Wood for good
In attracting EGGER Group, planning and patience are economic virtues.
Challenge: Attract a large-scale manufacturer with an expedited timeline and specific workforce requirements.
Solution: Develop a plan to build out infrastructure so that work can start quickly when a tenant arrives. Tailor workforce-training programs to meet the company’s needs.
By D. Lawrence Bivins
It’s midmorning at the I-85 Corporate Center near Lexington, and the dust is flying. An access road is being paved. Construction crews lay foundations for buildings that will house a training center and executive offices. Wastewater and natural-gas lines are going in. Railroad tracks are being extended. Not far away, at Davidson County Community College, nine apprentices sign on to a unique four-year experiential learning commitment.
Karl Grasser is among those watching the action, all of which is intended to get Austria-based EGGER Group’s first-ever U.S. operations ready in the time frame that company executives hope for. “Our production is slated to start in mid-2020,” says Grasser, an EGGER manager who worked closely on the company’s yearlong search for a North American outpost. The family-owned, wood-materials manufacturer is investing $700 million in a production site that will employ 400 in its initial six-year phase. The numbers could go higher — as many as 370 more workers could be hired if demand for the company’s products remains strong. “This is the first stage of our investment,” Grasser says. “We try to keep our commitments realistic.”
EGGER began in 1961 with a single chipboard plant in St. Johann in the Tyrol region of Austria, between Innsbruck and Salzburg. Today the company operates 19 plants around the world and employs a workforce of more than 8,700 making worktops, cabinets, flooring and other building products. Since the mid-2000s, EGGER has grown significantly in Europe and, more recently, expanded into South America with a facility in Argentina. In exploring options for its initial move into the U.S., the company’s search was self-guided. “We didn’t have a consultant,” Grasser says. Instead, company officials quietly pored over census forecasts, data on North American wood-fiber markets and other research.
“We assembled a scorecard,” Grasser says. The company’s analysis led to primary consideration of a region stretching from Florida to Virginia. From there, EGGER contacted officials in seven states to begin identifying possible properties. The focus turned to the availability of 220-plus-acre sites equipped with the right infrastructure. Technical needs included abundant supplies of natural gas, electricity, water and wastewater service, along with highway and rail access. An initial list of 50 specific properties was winnowed to 10 sites that Grasser and his colleagues presented to top EGGER executives for their feedback. Three finalists emerged: Dublin, Ga.; Orangeburg, S.C.; and Lexington, N.C.
On several fronts, North Carolina’s reputation preceded its entry into EGGER’s search. The presence of Austrian and German companies in the state, especially in the Charlotte region, offered ready evidence that North Carolina was an accommodating backdrop for central European firms. (Charlotte is about 60 miles southwest of Lexington.) “There’s a pretty strong community,” Grasser says. “Knowledge-sharing with other Austrian companies was very helpful to us.”
Ryan Nance, business-development director at the Economic Development Partnership of North Carolina, soon introduced Grasser to Steve Googe, Davidson County’s economic-development director. Googe, who has since retired from a 25-year career with the county, got to work on a 12-page Request for Information that EGGER presented to its three finalists.
Googe was armed with answers to the company’s questions. He also had ready partners to help the county recruit EGGER. Most of all, Googe had an appealing site he had long worked to market. In fact, what is now the I-85 Corporate Center was nearly two decades in the making. Automotive giants Toyota Motor Corp. and Mercedes-Benz each had considered the property early on, evidence of the site’s appeal. “Those projects didn’t work out because we weren’t ready,” Googe explains. “We had two options: We could sit and do nothing and hope someone would come by, or we could go ahead and put in the infrastructure.”
County officials chipped away at the remaining ingredients: bringing the site under local government ownership, conducting the necessary engineering and environmental assessments, and organizing a plan to extend the necessary infrastructure that would hasten development.
The city of Lexington pledged to provide natural gas and wastewater service, while officials from Norfolk Southern Corp. and the North Carolina Railroad Co. agreed to extend tracks to the property from their nearby mainline.
“Rail projects have almost quadrupled over the last two to three years,” says Anna Lea Moore, vice president for economic development at N.C. Railroad., which has worked closely with the state’s communities to equip more industrial properties with access to rail service. “It’s important that communities pay attention to the readiness of their rail sites and, at a minimum, understand how sites can be served,” Moore says.
In the case of Davidson County, planning and patience were rewarded. “Nine years later, EGGER comes along, and that opened the door for a lot of support,” Googe says. With EGGER in hand, the North Carolina Rural Infrastructure Authority soon approved more than $2.9 million in funds from the state’s Industrial Development Fund-Utility Account, which is derived from proceeds of the state’s Job Development and Investment Grant program. State legislators established JDIG in 2002 to encourage corporate expansions across North Carolina. The program channels a portion of the awards going to companies in wealthier urban counties into the Utility Account in order to help less prosperous communities such as Davidson County modernize industrial infrastructure. The area was stung in the last 20 years by massive job losses at local furniture plants.
The authority also approved more than $2.2 million in federal Community Development Block Grant funds to support the county’s construction of a nearly 24,000-foot natural-gas line into the site. Rural authority awards complemented a $1 million grant from the Golden LEAF Foundation. Those funds, derived from the state’s portion of the 1998 Tobacco Master Settlement Agreement, will be used to improve public infrastructure at the project site.
Laying down new hard assets is not uncommon when communities recruit large manufacturers. But the arrival of EGGER also required the relocation of one key piece of existing infrastructure: The presence of a Duke Energy transmission line at the site interfered with the company’s plans to develop its campus there.
“We had a line that was squarely in the way of how they were proposing to build their plant,” says John Geib, director of North Carolina economic development for Duke Energy. The Charlotte-based utility, which will provide electricity to EGGER, agreed to move the line at its own expense once the company finalized its development plans. Duke’s transmission engineering and planning teams worked vigorously to find solutions that met EGGER’s ambitious vision and timetable. To accomplish that, Duke is investing as much as $5 million in serving the company. “It makes sense to spend the money in order to win the project,” Geib says. “We’re prepared to do that, and there’s a system for how we do it.”
Googe, who now works for EGGER as a consultant, credits Duke’s flexibility as one of the keys to addressing the company’s needs. Based on his experience, he also knew that the recruitment of international companies required collaboration at the highest reaches of state government. In 2004, he worked to bring Belgium’s UNILIN Flooring, now part of Mohawk Industries Inc., to Thomasville. That effort, which involved an $80 million investment and 250 new jobs, required close collaboration with Tony Copeland, then an assistant secretary at the N.C. Department of Commerce.
Copeland returned to lead the department in January 2017 after being appointed secretary by Gov. Roy Cooper. In the following months, as EGGER narrowed its options, Copeland and Googe traveled to Austria at the invitation of company officials, visiting EGGER’s headquarters and plant in St. Johann before flying to Suceava, Romania, home of the company’s largest production facility.
“We saw their manufacturing and their products, and the sophistication of their employees and training,” says Copeland, whose career has included work as location adviser, telecom-industry executive and attorney. The seasoning of Copeland and Googe included understanding the demands of working with family-owned European firms. “The decision-making process is generally much more streamlined than that of a publicly held company,” Copeland says. “They’re usually faster and more direct.”
EGGER’s Grasser says the company invited officials from the other finalist destinations to Europe as well. “We wanted them to be comfortable with our values as a company,” Grasser says. The personal touch included a home-cooked dinner hosted by the company’s owners, brothers Michael and Fritz Egger.
That hospitality was returned by Davidson County leaders when EGGER executives visited there. “They sensed our passion and pride,” says Lexington Mayor Newell Clark, who worked with the city’s tourism director to organize a bus tour that hit local hot spots like Richard Childress Racing, Childress Vineyards and Lexington’s vibrant downtown district. Lexington leaders have revitalized the city’s core, which now boasts coffeehouses, craft breweries and free public Wi-Fi. Vacancy rates along Main Street are now a scant 4%, Clark says, down from as much as 35% 20 years ago when local officials established a downtown development district.
“The size of our community reminded them of home,” Clark says. He believes Googe’s success in landing EGGER came down to knowing who to put in front of the company — and when. “Steve knew just who to bring in at the right time, and it was key.” Unlike domestic business leaders, Europeans don’t always understand the political significance of counties, the role of county commissioners or the nuances of North Carolina local government, he says. “But as Austrians, they understood what a mayor is,” Clark says. “EGGER identified with cities. It’s what they know.”
Also included on EGGER’s bus tour were stops at two educational facilities that factor closely into the county’s economic strategy. The first was Yadkin Valley Regional Career Academy, a career and technical high school that opened in fall 2012. Known locally as “Valley Academy,” the school forges career-ready graduates through a four- or five-year course of study that emphasizes project-based learning in science, technology, engineering and math. The school partners with Davidson County Community College, and its 250 students are drawn from across the county’s three school systems.
“As a nation, we’ve fallen behind the rest of the world in providing hands-on industrial training for our students,” says Larry Potts, a longtime member of the Davidson County Board of Commissioners who was elected to the North Carolina House of Representatives in 2016. Potts believes secondary education curricula in the U.S. are designed around the assumption that every graduate will proceed to a four-year university. Technical diplomas earned from places such as Valley Academy will be key in rekindling the nation’s manufacturing sector. “We have to change our mindset and realize that not everyone is going to do mind work for a career,” Potts says.
Davidson County Community College had already begun working with local industry leaders to create an apprenticeship consortium like those in other parts of the state, all of which had risen at the urging of European manufacturers. “The consortium is industry-led and industry-driven,” explains Margaret Annunziata, vice president for academic affairs at the college. Local manufacturers that have worked with Annunziata’s team include Ingersoll Rand and CPM Wolverine Proctor — companies with Irish and Scottish roots, respectively.
Apprenticeships enable students to hone industry-specific skills while also gaining connections to an employer’s unique corporate culture. The experience cements an early and mutual commitment companies and workers make to each other, which clarifies paths for career advancement and reduces turnover. “It’s not always skills that are the greatest challenge but finding a fit with the culture of the organization, the practices and the expectations,” Annunziata adds. “That’s difficult in a lot of the industries we’re talking about.”
Grasser calls North Carolina’s apprenticeship programs a competitive advantage. By summer 2018, the company had signed its first nine apprentices. Working with EGGER, the college has designed two four-year tracks based on a model that has proven itself in Austria: an electronics concentration leading to an associate degree in electronics engineering technology and an operations and maintenance concentration that leads to an associate in applied engineering technology. Receipt of a degree, designed to give apprentices additional career flexibility, was EGGER’s idea. The company provides salary and benefits to students as they learn and covers the cost of tuition and textbooks. Students will graduate with a journeyman certificate, a guaranteed job and no student debt. “In North Carolina, there is fertile soil for these types of apprenticeship programs,” Grasser says. “It is further ahead than other states.”
In March 2018, the college sent a delegation to Austria to view EGGER’s operations and training systems and tour schools around Innsbruck that train EGGER apprentices. The college also intends to provide other workforce services such as continuing education and training on Six Sigma, a data-driven quality control methodology. It is lending EGGER classroom space on campus while the company completes construction of its own training facility. “Davidson County Community College is one of our most important partners in North Carolina,” Grasser says.
Secretary Copeland believes workforce was a key factor that landed EGGER, which he calls “a phenomenal investment” for Davidson County. “They were satisfied they would find a strong workforce,” he says. The win, especially when paired with the arrival of China’s Triangle Tyre to Edgecombe County in late 2017, is evidence that big transformative projects still happen outside the state’s major metro areas.
He is also quick to point out that, for his agency, big projects don’t end when companies make their choice public. “With large investments like EGGER, there’s a tremendous amount of work that Commerce does post-deal — things like permitting, site placement, training and other needs,” he says. “We’ll continue to partner with them for years.”