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Global Carolina Perspectives: Jack Ellenberg

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COLUMBIA, SC Jack Ellenberg, Deputy Secretary at the South Carolina Department of Commerce, isn’t necessarily comfortable being singled out as a chief architect of, or as deserving special credit for, bringing aeronautics giant Boeing to South Carolina – easily the largest economic development announcement in the state's history since German automaker BMW agreed to locate its first North American manufacturing plant in Greer back in 1992.

And that’s understandable; after all, announcements of that order of magnitude don’t happen without the cooperation of a small army of national and state legislators, municipal officials, attorneys and aggressive private-sector leadership.

However, throughout the difficult negotiations with Boeing dating back to 2003 and since, Ellenberg has been South Carolina’s point person for Boeing and – whether he’s comfortable with it or not – was the single most important economic development professional responsible for making the dream of landing Boeing a reality on Oct. 28 of last year.

A Clemson grad whose first job was working with an Atlanta school district, Ellenberg has been with the South Carolina Department of Commerce since 1996 and was recently named Southern Business & Development magazine’s 2010 Person of the Year.

In recognition of his work in bringing one of the world’s most influential global corporations to the Palmetto State, Ellenberg recently sat down with the Global Carolina Business Journal to discuss what the announcement means to potential suppliers, how the economic development business has changed in the past 14 years and what the future holds for South Carolina’s economy in the wake of the milestone Boeing deal.

Global Carolina: You came in during former Gov. David Beasley’s administration and have now worked for three governors and four secretaries of commerce in Robert Royall, Charlie Way, Bob Faith and Joe Taylor. How have things changed since you started?

Jack Ellenberg: Things have changed dramatically. The biggest change in the past 14 years has been the speed. It used to be that a company would come in, like a BMW, and they’d literally drive down the interstate and say, “We really like this area, can we put together a site?” Then you had to worry about getting the site together, getting the infrastructure in place and all that work.

Now the expectation is that you have a site ready to go, shovel-ready. You hear that phrase all the time. It’s because in today’s world, what separates you from your competition is the business environment and your ability to get companies up and running quicker than your competition, so it’s how quickly can they get from point A to the market.

GC: In years past, there has been a mentality of “If you build it, they will come” in terms of attracting economic development through the completion of industrial parks and providing the requisite infrastructure. Is that still the model?

JE: We preach all the time to our local developers: “Product, product, product.” Product in our business is, “Is there an available site or building?” In this economy, a building is going to trump a site. Because of the current availability of buildings and the consolidation or downsizing of businesses – whatever the case may be – you can get into a building much cheaper than you can build a new one. So the ability to identify buildings gives you that leg up in terms of how quickly you can get companies to market.

GC: Moving on to Boeing, I don’t want to rehash what’s already well known, but there is one thing I do want to touch on: In previous interviews you’ve mentioned that the opportunities for first-tier suppliers for Boeing aren’t many because the company’s manufacturing processes are so established, but that there may be opportunities for second- and third-tier suppliers. Can you elaborate on that?

JE: It’s important to understand what goes into manufacturing the 787 [Dreamliner] to begin with. Line one is in Seattle, in Everett [Wash.], and that’s a full, final assembly line. To accommodate that, if you look at how it is built, the primary components, if you will, are spread around the globe. The wings are coming out of Nagoya, Japan. Today, we’re building the aft fuselage in Charleston; we’re marrying it with the center fuselage in Charleston; that center fuselage comes out of Italy; the cockpit comes out of Wichita [Kans.]; the tail is made in Everett; and the engines are made in England.

There’s a modified 747 that flies around the world every day picking up those pieces and delivering them to Everett. That logistics model will not change with a second assembly line in Charleston. The whole idea is, the wings will go to Seattle and Charleston from Nagoya, Japan. It’s important that everyone keep in mind that when we’re talking about suppliers we’re not talking about those [tier-one] companies.

What we are talking about is the fact that Charleston becomes a delivery center. That means if you’re American Airlines and you fly 787s, you can pick them up in Charleston, South Carolina, ready to go, in your colors, and go straight into service that day. So the components that go into the upfit and final completion, if you will, of the aircraft – wiring, harnesses, entertainment systems, seats, interiors, overheads, all those components that create a final aircraft – are opportunities that are in-state.

There are some synergies between what’s happening in Charleston and what’s happening with Lockheed Martin in Greenville. There are some synergies between what’s happening in Charleston and what’s happening with Gulfstream across the river in Savannah. So we have a concentration of aerospace line assembly and operations, so the suppliers can supply multiple companies. It’ll be driven by what Boeing thinks they need to have in place and identifying what can come in.

GC: What is the current state of the aeronautics cluster in South Carolina beyond the Boeing announcement?

South Carolina has a rich history in aviation and aerospace. From companies up-fitting traditional aluminum skinned aircraft to defense companies to cutting-edge technology, many world-renowned aviation and aerospace companies call South Carolina home. Today, South Carolina boasts some 100 aviation companies investing billions of dollars in the state. Some of those include:

ACAS

ATI Allvac

BAE Systems

Boeing

Cytec Carbon Fibers

GE Aviation

Honeywell International

Lockheed Martin

Michelin Aircraft Tires

Nasmyth Group

Northrop Grumman 

Venture Aerobearings (GE JV and SKF)

Vought Aircraft Industries


JE: You have Lockheed and you have GE [General Electric] Aviation in Greenville; you have a joint venture between GE and the SKF Group in Charleston called Venture Aerobearings. You have, of course, the ongoing Boeing activity; you have ACAS [Air Carrier Accessory Service] in Marion, which just had an announcement for a landing gear refurbishing. All of these are part of that aerospace cluster.

If you look at the BMW model – and I hate to go back to this, but it’s relevant – BMW came in and they wanted to bring suppliers, but there were a lot of suppliers who said, “We can’t go just on BMW’s contract alone. We can’t justify the relocation.” But when Mercedes popped up in Alabama, suddenly they had some justification. And now with VW going to Tennessee, there’s that added spreading the risk around between three OEMs [original equipment manufacturers] versus just one. So we’re seeing continual growth around BMW.

The same holds true for Boeing. Tier ones aside, you can spread the risk to Gulfstream. You can spread the risk to Lockheed Martin either in Greenville or in Atlanta with Martin Marietta. HondaJet in North Carolina is another. So you have this concentration in and around South Carolina that will help recruit suppliers. I think we’ll make the Gulfstreams and the HondaJets and the Lockheeds happy for the same reasons Mercedes made BMW happy.

GC: Looking to the future, what do you think the role of the South Carolina Department of Commerce should be in attracting new businesses with an eye to global commerce?

JE: As the lead economic development agency, we’re tasked with creating economic opportunities for our citizens through job creation. We’ll continue to look for ways to leverage the assets of our state, whether that’s a tremendous transportation network or the Port of Charleston, a deep water port, which is a tremendous asset to the state. About two weeks ago, the Mediterranean Shipping Company’s Rita became the largest container ship ever to call on the Port of Charleston, and it did so because it can. That ship cannot call on Savannah and other ports today because they have channel-depth issues we do not have.

The fact that they’re calling today, and then with the widened Panama Canal scheduled to open in 2014, puts us at a distinct advantage over our competition. So if you’re a customer who is shipping items around the world, you’re looking at that. We’re leveraging that asset. We’re leveraging the five interstates that cross our state; we’re leveraging access to the [Charleston] International Airport; we’re leveraging the growing aerospace industry; we’re leveraging advanced materials, automotive, our research universities and putting all of those in front of the companies we ourselves are in front of.

And it’s not all about manufacturing. BMW started as a branch manufacturing facility, but we’ve grown it far beyond that. If you look at what we did at CU-ICAR [Clemson University International Center for Automotive Research] with the BMW Information Technology Research Center, that research component out of Germany – if you think it was difficult to bring manufacturing out of Germany, you can imagine how difficult it was to bring research out of Germany – the reality is we can do it and do it very well.

GC: Has the role of the South Carolina Department of Commerce changed with regards to how it works with local and regional economic development agencies in terms of where new business locates?

JE: To me it’s a simple process: The needs of the company drive the decision. Our goal is to marry their needs with the best locations, and it could be multiple locations. Quite frankly, the more locations you have in the mix, the better your chances for getting the project. We try to find what the drivers are for the company and what we have that meets their business needs.

But also, the environment has changed. When I started, we didn’t have the regional alliances we have now. That’s been a development of the past seven or so years. But they play an important role, especially in times like we’re in now where on the local levels, the state level, on a variety of levels, there are budget challenges and marketing challenges, and that’s where they make a difference.

GC: Managing resources for companies is also key in terms of how much they can afford to spend taking trips and how many sites they can visit now versus before. Has the economy changed the way you recruit or target companies?

JE: Not really, but it’s hard to say, because the whole recruitment process has changed. It may or may not be related to the economy, but companies are using the Internet more. We pay very close attention to, and are very proud of, our Web site, because we realize we may only get one chance at them because they’re doing their initial run-bys before contacting us. That’s minimized their risk in terms of budgets, but it’s also a sign of the times.

GC: What advice would you give to companies who are wondering whether now is the right time to explore global markets?

JE: Well, of course they should come to the South Carolina Department of Commerce first! We have the resources available, having worked with so many international companies. We have an office in Europe, and we have an office in Asia, both serving the needs not just of foreign direct investment for trade opportunities for South Carolina–based companies. We have a significant amount of experience working with international businesses, and we bring a very high level of assistance.

Our goal is, we have 46 counties, we want to bring projects into the state. We don’t steer projects; we don’t have favorites. We’re trying to match their needs with what we have. It’s pooling the resources that are external to us in other state agencies. It could be a permitting issue, bringing DHEC [the S.C. Department of Health and Environmental Control] on board. It could be a worker-training issue, bringing the state technical college system on board. We pull the team together on the state level to help support the local folks when it gets down to that level.

GC: Finally, I want to ask you what is the lesson of Boeing? What can be learned through the seven-year process that led from initial conversations to a major announcement?

JE: I think the lesson of Boeing is that the State of South Carolina can and does compete daily on a global stage. We are a global player. If you look at our success, the best companies in the world call South Carolina home, and we’re very proud of that. That’s not by accident. We are aggressively pursuing those companies, and they’re finding out they can be successful here.

In the 15 or so years of BMW, they’ve grown every year they’ve been here. The best-selling cars in the BMW family come out of South Carolina. That’s been the evidence other companies have needed. And getting Boeing drives home the point that South Carolina is a great place to do business and that our citizens make some of the best products in the world.

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