CNG Economic Development

CNG economic development speech for the Chief Executive Officer

Thank you for being here today. I know most of you must attend a lot of these gatherings, and receive invitations to even more. The competition for foreign investment can be as fierce as an Olympic medal round, and it takes place on many levels: between metropolitan areas, between states, and even between countries.

Bringing in outside investment is not a modern notion. In medieval France, when the royal court held a pageant in a distant city, it kindled an economic boom. The entire town was renovated. The court financed the building of new roads, bridges and buildings. To attract this windfall, cities often sent representatives to the court in Paris to make a case for selecting their area for the next pageant.

It’s no wonder that we still sometimes refer to the process of marketing economic development as “courting.”

Today, it’s not a King who brings investment to a region, it’s corporations, large and small. Corporations bring capital and jobs and an expanded tax base and new opportunities for local vendors. And they bring new ideas to the community, and new energy to addressing local challenges.
I begin with the assumption that you have heard it all before, and take these presentations with a grain of salt. That makes my task a tough one: To influence your companies to consider expansion or transfer to the region served by Consolidated Natural Gas Company, then to come to CNG’s economic development department to help you make your move. But what makes the job easier is knowing that our region is an attractive one where many foreign-owned companies have already found a home.

First, an introduction to CNG: CNG is an integrated natural gas system with assets of about six billion dollars. We own six gas distribution utilities that deliver natural gas directly to consumers and industry in Pennsylvania, Ohio, West Virginia and Virginia. Our exploration company, CNG Producing, explores for and produces natural gas and oil on more than four million acres in 23 states, the Gulf of Mexico and Canada. Our interstate pipeline, CNG Transmission, delivers gas wholesale to CNG subsidiaries and other utilities throughout the northeast and mid-Atlantic states.

Wall Street regards CNG as the financially-strongest company in our industry. In fact, FORBES MAGAZINE recently picked CNG as the single energy company most likely to succeed in the 1990s.

FINANCIAL WORLD MAGAZINE recently described CNG’s corporate strategy as this: To become the energy lifeline of a region. There is no doubt that our pipeline and storage fields are a key link between southwestern gas supplies and the energy-hungry northeast. And that explains why we are so interested in the development of the region. If the region grows, we grow, too.

CNG’s region is highly diversified with a robust, growing economy, but it wasn’t always so. When describing what much of the area went through in the 70s and 80s, I always feel like heaving a long sigh of relief and saying, “We survived.”

It’s no secret that our region suffered when the U.S. economy endured the economic dislocations of the 70s and early 80s. It’s no secret that thousands of jobs were lost abroad or to the sunbelt. And it’s no secret that many of our major cities – Pittsburgh, Cleveland, Akron, Youngstown, Clarksburg, Parkersburg, Buffalo, Rochester and Syracuse – lost population.

But a funny thing happened. Just as pruning a tree makes the tree stronger, forced pruning in the 70s and 80s made our region stronger. While costs escalated in California, Boston, New York and the southwest, our region suddenly found it had a lower than average cost of living and a very low cost of real estate.

Our local governments woke up and created some of the most innovative economic development, technology transfer and tax abatement packages around. The decline of heavy industry created a large pool of highly skilled and available labor, augmented by the traditional commitment to education in the region.

And while in other parts of the U.S., burgeoning populations now overwhelm limited resources and clog inadequate transportation systems, our cities are experiencing renaissance.

THE PLACES RATED ALMANAC ranks the 333 largest U.S. metropolitan areas in such categories as cost of living, jobs, crime, transportation, the arts, education and recreation. An analysis of the last survey reveals the region’s broad-based strengths. PLACES RATED ranks 10 of the metropolitan areas in the CNG territory, and six made the top 50 for overall quality of life. When you look at individual categories, you find that none of our cities ranks number one. But you also find that practically none of our cities ranks very low in any category. Our cities – and by implication the region – do well everywhere and poorly nowhere.

We are thus a region of many strengths that when added together produce a vital economic climate and an unparalleled quality of life. That’s why so many foreign companies have selected our cities for investment or expansion. Nothing succeeds like success, and foreign companies have succeeded in our region.

The international accounting firm of KPMG Peat Marwick conducts annual surveys of foreign-owned companies in 17 regions of the U.S. Based on its surveys in our service area, we know why foreign-owned companies like the region.

First and foremost, foreign companies invest in CNG’s region because of its proximity to a key industry, market or supplier. And it’s no wonder! Pittsburgh is within a day’s drive of 51 percent of the nation’s buying power and 22 of the 35 top industrial markets. Cleveland is a day’s drive of 64 percent of all industrial plants in the U.S. and 74 percent of the U.S. headquarters of the FORTUNE 1000 companies. Norfolk and Virginia Beach are within a 750 mile radius of two-thirds of the U.S. population and three-quarters of its manufacturing activities.

The low-cost of our high-quality labor is also very important to the foreign companies coming to CNG’s region, according to the Peat Marwick study, and again that’s no surprise. Cleveland, Pittsburgh, Norfolk, Virginia Beach and all of West Virginia have lower wage rates than New York, Los Angeles, Atlanta, Chicago, Denver, Detroit and Seattle for virtually every job title.

Another reason that managers of foreign companies cite for coming to CNG’s region is quality of life, as witnessed by the high ranking of our cities in the PLACES RATED study.

And the cost of this high quality of life is remarkably low. A recent FORTUNE MAGAZINE survey of executives and consulting firms found that Cleveland has one of the lowest costs of living in the world for managers and executives. In fact, the same amount of money buys 100 percent more goods and services in Cleveland than in Osaka.

The average cost of a home in most of our cities is lower than the national average, and everywhere we are below New York, San Diego, Los Angeles, Washington, Philadelphia and Raleigh. That means not only your executives, but all your employees will be able to afford to buy a home. For example, 67 percent of all families own homes in Pittsburgh’s Allegheny County, the highest percentage of home ownership in the entire country.

I want to outline current foreign investment in several of our major population centers. Let’s start with western Pennsylvania, which includes Pittsburgh and the surrounding counties.

Pittsburgh has made a remarkable transformation from a city once dominated by heavy metals production to a diversified economy. Currently seven percent of the Pittsburgh work force is employed in high tech or advanced technologies. Among the largest employers are the major research institutions, The University of Pittsburgh and Carnegie Mellon University, and the several research-oriented hospitals.

But above all, Pittsburgh is a corporate center, which may explain why it has more golf courses and boats per capita than any other city in the U.S. This trend shows up in the foreign investment in western Pennsylvania. Of the 260 companies in the area owned at least 50 percent by foreign interests, 97 have their U.S. headquarters in the Pittsburgh area. Foreign companies are responsible for approximately 30,000 jobs in western Pennsylvania.

Miles, Inc., the U.S. operations of Bayer, the large German chemical company, began in Pittsburgh as a small joint venture in the early 50s. Through growth and acquisition, Miles has flourished and become a $6 billion company with manufacturing facilities across the country. But its headquarters and much manufacturing remain in Pittsburgh because of the high quality of life in our region.

Smith Kline Beecham also finds Pittsburgh a fine location for the headquarters of its consumer brands operation.

Sony is a more recent arrival. It is in the process of opening a manufacturing facility in western Pennsylvania that will employ ___. Sony selected the area over its competitors because of the low cost of high quality labor and the proximity to markets.

Some other foreign-based or foreign-owned companies in western Pennsylvania are Aristech, Beazer, Copperweld, Asea Brown Boveri, AEG Westinghouse, Contraves Goerz and National Mine Service. The key industries include chemicals, durable goods, fabricated metal products, electrical and electronics, rubber and miscellaneous plastics and engineering. 36 percent of the foreign companies in western Pennsylvania have moved there in the past five years. Germany, the United Kingdom, Canada and Japan have the largest number of companies in the region.

By the way, the Pittsburgh area has a number of schools for Japanese and German elementary school children.

Let’s turn to Ohio, which is a major location for foreign investment. There are 581 foreign-owned companies in Ohio, including more than 250 in the CNG cities of Cleveland, Akron, Youngstown, Canton and Lima. The 173 foreign-owned companies in Cleveland alone employ more than 35,000.

Nearly half of all foreign-owned companies in CNG’s Ohio are Japanese. Japan and the United Kingdom together represent more than 75 percent of the direct foreign investment of more than $4.1 billion by foreign-owned companies in Ohio. 78 percent of Ohio’s foreign-owned operations were established in the 80s.

In contrast to western Pennsylvania, CNG’s Ohio territory has a heavier concentration of large manufacturing operations, and foreign investment reflects this. The foreign companies in CNG’s Ohio primarily manufacture durable goods, such as transportation equipment, machinery, electrical equipment and fabricated metal products. In fact, more than 75 percent of all foreign-owned operations in Ohio manufacture or distribute durable goods.

Some foreign-owned companies in CNG’s Ohio: AKZO, Mannesmann Demag, Sony, Bridgestone/Firestone, US/Kobe Steel, Feralloy Corporation, White Consolidated, Nippon Electronic’s Information Systems, Mitsubishi, Nestle-owned Stouffer Foods and Hitachi Metals, whose story we will hear in a few minutes.

Cleveland is currently in the process of rebuilding its downtown. Late last year, the tallest building in Ohio opened in downtown Cleveland. And just south of downtown, the new Gateway sports complex is now under construction.

Cleveland’s exurban areas are also in a growth spurt. The counties of Geauga, Medina and Lake gained 54 new factories in 1990 and 1991 alone. And Akron, which saw the tire industry crumble in the 70s and early 80s, has replaced the rubber factories with so many plastics operations that it’s now called Polymer Valley.

Let’s turn now to the Hampton Roads region of Virginia. The Hampton Roads cities of Norfolk, Newport News and Virginia Beach were traditionally port communities buttressed by a strong defense industry. Unlike the remainder of CNG’s territory, Hampton Roads did not go through the hard times of the 70s and 80s. In fact, during the 80s, the civilian labor force in the area grew by 27 percent.

As Hampton Roads has grown, so has foreign investment. According to the Hampton Roads Chamber of Commerce, there are 103 foreign-owned businesses in the area employing nearly 11,000 people. Japan, West Germany and the U.K. lead investment. About 52 percent have manufacturing facilities in Hampton Roads, and another 25 percent have established distribution facilities, taking advantage of the ice-free port. About 40 percent have established their operations over the past five years.

Canon Virginia opened a plant to manufacture office equipment in Newport News in 1985, and it now employs more than 1,200.

Other companies include Nissan, Sumitomo, Gambrol-Hospal, Mitsubishi, Stihl, Siemens, Mercedes-Benz, Hoechst-Celanese, Thomas J. Lipton, Addington-Beamon and Schlumberger.

Distribution advantages are particularly important to foreign companies who have established operations in Hampton Roads. The Port of Hampton Roads ranks second in total tonnage and third in cargo shipments of all East Coast ports. 70 shipping lines serve the port.

Now let’s take a look at West Virginia, one of the few states in the country that has an energy surplus. West Virginia is one of the largest producers of both bituminous coal and natural gas. Other significant natural resources include timber, clay, limestone and salt.

33 foreign companies in West Virginia take advantage of these abundant natural resources. They tend to have energy-intensive manufacturing operations, or are involved in energy exploration or the manufacture of coal mining equipment. Foreign owned companies employ more than 17,500 in West Virginia. Canadian, German and Japanese represent more than half the companies.

Some of the foreign-owned companies in West Virginia are Rhone-Poulenc, BASF, Aristech, Consolidation Coal, Wheeling-Nisshin Steel, Miles and EIMCO Coal Machinery.

West Virginia is a rural state The metropolitan rush hour in such major cities of Clarksburg and Parkersburg sometimes lasts as long as 15 minutes. For nearly two decades it has had the lowest crime rate in the U.S.

As you can see, CNG’s region includes something for nearly every type of foreign company:

  • Western Pennsylvania has a diversified economy with manufacturing, high technology, healthcare and a strong corporate sector.
  • ¬†Ohio is a vibrant manufacturing center.
  • Hampton Roads is a distribution and manufacturing center; and
  • West Virginia has an abundance of natural resources.

All four areas offer a high quality of life at below average costs and lower than average labor costs.

If you want to look at our region for a new facility or for relocation, CNG can help you in four ways.

First, we have a strong economic development department that includes ___ full-time professionals system-wide. We have been involved in economic development since the late 1950s. Over the years we have built the expertise to coordinate all phases of business relocation or expansion. We can expedite proceedings with local officials, make contacts for government assistance and tax abatement programs and identify local suppliers and services. And we do it all confidentially.

Second, we have experience working with foreign companies. We currently have a joint venture with Japex, a unit of Japan Petroleum Exploration Company, to develop and explore for natural gas and oil in the Gulf of Mexico. And we have helped a number of foreign companies establish operations in our service area, firms like Hitachi Metals, Sony and Mitsubishi.

The third reason to ask for CNG’s help in establishing a facility in our region is that we have an enormous amount of information that we constantly update. Our comprehensive files include information on available sites, buildings and industrial parks; current service and rate for all utilities; information on transportation; analyses of the labor force as it pertains to your company’s needs; government incentives, including enterprise zones, job creation credits, tax abatement and economic development programs; and community profiles. For example, the information we provided Sony helped it to evaluate the many advantages of opening its new U.S. manufacturing operation in the Pittsburgh area.

Because we have strong ties with the financial community, we can also quickly tell you where private sector funding may be available.

Fourth and finally, CNG can be your central source for energy for your new facility. Certainly, we will supply you with all the natural gas you need at highly competitive rates. But we can also coordinate the supply of other energy requirements. And, our R&D department will help you develop ways to use natural gas to bring down your energy costs, while complying with the new stiff Clean Air Act regulations.

For example, it was CNG’s ability to store and provide natural gas on an as-needed basis that enabled the Mitsubishi-owned Doswell Limited Partnership to open the largest independent electrical power plant in the U.S. The Doswell power plant in Hanover, Virginia runs on natural gas and is the largest Japanese investment ever in the state of Virginia.

We can also assist in financing the development and implementation of new gas technologies that will help make your company competitive and productive.

Our strong economic development department, our experience working with foreign companies, our information gathering capabilities and our business itself – selling natural gas – these are all compelling reasons to make CNG a strategic partner when you begin investigating our region for a new plant or other facility.

Before I take some questions, I want to leave you with one thought. Consolidated Natural Gas and the region it represents welcome foreign investment. Our cities are among the most cosmopolitan in the country, with large populations of foreign nationals. We enjoy the interplay of ideas and customs that takes place when working with people of other cultures. We embrace the concept of the global economy. And we understand the significant positive impact that foreign investment can make on our region.

Now for some questions….