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Area Development - Site Selection, Facility Planning and Workforce Development

First Person: Foreign Investment Driving Uptick in Manufacturing Plant Construction

Five years ago, Area Development interviewed Jim Gray, then CEO of Gray Construction, a Lexington, Kentucky-headquartered national industrial construction firm specializing in designing and building manufacturing plants for some of the largest global manufacturers. Jim Gray is now mayor of Lexington, and Stephen Gray is the company’s CEO. Area Development thought it would be interesting to get some comments from Stephen on manufacturing’s contribution to economic growth.

Q1 2014
AD: How do you feel the federal government’s efforts over the last five years have helped or impeded the industrial construction industry?

Gray: We had some tough times in 2008–2010, but we stayed the course. We held onto our resources that would allow us to take advantage of the market when the economy recovered, and had confidence that manufacturing would turn around. In 2010 it did, and 2011, 2012, and 2013 were our best years ever.

As far as whether the government helped turn manufacturing around, let’s just say it didn’t hurt it. What helped us was the fact that while it may have seemed bad in the U.S., everywhere else in the world that has manufacturing was worse.

AD:Where are you seeing the greatest demand for new manufacturing plant construction coming from? Is any of it a result of the reshoring we’re hearing so much about?

Gray: We’re certainly experiencing an uptick in the demand for new manufacturing plants, not only for the domestic manufacturing companies coming back to the U.S. due to reshoring, but there’s also big demand from foreign companies wanting to locate new manufacturing plants in the U.S. to reach North American customers. They look to the U.S. as the safest place to be — a great place to be if you want to grow your manufacturing business.

AD: Besides a customer base in the U.S., what other advantages for foreign companies do you see?

Gray: We see a big energy advantage in the U.S. That’s probably in the top three reasons that foreign companies are coming here — an abundance of energy resources for the next 100 years. It takes a lot of energy resources to run a manufacturing plant, so when considering plant location, companies want to buy energy somewhere that has a lot of energy and where the costs are more predictable.

When my customers look to the U.S., the reasons add up: cost-effective energy; close to the American consumer who will buy their product, which means good growth; and in the U.S. there’s a tremendous respect for capital. When you come here you don’t have to worry about a revolution. It’s a risk to go anywhere, but less of a risk in the U.S.

AD: Given this increase in manufacturing from both domestic and foreign companies, what steps do you think the government can take to help strengthen the U.S. manufacturing economy?

Any type of successful manufacturing business has to involve the people on the line who are the source of creative thinking. We’re seeing that those customers we build for are working on efficiency of design and how the manufacturing process will flow through the facility. Most of our planning meetings involve people from the manufacturing production line who understand the plant flow and who will help plan the facility. Stephen Gray, CEO, Gray Construction Gray: We need government to maintain a focus on helping create a work force that will be able to serve manufacturing. Here’s an interesting number: during the recession we lost 2.3 million jobs. Manufacturing has gained back close to 550,000 jobs and currently provides close to 12 million jobs. We’re just about back to the same GDP level of productivity that we had in 2008, yet here we are in 2014 with fewer manufacturing employees than our pre-recession levels. That should turn a lot of heads. What this tells us is that going forward we’ll do more with fewer people. The remaining employees and the new hires will have to have some unique skills, and think about manufacturing things differently. This is not Henry Ford’s assembly line.

AD: You mentioned the productivity of the American worker. Is that an attractive asset to companies in other countries looking to be closer to the North American market?

Gray: Currently, about 70 percent of our manufacturing facility projects are with foreign investment. Productivity of our work force is another reason that foreign companies want to be in the U.S. We’re the most efficient manufacturing environment of anywhere in the world, not including textiles. The U.S. worker is very productive. Management, along with the involvement of labor, is constantly trying to figure out more efficient ways to get products out the door.

AD: How does that influence the types of manufacturing facilities that Gray Construction builds?

Gray: Any type of successful manufacturing business has to involve the people on the line who are the source of creative thinking. We’re seeing that those customers we build for are working on efficiency of design and how the manufacturing process will flow through the facility. Most of our planning meetings involve people from the manufacturing production line who understand the plant flow and who will help plan the facility.

AD: What’s the most active region in the U.S. for new manufacturing facilities and why?

Gray:If you’re working with site selection consultants, they’ll have the Southeast at the top of the list. Obviously, other things weigh in like customer location, but the Southeast will be in the running 99 percent of the time. Outside the Southeast, Texas is active — we currently have a project in Houston. In the Midwest, Indiana is very strong. The move to being a right-to-work state really helped. Opportunities popped up almost immediately after that.

AD:What do you believe is the most important factor that companies look for in deciding on the perfect location for a new manufacturing plant?

Gray: First on the list is finding a good base of skilled workers. They are willing to spend money on good workplace skills, and training is important. These companies will often partner with a community college in the area to train workers in the types of skills the company needs. Often they’re training the work force while we’re building the plant. After that, they want an infrastructure-ready site. This is key to help them get up and running, and getting their products to market faster.

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