOLUTION
Maximize Your Core & Non-Core Processes in Staffing
DAVID WILKINS
A Legacy of Turning Crisis into Consensus
MOVING SOUTH CAROLINA
Suppliers Drive the Automotive Industry
EXCELLERATE
Introducing the South Carolina Automotive Council
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Executive Editor Lewis F. Gossett gossett@myscma.com Managing Editor James A. Richter richter@myscma.com Creative Director Will Bryan will@gencreative.com Design/Layout Genesis Creative www.gencreative.com Contributing Writers Susan Polowczuk Randy Hatcher Burnet R. Maybank, III Lewis F. Gossett James A. Richter Cover Photograph Shutterstock Advertising (803) 799-9695 James A. Richter richter@myscma.com Editorial Office 1340 Bull Street Columbia, SC 29201 (803) 799-9695 fax (803) 771-8738 www.madeinsc.org Copyright ©2010 SCMA. All rights reserved. Reproduction in whole or in part without the permission of the SCMA is prohibited. Printed in South Carolina. When you have finished with this magazine please recycle it.
From the President Where would S.C. be right now without the automotive industry?
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Turning Crisis Into Consensus A Look at Ambassador David Wilkins’ Service to South Carolina.
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Excellerate An Introduction to the S.C. Automotive Council.
Collaborating to Commercialize
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A Look at Clemson Universities’ International Center for Automotive Research.
Workforce Evolution
Putting Money on the Table
Maximizing Core and Non-core Processes in Staffing.
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Vital S.C. Tax Incentives, and What You Might Be Missing.
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Moving South Carolina Suppliers Drive the Automotive Industry.
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SCMA 2010 Calendar
What’s Going on in SC for Manufacturers in 2010.
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From the President
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here would South Carolina’s economy be right now without the automotive industry? In the last several years, we have watched our state lose tens of thousands of jobs, many of them from the manufacturing sector. We have seen headlines from across the country that have decried the woes of the American automobile industry, at times questioning its ability to continue to exist. Those of us in this State, however, have known that those headlines were not nearly as severe for the Southeastern automotive sector as they were for the so-called Rust Belt. We have known for a while that we have a much stronger automotive sector and that there is a much brighter future for this vital part of South Carolina’s manufacturing community. South Carolina is home to world class original equipment manufacturers and automotive parts suppliers. Companies like BMW, Daimler, Bosch, Bridgestone, Magna, Lear, BorgWarner, and Mercedes call our State home and provide the world with first quality products. Officials from these companies will tell you that among the keys to their successes were their corporate decisions to invest in the people of South Carolina. Sure, economic times have challenged them just as they have companies from other regions, but they have shown resilience and have continued toward bright futures. The automotive sector in South Carolina is dynamic, diverse, and relatively healthy. At SCMA, we along with a large number of automotive members believe it is time for this sector to have a distinct identity and presence within our organization. As a result, a core group of leadership companies from across the State formed the South Carolina Automotive Council, an industrial sector Council within the SCMA. We have formed strong partnerships with Clemson University’s International Center for Automotive Research and the Upstate Alliance, and we are excited to announce the June opening of an Automotive Council office on the ICAR campus in Greenville.
South Carolina Automotive Council will firmly establish the identity of the automotive sector as a leading part of South Carolina’s manufacturing base. We will build upon the inherent strengths within South Carolina’s economy that facilitate a strong automotive industry and that create the possibility of further growth and prosperity. Please join us as we begin showcasing for the South Carolina business community, public policy makers, and general public at large the people, companies, and products that constitute the automotive sector in our State. We hope that each of you who are reading this magazine will join the South Carolina Automotive Council and will participate in its wide array of activities, including sharing best practices, working toward common goals, any ensuring the best climate possible for automotive manufacturing. We look forward to working with you and to clearly demonstrating to the rest of the country and the world that the automotive sector in South Carolina is the new center of the automotive world.
We have bold plans for this new organization, and we will soon embark on a wide array of new programs, initiatives, conferences, and training opportunities. Combined with the already strong public policy voice of the SCMA, the
President & CEO South Carolina Manufacturers Alliance gossett@myscma.com
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• Made in SC
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photography by Renee Ittner-McManus
Lewis F. Gossett
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Focus on Manufacturing
The South Carolina Automotive Council:
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Excellerate
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he time is right. The momentum has been building steadily. South Carolina has become an industrial center for automotive manufacturing, poised to rival, if not surpass, Detroit in years to come. With a heavy concentration of original equipment manufacturers, suppliers of all shapes and sizes, world class research, and a workforce capable of working at the highest levels, South Carolina’s future as a hub for the automotive industry is bright. That’s why, through the South Carolina Manufacturers Alliance, the industry and a number of strategic partners are coming together to form the South Carolina Automotive Council – a forum to promote the interests and identity of this growing part of South Carolina’s economy. To demonstrate just how timely this new organization is, take a look at the new world of automotive manufacturing. International automotive manufacturers and their suppliers, in search of a North American location, may very well be looking at that upside down map. These companies are not constrained by the idea that automobiles should be manufactured in the Great Lakes region. Instead, they are seeking the place with the highest number of available, skilled employees, and a well-designed infrastructure. In the last two decades North American newcomers, largely international companies, have discovered the benefits of a southern location. Why the South? As the Mid-South Bureau Chief for Automotive News Magazine Lindsay Chappell explained in a 2006 article,
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“Only people in Detroit ask that question. International automakers look at a big map of North America and see the congestion, shortage of workers, and multi-generational brand loyalty that are prevalent in the northern United States. The “big three” (Ford, Chrysler, and General Motors) are loyal to the Great Lakes area, but increasingly other auto companies are looking at the South as a land of opportunity. In contrast to the North, they are finding wide open spaces, abundant skilled labor, and positive relationships with government to get things done.” This southern automotive phenomenon began in the early 1980s. Prior to that time, Ford was manufacturing in Atlanta and GM in Shreveport, LA, but those plants were definitely an exception to the Great Lakes-rule. At the time, the import market was growing so fast that it became necessary for major international automotive manufacturers to establish North American operations. In quick succession, Nissan, Toyota, Saturn, BMW, Mercedes, and numerous suppliers chose locations in the South. The result is a second U.S. automotive industry based in the Southern Automotive Corridor. The “big three” believe that the Great Lakes region is the center of the map. As other automakers have entered the U.S. market, they simply don’t see things that way. In the South, they see access to suppliers, warm weather to speed production, and a freedom from constraints and attitudes they will still find in the North. In other words, they can come to the southern states and do business in a way that makes sense without having unions dictate how they hire workers and local government dictate how they get permits.
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July 2010 •
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South Carolina OEMs (Original Equipment Manufacturers) BMW Manufacturing Co. - Greer
Freightliner - Gaffney
Mercedes - Ladson
» When BMW chose South Carolina for its North American operations,
the State was not known for its automotive manufacturing sector. Michelin’s North American headquarters has been located in Greenville since the 1970s and there were less than 100 automotive supplier manufacturers, but no major original equipment manufacturers (OEM) had ever invested in the State. Before choosing Spartanburg County, BMW approached the site selection process with the rigor you would expect. After a three and a half year process, during which they investigated 250 locations worldwide, the company made the strategic decision to build “Ultimate Driving Machines” for the global market in South Carolina. Today, the company has found a home in the Southern Automotive Corridor, investing more than $2.4 billion and employing more than 5,000 people. “The factors that led BMW to select South Carolina include an available, high quality work force, an excellent site with appropriate infrastructure, a supportive business climate, and excellent cooperation from State and local officials. Overall, the State offered a comfortable package for our company to begin a new business venture,” said Bobby Hitt, Department Manager for Corporate Affairs of BMW Manufacturing Co. Considering how important the “Made in Germany” image is to BMW, the number one issue the company faced was: Could they find a skilled labor force to provide the premium quality on which the company had build its impeccable reputation?
Honda - Timmonsville
American LaFrance, LLC - Summerville
Streit USA Armoring, LLC - N. Charleston
As former Vice President for Community and Corporate Relations, Carl Flesher explained in an early 2002 newspaper interview, “The secret to our success in South Carolina is the people. My chairman would tell you that he came here incognito for about six months and drove through neighborhoods, he went into restaurants and went to the movies and he said, ‘I spent time looking into people’s faces trying to find out: could we build BMW products here?’ And he came to the conclusion that with the obvious sense of pride and the friendliness, we could. Our success has proven that.” In addition to the quality work force, BMW also attributes its success to a state government that listens and is willing to provide the infrastructure that business needs to be profitable and successful. In fact, with the readyto-work attitude the company found in South Carolina, BMW set a new world record for the fastest start-up in automotive history-just 23 months. BMW Manufacturing Co. investment in South Carolina was the catalyst for more OEMs to setup shop in the State –South Carolina is now home to eight.
History
Road Rescue - Marion
Force Protection - Ladson
South Carolina is usually not the first state to come to mind when thinking in terms of the early days of the automotive industry, but in reality, this state does have a unique history to share. Around the time that Henry Ford was drawing up ideas for his Model T, John Gary Anderson of Rock Hill, SC was cooking up some big plans of his own. Starting out as the Rock Hill Buggy Co. in 1886, Anderson eventually grew his business he shared with father-in-law, Adley D. Holler, to make way for the future of automobiles. Anderson Motor Co. became the new name to fit the new vision- high-end luxury cars. From 1916 to 1925, Anderson Motor Co. made by hand luxury cars that sold from $1,650 for the fivepassenger touring car, to $2,550 for the sedan; a steep comparison to Ford’s Model T that was selling from $345 to $760 at the time. Anderson had a motto that accompanied that costly price tag, “A Little Bit Higher in Price, But Made in Dixie”. The Model C, the proper name for Anderson’s luxury model, had a lot to offer other than a fat bill. Not only were the Model Cs manufactured by hand, but they were also built very meticulously compared to the assembly-line manufactured Model Ts; offering customers a greater piece of mind when it came to reliability. Among other things, the Model C offered color options while Ford’s
Model T only came with the standard black. Other luxury features included leather upholstery, wooden chassis’ with steel overlays, footrests, and passenger handle bars. Unfortunately, the South could not provide enough business for Anderson Motor Co. to survive at the time, and in 1926, the company called it quits.
BMW Manufacturing Co.
Excellerate In a unique way, the South has always been an integral part of the automotive industry, even when it was first making its appearance around the turn of the 20th century. With innovative minds such as that of John Anderson, the Palmetto State has been able to keep up with the best of them to claim its place in the automotive industry. Today, South Carolina has a vibrant and growing automotive manufacturing cluster, including original equipment manufacturers, suppliers, specialty vendors, and growing research capabilities. The industry sector is growing rapidly and becoming a significant force in the South Carolina business community. With that growth and maturity comes a larger number of issues, including growing government regulation, industry-wide restructuring, workforce development, industry image, and fierce global competition. Leading world class operations such as BMW, Mercedes, Force Protection, Bosch, Michelin, BorgWarner, Daimler Trucks, Magna Drive Automotive Industries, Lear, and Bridgestone have significant and growing operations in South Carolina, but there are literally hundreds of other manufacturing concerns in this State making parts or providing services for those companies and other manufacturing interests around the world.
bmwusfactory.com
The Ultimate Driving Machine
®
The South Carolina Manufacturers Alliance, along with CU-ICAR, and the Upstate Alliance has created, the South Carolina Automotive Council, which is a forum for the automotive industry to collectively establish its position within South Carolina’s economy and to enhance collaboration, identify unique issues, and create an environment for continued success and growth for all of South Carolina automotive companies. “We believe this new forum will contribute to the continued growth of the industry in South Carolina, providing infrastructure and support for the collaboration, educational opportunities, and pursuit of other industry goals needed by this significant part of our economy, “ stated Lewis F. Gossett, President and CEO of the South Carolina Manufacturers Alliance. “We are excited to open an office for the Council on the CU-ICAR Campus in Greenville, and with our partners at the Upstate Alliance, we will be able to play a strong role in further economic development in this sector. Our Upstate location notwithstanding, though, this is a statewide group with a statewide Board of Directors, and partners from all over South Carolina. Folks from around the world will see that this industry in South Carolina and its new organization are assuming their rightful place in the global automotive industry.” +++
Membership in the Council is open to all South Carolina manufacturers in the automotive sector. For more information about the South Carolina Automotive Council, including the first annual South Carolina Automotive Summit scheduled for Winter 2011, please contact Jennifer DeWitt at SCMA at dewitt@myscma.com
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BMW EfficientDynamics
Less emissions. More driving pleasure.
July 2010 •
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Collaborating to Commercialize
Academia, industry, and government are working together at Clemson’s International Center for Automotive Research By Susan Polowczuk
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he Clemson University International Center for Automotive Research (CU-ICAR) is a 250-acre advancedtechnology research campus located in Greenville, S.C., where academia, industry, and government organizations collaborate to fill the gap between basic research and commercial application of automotive technologies. Located on the I-85 corridor between Atlanta and Charlotte, CU-ICAR is in the center of the Southeastern automotive and motorsports economy. With more than $220 million in commitments from the state of South Carolina and private industry partners such as BMW, Michelin, and others, it is the ultimate in public/private partnership. The campus houses the Carroll A. Campbell Jr. Graduate Engineering Center, a combination of contemporary architecture, stateof-the-art facilities, staff, faculty, and students who are leaders in innovative research. The master’s and doctoral programs in automotive engineering focus on systems integration, design and development, manufacturing, and vehicle electronics systems. “CU-ICAR was designed with interdisciplinary interaction in mind,” says Campbell Center Executive Director Imtiaz Haque. “We have created a place where science and technology interface and where innovation is both encouraged and expected. Our vision is to bring people from diverse technical backgrounds together to encourage collaboration to solve some of the toughest challenges facing the automotive industry today.” The Campbell Center at CU-ICAR offers cutting-edge laboratory and test cell facilities for private clients and partners as well as for academic
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research. Four endowed chairs, world-class faculty members who have been recruited to lead key research areas, steer the academic program. The chairs have been endowed by BMW and Michelin , which have manufacturing facilities in the Greenville area. This article offers a snapshot of CU-ICAR research of new technologies in the transportation arena and their commercial applications.
SUSPENSION Successful, sustainable cars of the near future need to be lightweight and fuel-efficient and CU-ICAR researchers are working on a variety of projects to achieve this goal. Current research by John Ziegert and his group is aimed at designing a compliant, or flexible, link suspension concept for a highperformance car that is less complex, lighter weight, and therefore less expensive than current designs. The suspension design uses compliant or flexible links in the suspension to eliminate the need for a separate spring, thus integrating the energy storage and wheel-motion guidance functions. The goal is to achieve similar stiffness and wheel motions when compared to a benchmark Original Equipment Manufacturer (OEM) suspension while using fewer components and having reduced mass and complexity. “Reduction of vehicle weight is critical to higher fuel economy and lower greenhouse gas production,” says Ziegert. “One way to accomplish this is by combining functions that were previously carried out by separate components into a single, lighter component. This compliant link suspension design can achieve
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Photo courtesy of Clemson University
Clemson University’s International Center for Automotive Research
equivalent performance to a conventional suspension with fewer parts and with reduced weight.”
specifying components, and experimenting when less than 100 percent of the information is available.
Ziegert’s group used a computational model to simulate the suspension motions, as the dimensions and attachment point locations of the link were varied. The design was refined until the predicted performance closely matched the performance of the benchmark suspension. A mockup of the proposed suspension was built with an adjustable test fixture and experiments validated the results of the simulations.
“These future automotive engineers learn not just design and programming, but how components are integrated to subsystems and how subsystems are integrated to build manufacturing systems,” says Laine Mears, CU-ICAR researcher and assistant professor of automotive engineering. Industrial partners such as Okuma America Corporation, a major machine tool manufacturer, and Automation Engineering, a systems integrator, support study in automation. These partners supply expertise, equipment, internships, real-world problems, and real-world feedback.
AUTOMOTIVE PAINT The automotive industry has been forced to reinvent itself to adapt to changes in its operating environment, which include customer base, competitors, and governmental regulations. In the past, the trigger to such changes were the lack of product differentiation, the oil crisis, and markets maturity. Now, however, the industry is seeking innovative ways and technologies to reinvent itself one more time, to be environmentally conscious while keeping its competitive edge through pricing and added features. Rethinking the current painting technology is a key innovation aiding automotive OEMs to tackle such a challenge. In energy consumption, American vehicle manufacturing facilities spend around $4 billion annually on energy, of which 60 percent is consumed in painting booths. Current painting booths are long, slow, and cost an OEM an estimated $10,000 per square foot to build and $100,000 per square foot to operate annually. Mohammad Omar, researcher and assistant professor of automotive engineering, and his research group are introducing innovations in the painting technology and booth design for a shorter, more efficient, and flexible painting operation. This is achieved through investigating ultraviolet curing technologies that reduce the curing oven space from 200 feet to two feet, while reducing its energy consumption by 90 percent. Additionally, new overhanging robot designs with a new control scheme reduce the paint overspray and the cycle time, allowing one robot to paint a complete vehicle shell. “We’ve also developed, patented non-intrusive inspection systems to monitor and control the paint quality and thickness in real time,” says Omar. “This allows the painting booth to be self-controlled, thus reducing the repair and improving efficiency.” Further research is being conducted to introduce new paint formulations to allow the consecutive paint layers to be applied wet-on-wet; such formulations also will reduce the amount of paint required, which ultimately reduces the vehicle weight by approximately 10 pounds.
AUTOMATION Automation is a key component in the technology strategy of the automotive industry, not only for systems within the vehicle such as stability control and antilock braking systems, but also for value-added operations within the manufacturing environment. Therefore, a CU-ICAR course in factory automation focuses on fundamentals and migration strategies for the incorporation of automation approaches to previously manual systems. Students design, build, and program on a number of platforms, from traditional Programmable Logic Controllers (PLCs) to more flexible Programmable Automation Controllers (PACs), Computer Numerical Control (CNC) systems and robotic systems. Students are automation engineers learning systems integration in contacting hardware and software vendors,
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Mears and his research group have numerous projects in advanced machine tool sensing and control for an improved machining process to support broader use of lightweight materials such as titanium alloys in vehicles. Improved communication and use of available information within and between operations are the basis of the approach, which is applied to robotic systems as well. Also being examined are new methods for sensing feedback to automation systems. A project sponsored by the National Science Foundation is testing a new sensor that uses a hybrid vision method in place of traditional position encoders to control motion. The benefit is that independent axis control systems are replaced by an automated “set of eyes” that correct for position error in real time without the need for complex error mapping. A new research area is in new ways for the human operator to interface with automation; one project in partnership with Okuma has demonstrated control of a CNC machine tool by voice command.
TECHNOLOGY TRANSFER Similar to other academic research campuses, CU-ICAR is poised to transfer technology via the traditional portals of education, outreach and public/private research collaboration. In addition, it is anticipated that the outcomes of these traditional interactions will lead to the commercialization of generated intellectual property. “The research activity at CU-ICAR is in the early stages of technology transfer,” says Vincie Albritton, director of Clemson’s Office of Technology Transfer. “As the program matures, Clemson expects increased disclosure of intellectual property in the automotive transportation research sector. Coupled with Clemson’s technology transfer infrastructure, the CU-ICAR model is an improved opportunity for successful licensing and start-up activity.” Clemson has a solid history of technology transfer through intellectual property commercialization. Over the past 25 years, licensed technology has generated more than $55 million in gross royalty income. University technology also has been the foundation for 10 startup companies. Collectively, Clemson’s strong research capability and success in technology transfer have been instrumental in recruiting emerging technology companies to South Carolina. As a land-grant institution without a medical college, Clemson technology transfer is succeeding in the fields of biomaterials, information technology, physical chemistry, advanced materials and now automotive transportation. +++
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Moving South Carolina
Suppliers Drive the Automotive Industry
The parts in a vehicle that make it safe and economical to use. The next time you sit in your car, think for a minute about what is inside – the instrument panel, audio system, overhead consoles, climate control system, seats, and other components. Think about what makes your car safer and more fuel-efficient – airbags, seatbelts, headlights, brakes, catalytic converters, and tires. You begin to understand that the car is really the sum of its parts. In fact, more than two-thirds of the value in today’s vehicles and the majority of parts used to service your vehicle over its lifespan are produced by parts suppliers. Original equipment suppliers design, engineer, and manufacture parts required for the assembly of passenger cars and light trucks. OE suppliers interact directly with vehicle manufacturers, and their success is tied directly to the number of vehicles produced. The OE sector is often divided into levels or tiers. Tier 1 suppliers provide full design, engineering support, and sell finished components, such as transmissions, seats, and instrument panels directly to the vehicle manufacturer. Tier 2 suppliers sell parts like transmission gears, electronics, and seats covers to the Tier 1 suppliers. Tier 3 suppliers provide raw materials to either of the other suppliers. Each tier depends on the financial health of the other tiers
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for its survival. Ultimately, all suppliers depend on the financial health of the domestic and foreign vehicle manufacturers at the top of the supply chain pyramid. Parts suppliers are the backbone of the vehicle manufacturing industry and South Carolina’s manufacturing base. There are currently more than 250 automotive and automotive-related companies in South Carolina. From a diverse group of OEMs down to an expansive Tier network, South Carolina has an established automotive industry. Nearly one in six persons working in South Carolina’s manufacturing industry work for automotive companies, and 37 of South Carolina’s 46 counties host automotiverelated companies. With its remarkable growth, the automotive sector in South Carolina now employs about 31,000. Recognized as a leader in manufacturing in the Southeast (#1 ranking by Business Facilities magazine in 2008), South Carolina is putting its expertise to work for the automotive industry.
S.C. Suppliers Since the turn of the century, when Milliken & Company made fabric seats and roofs for Henry Ford’s gas-powered cars, South Carolina’s name has been synonymous with automotive success. This impeccable tradition attracted BMW, Mercedes, Force Protection, and other OEMS to locate assembly plants in South Carolina. With a statewide network of companies involved in the automotive industry, this cluster has played a central role in fueling South Carolina’s economy. The numbers point to
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©Shutterstock
T
ransportation is essential to our way of life. We drive to work, take our children to school, and run errands. We maintain our vehicles with a broad range of services, parts, and accessories. Safe and efficient transportation is essential to keeping our economy moving.
strong economic activity, intensive job creation, and a vast array of world-class companies choosing to invest heavily in South Carolina. Automotive suppliers are now scattered throughout the South with a presence in virtually every state. As the center of the automotive universe has shifted southward, South Carolina has become one of the Southern Automotive Corridor’s great success stories. The state is now home to major suppliers, including BorgWarner, Magna International, Staubli, Lear, Behr Heat Transfer, D.A.A. Draexlmaier, Drive Automotive, 2AM Group, Michelin, Nucor-Berkeley, Roy Metal Finishing, Sage Automotive, and many others.
Innovation Automotive suppliers continue to be under intense pressure to reduce their overall cost structure. This pressure stems from a number of factors including the demands for price cuts from their OEMs – which are the result of price pressures that the OEMs are facing in the competitive automotive marketplace. While the pressure to lower costs on all fronts continues to rise, other demands are pushing the suppliers to make new capital investments. These demands include the continued interest from the OEMs in providing just-in-time deliveries and eliminating
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inventories. In addition, there is an increased need for the suppliers to add research and development capabilities. Both of these items result in the need for the suppliers to continue to invest in new information technology systems. Finally, the OEMs continue to rely on these suppliers to design, engineer, and build a greater proportion of the total vehicle moving them further away from simple component manufacturing to complete subsystem production. This, too, has resulted in the need for increased capital investments in research and development and information technology has the suppliers have looked for ways to innovate their processes. The National Science Foundation reports that in 2005, nearly 40% of the automotiverelated research and development occurs in the automotive supplier sector. Some of the suppliers have been able to adapt to this new environment and others have not. This competitive environment has resulted in a number of mergers, acquisitions, and other industry consolidations. Companies that are being successful in this environment are those that have been able to adapt quickly bringing new products and processes to the marketplace. In order to be successful supplier companies must have a collaborative and open relationship with their customer OEMs.
July 2010 •
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South Carolina Supplier Innovations
All of the factors discussed above have an impact on the location strategies of automotive supplier companies. In today’s competitive environment, it is more important than ever for automotive supplier companies to make strategic thoughtful choices about their plant locations rather than simply building facilities where customers demand.
Factors in Automotive Supplier Plant Locations 1 Proximity to OEMs
nucor-Berkeley Developed a stronger and lighter weight grade of steel that decreases weight of the vehicle while not compromising strength of the metal used in cars.
The current plant site model for automotive assembly operations and their suppliers usually means that the landing of an automotive final assembly plant will also result in a region receiving more than its fair share of secondary facilities that will supply the plant. Typically, the supplier operations create even more jobs for the community than the automotive assembly plant itself.
2 Human Resources Tier 1 and Tier 2 suppliers will have to continue to find ways to become more productive in order to meet the competitive demands of the current economic situation. This productivity will come in the form of new innovative processes, information technology, and highly-automated machinery. As such, these facilities will require a dramatically different skill set from a flexible and high-performance workforce.
3 Engineering Support / Higher Education
Pure Power Technologies/Navistar and Roberts Bosch, LLC Continuously developing fuel injector technologies that maximize efficiency in gasoline consumption.
As the supplier companies’ participation in research and development continues to increase, their need to have access to quality engineering programs and engineering support will also continue to increase. In plant location searches, access to graduate students from quality engineering programs will be an important consideration. In addition, locations that can offer financial support to shared research infrastructure and research programs will have a competitive advantage in future supplier capital investment decisions.
4 Transportation infrastructure Proximity to Interstate systems (or highways of comparable quality) with quick efficient access to multiple assembly plants will be a must requirement for most suppliers. South Carolina’s unparalleled transportation opportunities make reaching any market an easy task. The state’s central U.S. East Coast location, advanced communications network, integrated transportation system of highways, airports, seaports, and railways ensures that any company can easily reach every one of their markets and efficiently send and receive shipments around the world. Timken Manufacturers tapered roller bearings that handle extreme stress when driving – used in the traditional automotive industry, as well as the farm, construction, and industrial equipment markets.
South Carolina is home to a convenient intermodal transportation system that puts automotive companies in South Carolina within 500 miles of over 1,000 assemblers and suppliers. With convenient access to all of the Southeast’s major metropolitan areas, South Carolina offers a strategic location from which to meet customers’ demands for timely delivery. In fact, a location in South Carolina means proximity to key population centers, as well as access to a vastly extensive intermodal transportation network. All of these factors make South Carolina an ideal place for automotive suppliers and manufacturers to have operations that meets domestic and international needs. Because of South Carolina’s business environment that encourages cooperative relationships with technical schools and other educational institutions, local and state government officials, and industry experts, the automotive industry can only continue to grow and be prosperous in the Palmetto State. +++
©Shutterstock
Michelin and Bridgestone/Firestone Develop long lasting tires that maximize fuel efficiency.
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• Made in SC
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Made in SC Feature
DAVID WILKINS:
TURNING CRISIS INTO CONSENSUS I
t’s a word we hear often in politics, but a reality we seldom see achieved.
Sure, plenty of politicians like to talk about “building consensus,” but very few of them grasp the complexities or possess the firmness of character and strength of mind necessary to truly bring it about. Whether in normal circumstances or in what Thomas Paine called “the times that try men’s souls,” the process of bringing together diverse and often competing interests on divisive, emotionallycharged issues is not something that can be accomplished through sound bites or self-serving soliloquies.
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• Made in SC
While we tend to equate consensus-building with “cooler heads prevailing,” the road to any worthwhile resolution is invariably quite rocky, full of white hot passion and red-blooded rhetoric – the vast majority of which takes place unscripted and off-camera, behind closed doors. Needless to say, that’s the sort of real-life give and take that requires a special skill set. Also, ask anyone in a leadership position, and they’ll tell you that in such situations real consensus isn’t achieved by brokering temporary cease fires (which often only breed lingering resentment) – it can only be achieved by negotiating lasting compromises that go to the very heart of the matter. At every step of his storied political career, former U.S. Ambassador and S.C. Speaker of the House David H. Wilkins has crafted precisely these kinds of solutions – and he’s crafted them in some of the most difficult, emotionally-charged political environments imaginable. As an attorney, statesman, campaigner, diplomat, and, most recently, business leader and University trustee, Wilkins has forged for himself a legacy unrivaled among the current generation of Palmetto political leaders – setting a tremendously high bar in the process for those who would seek to follow in his footsteps. “David has never been about advancing himself – he’s always just been himself,” says former House Majority Leader Jim Merrill, who served under Wilkins. “He brought people around to his way
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©Shutterstock
“Consensus …”
Nor can it be achieved by elected officials whose exclusive focus is obtaining short-term credit or temporary upward political mobility.
Ambassador David Wilkins with Canadian Prime Minister, Stephen Harper
of thinking through his intellect and the sheer force of his personality.” That, in a nutshell, is Wilkins’ secret – a candid, unflinching honesty coupled with a genuine desire to put the best interests of his state and country first. Needless to say, the “unflinching” side of his personality has won him his fair share of political enemies (and a few unfavorable press clippings) over the years, but Wilkins has navigated those land mines by sticking to his principles, earning the respect of friends and foes alike.
“He brought people around to his way of thinking through his intellect and the sheer force of his personality.” -Jim Merrill former SC House Majority Leader
©Courtesy of the Offiice of the Prime Minister of Canada
“David Wilkins never went out looking for credit, nor did he ever run and hide from controversy,” said Rick Quinn, another former Majority Leader who served under Wilkins. “He was always willing to risk his own political capital defending what he believed to be right, and when you see your leader taking hits like that for doing the right thing, it inspires you to stand behind him.” The first Republican House Speaker elected in South Carolina since Reconstruction, Wilkins’ unlikely rise to power hastened a broader GOP revival in the Palmetto State. Under his leadership, a new era of pro-business policymaking and bipartisan cooperation
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emerged – not to mention real consensus on some of the Palmetto State’s most contentious unresolved issues. Next, as U.S. Ambassador to Canada during President George W. Bush’s second term, Wilkins had a similarly transformative effect – restoring a rocky diplomatic relationship and resolving one of the thorniest trade issues between the two nations.
None of it came easy, but Wilkins’ uncanny ability to manage complicated, contentious negotiations enabled him to repeatedly forge lasting consensus from lingering crises – cementing his legacy as one of the most effective political leaders that this state has ever seen.
RISE OF A POLITICAL OUTSIDER It’s hard to imagine anyone taking a faster or less likely path to power than the road David Wilkins took – in the span of less than a decade-and-a-half – from an Upstate attorney to the most powerful politician in South Carolina. Born and raised in Greenville, S.C., Wilkins graduated from
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As an Upstate lawyer who handled mostly family court cases, Wilkins was a political rarity when he decided to run for office. In the 1970’s and ‘80’s, after all, most legislators in the Palmetto State were well-connected trial lawyers – not family court attorneys. Of course, Wilkins had something else working against him – the “R” beside his name. First elected to the S.C. House of Representatives in 1980 – the year Ronald Reagan won the presidency – Wilkins was one of only 18 Republicans in the entire chamber. Like other Southern States, the South Carolina General Assembly had been dominated for more than a century by Democrats, and the notion that a Republican might one day lead either chamber was considered absurd – if it was considered at all. “You could almost count us on two hands,” Wilkins recalls. But times were changing – and as an ongoing power shift continued taking hold across the Deep South, Wilkins quickly emerged as a valued and respected ally of Republicans and Democrats alike. Within six years, he had been elected Chairman of the House Judiciary Committee – and six years later he was elected Speaker Pro Tempore. In both instances, Wilkins was elevated by Democratic majorities. “To be elected Judiciary Chairman, then Speaker Pro Tempore – all when his party was not even in charge – was politically unheard of,” says Charles Reid, the current Clerk of the S.C. House of Representatives who served as Wilkins’ legal counsel. “Stuff like that just doesn’t happen.” So how did Wilkins do it? “He spent a lot of time learning the ropes, procedurally and politically,” Reid says. “He mastered the way the Judiciary Committee worked, earned the respect of his colleagues, and I think the reason why he was eventually elected Chairman of the
(1946)
David Wilkins born in Greenville, South Carolina.
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• Made in SC
(1964)
Graduated from Greenville High School.
Judiciary Committee was out of the professional respect that the other committee members had for him.” As he continued climbing the leadership ladder, Wilkins also developed a fundamental decision-making framework that eventually became the modus operandi of his career. “Every policy decision I made started with asking myself a simple question - ‘Is this what’s best for the state?’” Wilkins says. “I tried to look ten years down the road and ask, ‘Will this make us better off than we are now?’ Once I determined that the answer to those questions was ‘Yes,’ I just did the best I could to convince people – always respecting my colleagues and always respecting the dignity of the institution.”
SPEAKER IN A STORM On December 6, 1994, David H. Wilkins was elected Speaker by a Democratic-controlled S.C. House of Representatives. He was the first Republican to be elected Speaker in South Carolina – or in any other Southern state – since Reconstruction, and the news made headlines across the nation. Of course, he was to realize very soon that the job was not for the faint of heart, as contentious issues like video poker and the Confederate flag quickly took center stage and began to dominate the legislative debate. Wilkins also found himself in the middle of a bloody presidential primary in South Carolina – one that threatened to rip the Republican Party to pieces, particularly inside the State House. “It wasn’t easy for him at first,” former Majority Leader Merrill says. “Here was David Wilkins – a guy who had built his career on bringing people together – and all of a sudden he had to deal with multiple issues where everybody was at each other’s throats.” Of those issues, video poker was among the most divisive – and certainly the most lucrative. At the height of the industry’s influence in South Carolina, there were more than 33,000 video poker machines generating an estimated $3 billion in annual revenue – money which was able to purchase plenty of political muscle. Of course, video poker was “Public Enemy Number One” for a social conservative movement that had reached the pinnacle of its political power. Not surprisingly, both proponents and opponents of the games were flooding lawmakers’ accounts with campaign contributions and spending hundreds of thousands of dollars blanketing the airwaves with ads. On a personal level, Wilkins opposed video poker (staunchly), but he also listened to leading lawmakers on both sides of the debate and was able to work with them to craft a
(1968)
(1971)
Graduated Cum Laude with a Bachelor’s degree from Clemson University.
Earned Law Degree from the University of South Carolina.
www.madeinsc.org
photography provided by David Wilkins/Shutterstock
Greenville High School and attended Clemson University on a tennis scholarship. After graduating cum laude with a bachelor’s degree in 1968, he received his law degree from the University of South Carolina and served in the U.S. Army as a first lieutenant. He eventually settled down in Greenville with his wife, Susan, and began raising a family.
photography provided by David Wilkins/Shutterstock
compromise that would place the issue into the hands of voters. Ultimately, the Supreme Court stepped in and banned the industry before the public could vote, but Wilkins had proven his mettle under the most trying of circumstances. As a result, his stock soared. “There were immense pressures from outside forces that you couldn’t believe,” Reid says of the video poker debate. “The money involved was tremendous, but Wilkins found a way to get past all of that and bring everyone back to what was in the best interests of the state. Not everyone agreed with him, but they all respected him for how he handled himself and how he zealously safeguarded the institution of the House of Representatives.” Within months, though, Wilkins was staring down an even deeper divide within his chamber. This time, the issue was whether the Confederate battle flag should continue flying from the State House dome – and emotions were running every bit as hot as they had been during the video poker debate. First raised in 1962 by an all-white legislature, by 2000, the flag issue had so consumed the state’s discourse that it seemed nothing would be accomplished legislatively until there was some sort of resolution. Once again, though, a compromise was reached – and once again it was David Wilkins navigating the House through the storm. “Video poker and the Confederate Flag resulted in David and his family receiving several threats, but it never fazed him,” Reid says. “Instead, he stuck with his mantra of, ‘Is this good for the state?,’ and in both cases it was absolutely imperative for the state that a solution be found, if for no other reason than it would let us move on to more pressing issues.” What made things even harder for Wilkins was that during the flag debate, his new GOP majority was torn asunder as Republicans battled each other in the 2000 presidential primary election between George W. Bush and John McCain. Wilkins served as the state chairman for then-Governor Bush, who defeated McCain 53-42% in an especially bitter race – even by South Carolina standards.
“That was a brutal year,” he recalls. “And not just the flag debate or the presidential election but the process of bringing people back together after both of those battles were over. There were a lot of angry people, a lot of hurt feelings – a lot of distrust.” Not to mention plenty of unfinished business …
“THINGS LEFT TO DO” With so many divisive issues addressed – and with a Republican storming to victory in the 2002 governor’s race – it seemed that the road was finally open for Wilkins to pursue many of the probusiness goals he had set for his tenure as Speaker. Thus far, under his leadership the House of Representatives had steadfastly refused to raise taxes, but South Carolina’s underlying business climate still needed lots of work if the state were to become economically competitive in the new millennium. For Wilkins, finding ways to spark South Carolina’s economic engine involved doing something he had done at every step of his career – listening. Obviously he had his own ideas on how to attract jobs and industry to the state, but the close relationships that he cultivated with business leaders gave him access to an even broader range of policy ideas. “When it came to political leaders who were able to seek out, identify and then respond to the needs of the South Carolina business community, David Wilkins set the bar extremely high,” said S.C. Manufacturers Alliance President & CEO, Lewis Gossett. “His ability to bring together competing business and political interests on incredibly complicated legislation is legendary.” Gossett credits Wilkins personality and his ability to forge innovative, public-private partnerships as key ingredients to his success. “If you look at the collaboration between BMW and Clemson University, that sort of approach was vintage Wilkins,” Gossett
(1971-75)
(1980)
(1986-92)
(1992)
Served in the US Army for one year as a first lieutenant then in the Army Reserves.
Elected to the South Carolina House of Representatives – one of 18 Republicans.
Served as Chairman of the House Judiciary Committee.
Elected Speaker Pro Tempore by a Democratic House Majority.
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O, CANADA
The only real concern about Wilkins’ leadership, it seemed, was when it might come to an end. After all, given his instrumental role in the election of George W. Bush, most political observers agreed it wouldn’t be long before Wilkins accepted some sort of presidential appointment. In fact, twice during his term as Speaker, Wilkins was offered plum Bush administration posts – first as a federal judge and then as U.S. Ambassador to Chile – but he turned both offers down.
Even though Wilkins’ predecessor as Canadian ambassador – former Massachusetts Gov. Paul Celluci – had been an extremely unpopular figure in Canada, the nation did not welcome the South Carolina Speaker to Ottawa with open arms. After all, Wilkins was a staunch political ally and close family friend of an extremely unpopular U.S. president. In fact, Bush’s policies – and the self-assured aura of moral superiority with which they were advanced – had been rubbing Canadians the wrong way for years, particularly as Celluci pressured the Canadian government on hot button issues like the War on Iraq and missile defense.
In April of 2005, Wilkins received the “right call at the right time” from President Bush – an invitation to serve as U.S. Ambassador to Canada. And while the job may have been precisely what he was dreaming of, it did not have a fairy tale beginning.
“I was very grateful to the President, but the timing just wasn’t right on those,” Wilkins said. “I had things left to do.” One of those “things” was tort reform. Wilkins engineered passage of a landmark tort reform bill in 2004 that represents one of his crowning probusiness accomplishments. Governor Mark Sanford signed the legislation in Wilkins’ hometown, with the Speaker standing with him. As Speaker, Wilkins was revered by his colleagues. In fact, lawmakers who served under him are fond of swapping stories about him, frequently attempting to imitate his inimitable Southern drawl. “Not everyone liked him personally and certainly not everyone agreed with him,” said former majority leader Quinn. “But everyone respected him because he listened to them and genuinely put the best interests of South Carolina first.”
(1994)
Elected Speaker of the House by a Democratic House Majority.
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• Made in SC
photography provided by David Wilkins
says. “Not only did he help former Governor Carroll Campbell bring BMW to South Carolina, he’s a big reason why the company decided to expand its investment here. He had personal relationships with business leaders, and he knew how to make these partnerships worthwhile for them as well as for the taxpayers.”
Press Conference as Speaker of the House
“Every policy decision I made started with asking myself a simple questions - “Is this what’s best for the state?” -David Wilkins
(2000)
Co-Chair of the Bush-Cheney Campaign.
Canadian newspapers had described the former Massachusetts governor as “ill-mannered, obnoxious, (and) arrogant,” and popular Canadian TV satirist Rick Mercer had joked about producing a fictitious “farewell show” for Cellucci called Don’t Let the Door Hit You on the Ass. Few thought Wilkins would be any different than his predecessor, and many initially viewed him as a step in the wrong direction. To his critics, Wilkins was just another Bush crony who was intent on lecturing them about their international obligations – albeit in a thick-drawled, Southern accent. Also, Wilkins had only visited Canada once in his life – more than three decades earlier – and hailed from a political and ideological climate that
(2002)
Appointed by President Bush to the Board of Visitors of West Point.
(2005)
Nominated by President Bush for the post of U.S. Ambassador to Canada.
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»
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As much as he had long-coveted this very diplomatic post, Ottawa initially didn’t seem to “suit” Wilkins – and vice versa. “It’s a little bit like appointing a Hindu pharmacist to be your ambassador to the Vatican,” one Canadian TV analyst said of Wilkins’ selection. “I mean it’s not that he can’t do a good job, but it seems as though there would be a more obvious or more appropriate choice that you could have found.”
Hosting Gov. Schwarzenegger
“God has perfect timing, and I’m confident he sent me the sign I needed right when I needed it,” Wilkins said in his farewell remarks, words which were right at home in South Carolina but caused a minor media uproar in Canada. “I have a strong faith. I don’t apologize for that,” Wilkins said after the fact. “I don’t wear it on my sleeve. I don’t try to impose it on you. But I am not going to apologize for that.” Shortly after being appointed by Bush, Wilkins seemed to be living up to the Canadians’ preconceived notions. In a heated dispute over the timber tariffs, he told the Canadian government to stop its “emotional tirades” and return to the negotiating table. In response, the country’s industrial minister called Wilkins “hypocritical” and “a bully.” Wilkins also angered many Canadians when he blasted Prime Minister Paul Martin during the country’s 2006 elections. “It may be smart election-year politics to thump your chest and constantly criticize your friend and your No. 1 trading partner, but it is a slippery slope,” Wilkins said in a major international speech. Yet, while he was aggressively promoting American interests and defending his country from political attacks, Wilkins was
Elected by Clemson University to a lifetime seat on its Board of Trustees.
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• Made in SC
He was listening – and building relationships. Criticized for his lack of familiarity with Canada, within seven months, Wilkins had visited every province and territory in the country, logging tens of thousands of air miles. He was also earning the respect of the people he met along the way – disarming them with his Southern charm and invitations to attend “peanut boils” at his official residence. “It’s not a put-on,” said Frank McKenna, Wilkins’ counterpart as ambassador to Washington. “It’s real. He’s a modest, humble, and engaging person – and it is disarming.”
Greeting Canadian Troops in Afghanistan
Even before his arrival in Ottawa, Canadians were fuming over Wilkins’ farewell speech to the S.C. House of Representatives, in which he expressed the role that providence and his personal faith played in his appointment.
(2007)
doing something else – something he’s done at every point in his political career.
(Jan 2009)
Ended Tenure as Ambassador to Canada.
Meeting in Oval Office
There were dividends to this policy of “disarmament,” too – most notably a resolution to the softwood lumber dispute that represented the bulk of friction between the two nations. “I remember when I read in the paper about the soft timber deal that he helped negotiate in Canada,” former counsel Reid says. “I could just see him there telling the parties involved, ‘hey ya’ll, let’s sit down and talk,’ and that’s probably the personal approach that helped get the ball rolling for that deal to be resolved.” So effective was Wilkins’ negotiating ability – and so wellreceived was his “charm offensive” – that within a year the same Canadian press corps that seemed so ready to chew him up and spit him out was praising him effusively for his accomplishments. In fact, shortly after the election of 2008 signaled the end of his tenure as Ambassador, the same famed Canadian satirist who had been so critical of Wilkins’ predecessor did a glowing send-off for the affable South Carolinian. “Like any good friends, the relationship between the United States and Canada is ever-evolving,” Wilkins said in one of his final web chats as Ambassador. “We are currently facing a global economic crisis which will have an impact on both our countries and who knows what challenges we will face in the future. But, as in the past, I’m sure that the U.S. and Canada will work together cooperatively to solve any issues that come our way.”
(Feb 2009)
Became a partner at Nelson Mullins Riley & Scarborough LLP, the largerst law firm in South Carolina.
(July 2009)
Unanimously Elected Chairman of the Clemson Board of Trustees.
www.madeinsc.org
photography provided by David Wilkins/Clemson Universirsity/Nelson, Mullins, Riley & Scarborough, LLP
bore little resemblance to anything he would find in his new home. To make matters worse, South Carolina had a history of aggressively supporting U.S. tariffs placed on Canadian lumber – which has always been a sticking point in relations between the two countries.
photography provided by David Wilkins
AN ONGOING LEGACY The manufacturing community feels the effects of Wilkins’ legacy every day. It may be a specific facility he helped recruit or an operation that works to its fullest potential because of a business climate he zealously safeguarded or improved, but you can be certain the effects are there and appreciated.
In 2007, for example, Wilkins was appointed as a lifetime trustee to his alma mater, Clemson University. Two years later, he was unanimously elected as the Board’s chairman. Wilkins also currently runs the public policy and international law practices for Nelson, Mullins, Riley and Scarborough – South Carolina’s largest law firm.
Frequently mentioned as a statewide “Manufacturing in South candidate, he announced in 2008 that Carolina has been fortunate he would not seek the Governor’s to have many good friends in Mansion in 2010 – a move that policymaking positions, but few disappointed many business leaders. have been as loyal or dedicated to Still, his endorsement is among the South Carolina industry as David most coveted in the state, and his Wilkins,” said SCMA President prowess as a legislative strategist and & CEO, Lewis Gossett. “That’s fund-raiser is unrivaled. why it was particularly fitting that “He’s no longer just a politician, the SCMA presented him with its he’s an institution,” former Majority Carroll A. Campbell, Jr. Award for ildren Leader Quinn says. “His power ch nd ra G th his advocacy and exemplary service emson wi Supporting Cl truly transcends any political office or title.” to South Carolina manufacturing, an award only he and Governor Campbell have received to date.” And as it always has been, at the heart of Wilkins’ approach remains a simple, unwavering commitment to doing what’s best Beyond manufacturing, at the beginning of each year, Furman for his state. University’s Richard Riley Institute presents the David H. Wilkins Award for legislative leadership at an annual gala event - one that is broadcast statewide on S.C. Educational Television. Given to the state lawmaker who “embodies the highest principles of leadership based on integrity, compassion, vision, civility, and courage,” this coveted award is a fitting tribute to Wilkins’ legacy. Of course, most people who have such prestigious awards named in their honor aren’t continuing to play such integral roles in their state’s political and business circles.
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“Your responsibilities change,” Wilkins says. “But your principles shouldn’t. And if you’re a real leader, they don’t.” Wilkins’ principles haven’t changed – and while the political sands have undoubtedly shifted around him, his ability to turn crisis into consensus on some of the most divisive issues in state history has solidified his status as one of the Palmetto State’s alltime greatest statesmen. +++
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Workforce Development
Workforce Evolution
by Randy Hatcher
A Model for Maximizing Core & Non-Core Processes
I
f you knew 20 years ago what you know today, how would you structure and organize your plant? What jobs and functions are core, or business critical, and worthy of more of your time and resources? Conversely, what distracts your management team from focusing on these core activities? What if there was a way you could find more time to work on your business’ core, and in doing so help your company gain more focus? Three of South Carolina’s premiere manufacturers have answered these questions through embracing new workforce concepts. First, it is important to review history to see how they got there.
©Shutterstock
The Workforce Evolution It is said that necessity is the father of invention. Looking back it is easy to see that the way manufacturers have been managing their workforce has been evolving since the Industrial Revolution. The Patriarchal Staffing Model was born in a dizzying blur of economic expansion during the Industrial Revolution. The Rockefellers, Carnegies, and Fords became business legends,
www.madeinsc.org
patriarchs who spawned hundreds of other 2nd, 3rd, and 4th generation manufacturing companies. The workforces at each of these manufacturing firms had one thing in common; everybody worked directly for the company…janitors, cafeteria workers, security – everyone. These “too big to fail” employers paid well and even offered rich retirement and healthcare packages which today we affectionately refer to as legacy costs. Not only was this model premium priced, but it also offered limited flexibility in response to changing economic conditions and client demands. The Temporary Staffing Model arose during World War II when huge job gaps left by soldiers needed to be filled. After the war ended, many larger corporations had come to depend on temporary workers for special projects and seasonal peaks. In the 70’s and 80’s, they began using larger and larger numbers – 50, 100, or even thousands of temporary workers. This model allowed companies to strategically balance work levels by bringing in and laying off workers just when they needed them (something not easily done with their full-time employees). Companies converted a historically fixed cost to a variable one, saved money, and shifted liabilities for unemployment, EEOC, and worker’s compensation to a third party. As annual spends for temporary workers increased, corporations leveraged these costs, basically forcing a commodity price on people. Since nearly 80% of every hourly staffing bill rate is directly related to employee costs, pay rates were consequently suppressed or lowered when companies negotiated the bill rate down.
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It is predicted that workforce will metamorphose into a two party system with 50% of the company’s resources furnished by its own employees and the other 50% by third party suppliers, contractors, and integrators.
Outsourcing in South Carolina Companies Three premiere South Carolina manufacturers, Kimberly-Clark, Robert Bosch, and Alcoa have increased their competitiveness by co-developing hybrid workforce models over recent years using MAU’s Innovative Workforce Concept.
So companies saved a few cents an hour in the bill rate while manufacturing areas absorbed the hidden costs through 10-20% more labor hours to accomplish the same tasks. Production leaders demanded a more stable solution, and yet the front office held its ground on reducing full-time headcount. The Patriarchal Model and Temporary Staffing Model were both good models in their time, but today, their flawed designs combined with the economic crisis seem to be causing sufficient pain to encourage companies to make long term strategic workforce changes. The Outsourcing Model and MAU’s Innovative Workforce Concept answered the call as the next step in the workforce evolution. The seeds of Outsourcing were sown in the 70’s and 80’s with the low hanging fruit of security, janitorial, cafeteria workers, maintenance, etc. While savings have been realized through Outsourcing these functions, there still remain many other jobs and functions that do not add value to the final product. This model’s new approach to the workforce determines core and non-core functions first, and then sets the minimum number of full-time regular employees necessary to manage core processes for each location, region, or the entire company. Over time, more and more non-core functions can be outsourced to a reliable third party who specializes in that function, and who will in turn treat it like their core process.
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Kimberly-Clark, Beech Island, began a journey in the mid 90’s called, “Focus On the Process” where they identified all the core jobs and activities related to what made them unique – making better quality paper faster and cheaper. This meant that there were many other manufacturing and process jobs which were quickly classified as non-core. Mill Manager Bob Cross said, “The jobs we continue to invest in on a full-time basis are jobs that in some way touch the paper.” Functions such as internal and external logistics, raw material movement, packaging, shipping, sorting, custom orders, and rework were subsequently outsourced. In order to continue to optimize their competitive position, the search for reducing costs and improving service continues. Robert Bosch, Charleston, was an early adopter of Outsourcing after transitioning from using large numbers of MAU temporary workers. MAU’s Outsourcing initiatives with Bosch have included: outsourcing the entire internal and external employment function , managing product ramp-ups and rampdowns, operating sub-assembly shops, designing and managing an absenteeism program, and designing a more efficient Co-Op/ Intern utilization program. »
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Over time, this resulted in a two class employee system. The first class consisted of a well trained, stable, full-time employee class with market based pay and competitive benefits whose tenure, quality, and loyalty were strong. The second class temporary workers had lower pay, few benefits, and a myriad of accompanying problems: lower morale, higher absenteeism, higher turnover, less efficiency, poorer quality, and increased waste.
Alcoa, an aluminum smelter in Mt. Holly, began their outsourcing journey with MAU after a successful relationship using skilled and semi-skilled temporary manufacturing workers. An offline shop, smelting pot repair, was deemed non-core and veteran Alcoa employees in those positions were transitioned to core positions that directly “touched the metal.” Since MAU has assumed full production and quality responsibility for the pot reparation, smelting pots have remained in service 400 days longer. Alcoa was able to reduce their costs, better utilize their full-time employees, and improve their “pot” quality because they converted what was their non-core process into MAU’s core process.
Step One: Identify Core Processes. Examine all of the job titles currently staffed by full time employees, and note the jobs that meet these criteria: ‣ They add value to your product or service offering ‣ They differentiate you from your competition
‣ If you only had a dollar to spend, this job would receive a disproportionately larger portion in future compensation and benefits
Step Two: Find a trusted partner. Trust is the fundamental
How Do You Get Started? In The Age of Unreason, Charles Handy predicted the workforce would metamorphose into a two party system with 50% of the company’s resources furnished by its own employees, and the remaining 50% of the company resources furnished by third party suppliers, contractors, and integrators. That prediction is already true in Europe. In today’s competitive global economy, the need to establish such an outsourcing model has increased. The real question is how do you move down this trail seamlessly?
Step Three: Think more strategically. You only have a fixed amount of time each day, and what you think and act on each day directly influences your business and your career. Imagine how it would benefit you and your management team if you could focus more frequently on what will keep you in business and make you more competitive? Let me encourage you to find a partner and begin the journey. After you do so, you will be more focused, more purposeful, and more competitive. Focusing on your core business and converting your non-core processes into core process with a third party could be the most significant optimization initiative you implement in 2010. ©Shutterstock
»
basis of any outsourced relationship. As you embrace this strategy, you must find a partner who will allow you to grow at your own pace; one who brings expertise, reasonable costs, and efficiency gains without sacrificing quality. Lastly, make sure they fit your culture and can help you mitigate full-time employee unrest as they see change coming.
Enjoy the journey. +++
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The Lawyers of Constangy, Brooks & Smith, LLP Invite You to Visit
And, feel free to browse around awhile. www.constangy.com
By Burnet R. Maybank, III
A
s noted in a recent SCMA Study, The Economic Impact of Manufacturing in South Carolina, the manufacturing sector in South Carolina is a tremendous economic engine. Manufacturing generates substantial contributions to output, labor income, and jobs. The industry generates direct output of almost $95 billion a year, in South Carolina, and the direct and indirect impacts of the manufacturing sector totals over $141 billion a year. Fortunately, South Carolina has a rich mix of state and local tax incentives to help the manufacturing sector survive in these difficult economic times. Unfortunately, because we have so many incentives, and because the General Assembly tinkers with them on such a frequent basis, manufacturers often have a hard time taking full advantage of them. Below, we will identify the major incentives available and identify areas where manufacturers may be leaving money on the table.
1
income Tax incentives
At 5%, South Carolina has the lowest corporate income tax in the Southeast and one of the lowest in the nation. In addition, South Carolina uses doubleweighted sales factor in our formula for apportioning income to South Carolina for multi-state manufacturers and the state is phasing in a 100% sales factor. By 2011, only income from sales which occur in South Carolina will be apportioned to this state for corporate income tax purposes.
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After apportionment, manufacturers have a host of tax credits to reduce the relatively small amount of income apportioned to South Carolina subject to taxation. These include the Jobs Tax Credit for new jobs and the Investment Tax Credit for new investment for manufacturers located in roughly half the counties in South Carolina. Jobs Tax Credits range from $1,500 to $8,000 per job depending upon the county where the manufacturing facility is located. The investment tax credit ranges from 1% to 5% of the basis of the qualifying expenditure. Other income tax credits include Research and Development, Apprenticeship, Port Volume Increase, Quality Improvement Programs, several alternative energy credits and even a credit for Whole Effluent Toxicity Testing. In today’s business climate, relatively few (if any) manufacturers have a tax liability. In recognition of this, the General Assembly has created some of the longest carry forwards in the country. For example, both the Jobs Tax Credit and the Investment Tax Credit have 15-year carry forwards. Some manufacturers are examining whether to file consolidated returns or shift profitable functions to South Carolina in order to utilize unused credits. (South Carolina doesn’t have a true consolidated return, but taxpayers may elect a combined return.) Taxpayers may also petition the South Carolina Department of Revenue for use of factors different than the standard formula.
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Sales Taxes
South Carolina has a state sales tax rate of six percent. Many counties have adopted a one cent local option sales tax. South Carolina has a host of sales tax exemptions for manufacturers, most importantly an exemption for machinery and equipment. Other exemptions include electricity, material handling, and research and development. In addition, as stated below, exemptions for large manufacturing, warehouse, and distribution facilities also include exemption for material handling equipment, recycling, and construction materials. Manufacturers’ warehouse and distribution facilities with a capitol investment of $45 million are exempt from sales taxes on material handling equipment. The exemption for material handling equipment does require that notice be provided to the South Carolina Department of Revenue. This is a pitfall for the unwary as this is the only sales tax exemption which requires notice. As a result of several court cases, the exemption for machinery and equipment has been broadened. Previously the Department of Revenue adhered to the “Production Line Theory” in determining what machinery was used in manufacturing. Under this theory, items were found to be exempt only if “used directly” in the manufacturing process. Based upon the recent court decisions, the “Production Line Theory” is no longer used. Instead, machinery is exempt if such machinery is “integral and necessary” to the manufacturing process. This change is generally less restrictive
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noteworthy facts distinguishing South Carolina from other states include...
South Carolina has one of the lowest corporate tax rates in the united States. South Carolina has not had a general tax increase in over twenty years. South Carolina does not impose a state or local tax on intangibles or inventory. South Carolina does not impose a local, value-added, or unitary tax on related corporations. South Carolina does not permit local governments to impose an income tax. South Carolina provides alternative methods to fairly apportion income of multistate businesses. South Carolina permits generous job development and retraining credits to qualifying businesses. South Carolina’s tax incentives package is designed to encourage economic growth and to make South Carolina one of the best places in the nation to do business.
than the Department’s prior determination. As such, some machines that the Department would previously have held subject to the tax are exempt. Sales taxes on construction materials for manufacturers with a $100 million capital investment are also being phased out, with a complete exemption occurring in 2011.
3
Property Taxes
Simply put, according to recent studies by a Minnesota taxpayers group and the National Association of Manufacturers, South Carolina has the highest property taxes in the nation on manufacturers. Not amongst the highest - - the highest. Mercifully, South Carolina law provides significant property tax incentives to manufacturers, the most important of which is fee-in-lieu. Traditional property taxes are calculated by an equation with three variables: FMV * Assessment Ratio (10.5%) * Millage Rate (combined millage of county and school district plus any municipality.) Most importantly, fee-in-lieu can also lock in the millage for the life of the fee. It’s very important that manufacturers with fee-in-lieu’s which are 5 years or older confirm that they have received all applicable extensions from County Council, as the South Carolina Department of Revenue is currently auditing the investment period requirement contained in the fee-in-lieu law. Under the fee-in-lieu statute, the only investments which can be included in the fee-in-lieu are those which take place during the statutory investment
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period. The base investment period is five years, but the statute allows Council to extend the period upon request. Previously the extension period was two years. Now, as a result of a change proposed by the SCMA, the extension is five years. There is a strict deadline to request the extension. In addition, pollution control equipment is completely exempt, as is inventory, and a partial exemption exists for Research and Development equipment. Manufacturers tend to overlook a portion of their pollution control equipment. These include equipment and fixtures which support the pollution control function as well as mixed use equipment. For example, companies exclude the smoke stack as pollution control but may pay taxes on the wiring, conduit, and computer server which serve the smoke stack. A ten million dollar boiler may contain one million of pollution control equipment and the South Carolina Department of Revenue allows apportionment of this amount. Similarly the DOR recently ruled that equipment used for more than 50% of the time on R&D is exempt for various exemption purposes even if the equipment is also used for non-exempt purposes. County Council also has the legal authority to grant a Special Source Credit, which is a dollar for dollar reduction in the property tax bill otherwise owing. Many county councils are amenable to granting such credits on larger projects. It is also critical that manufacturers identify ghost assets (i.e. assets which have
been sold or scrapped) and remove them from the property tax rolls.
4
withholding Tax incentives
South Carolina also has a very lucrative withholding tax credit, commonly referred to as the EZ, or Job Development Credit for manufacturers with large numbers of new jobs. The credit typically runs for ten years. The amount of the credit is based upon the number of new jobs and the county where the jobs are located. The maximum credit is five percent of payroll.
5
Money Left on the Table
As a result of a variety of factors, manufacturers tend to leave money on the table regarding incentives. The most pressing issue is that manufacturers with fee-in-lieu’s between five and seven years old need to examine their fee-in-lieu documents to see if they have the maximum investment time period provided by law. A manufacturer with a warehouse not in a fee-in-lieu should ascertain whether it is receiving a 6% assessment ratio. Manufacturers should also examine whether they are paying sales and property taxes on mixed use equipment used for pollution control or R&D as well as non-exempt purposes. The Department of Revenue has several excellent publications available online. In addition the Department annually conducts a free sales and use tax workshop for manufacturers. +++
July 2010 •
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2010 SCMA Meetings / Events
Human Resources Managers Meeting Date · September 9-10 Location · The Marriott, Myrtle Beach, SC
LMC Annual Meeting & Dinner Date · October 19 Location · Trident Technical College, N. Charleston, SC
Defender of Manufacturing Dinner Date · November 3 Location · The Westin, Greenville, SC Sponsorship & Exhibiting Opportunities Available ∙ For more information, visit www.myscma.com or contact Jessica Watts at (803)799-9695 or watts@myscma.com
NEXT ISSUE
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The next edition of the Made in South Carolina Magazine will highlight the textile manufacturing industry and its impact on the State with a focus on research in Advance Materials, workforce development, and policy issues affecting the textile industry.
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• Made in SC
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