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Economic development officials hope to make manufacturing the state's trademark economy even if it goes against the grain of its history
Sunday, October 29, 2006
By Rebecca Mowbray


Hanson Pipe & Precast Inc. is best known for making concrete culverts, manholes and arches for drainage projects like the ones that Boh Bros. Construction Co. LLC is using in its road work at Veterans Memorial Boulevard and Severn Avenue in Metairie.

 

But last week, a new product started rolling off the production lines at the eastern New Orleans manufacturing operation: concrete wall panels to speed residential home construction.

 

"We're producing them now. We're starting this week in New Orleans," Oliver Delery Jr., Louisiana sales manager for Hanson, said Wednesday. Delery's family company, New Orleans Cement Products , was sold in 2002 after 70 years in business to Hanson PLC , a large multinational company based in London. "It's a whole new thing for our company."

 

If all goes well, the colorful display house that sits in front of Hanson's gray cement factory on Old Gentilly Road could be a sign of the future as other companies open advanced construction materials manufacturing plants in the New Orleans area or expand existing plants into construction-related production.

 

With some 124,000 homes destroyed during Hurricane Katrina in Louisiana and tens of thousands of others seriously damaged, local economic development officials are looking for a silver lining in the mayhem. If they can persuade companies that produce modern construction components to locate in the New Orleans area, not only would it hasten the building of houses that will help bring people home, it would diversify the local economy with coveted manufacturing jobs.

 

"We see it as an opportunity to grow a new industry for this market. When we look at the level of the rebuilding funds that are going to be flowing through this economy, it's a natural fit," said Steve Molnar, director of regional business development at Greater New Orleans Inc., a local business development group. "The cost of transporting a modular unit makes it more cost-effective to build closer to where they'll land."

 

Manufacturing jobs are prized because they're considered a mainstay of a solid, middle-class economy. They're well-paying jobs, often with benefits. Workers don't have to have much experience, and they can learn on the job to build a career and, possibly, gain an advanced education in engineering.

 

Moreover, manufacturing companies are less likely to relocate than other industries because of the investment that's been made in factories. After Katrina, local manufacturers were quick to get up and running because they had orders to fill, proving the stability of the jobs.

 

The sector is particularly valued at a time when the local economy has proved vulnerable to downturns in tourism, bringing to mind after the oil bust in the 1980s calls for the region to broaden into new industries. If the area can increase its manufacturing capability, it would represent the holy grail of economic development: diversification.

 

"You don't want to be too dependent upon one industry. Some industries are very susceptible to changes in the business cycles, some are less susceptible. The better distributed the jobs are, the better off the economy is," said Michael Chriszt, senior economist at the Federal Reserve Bank of Atlanta.

 

Ship, rail advantage

 

Historically, the New Orleans area hasn't been very strong in manufacturing.

 

The region's relative advantage over other places was its shipping and railroad connections through the Port of New Orleans, so it evolved as more of a transportation and warehousing hub than as a manufacturing destination. Most cargo shipped through the Port of New Orleans continues on to other destinations; only about 10 percent of it stays here, according to the port.

 

For that reason, Louisiana has long had less muscle in manufacturing than nearby states. While Louisiana had 11 percent of its jobs in manufacturing in 1990, according to the Bureau of Labor Statistics, manufacturing positions made up 24.3 percent of the jobs in Mississippi, 22.5 percent in Alabama and 17.2 percent in Georgia. Oil refining and chemical production jobs are included in the manufacturing sector.

 

Not only was Louisiana's proportion of jobs in manufacturing smaller than in other states in the region, but the state's absolute number of jobs is smaller, too.

 

The proportion of manufacturing jobs in the national economy has also declined as production has moved overseas, become more automated and required fewer humans. The nation also has begun importing more goods.

 

In Louisiana, where the manufacturing base started out small, now it's only a tiny proportion of the state's economy. Manufacturing comprises 8.2 percent of the state's employment. It makes up 15.2 percent of the jobs in Mississippi, 15.1 percent in Alabama, and 11 percent in Georgia, according to the Bureau of Labor Statistics.

 

Those declines over time are particularly evident in New Orleans. In 1964, about 56,800 people held manufacturing jobs in the New Orleans area, or 17.5 percent of regional employment and about double the number of manufacturing jobs the area has now. By 1990, it had fallen to 8.8 percent of total employment. Now it's 6.4 percent. Since the storm, the proportion hasn't really changed much because the entire economy shrunk.

 

"Manufacturing has always been a pretty small part of the New Orleans economy," Chriszt said. "What stands out is that it's a smaller proportion compared with most of the Southeast, except for Florida."

 

But Loren Scott, a consultant and former economics professor at Louisiana State University, notes that Louisiana's manufacturing jobs are of higher quality than those in many neighboring states because of the region's refining and shipbuilding positions. The average weekly manufacturing wage in Louisiana in 2005 was $726.60, according to the Bureau of Labor Statistics, compared with $542.55 per week in Mississippi and $609.14 in Alabama.

 

"We are heavily weighted in high-wage sectors such as chemical processing, refining and shipbuilding," Scott said.

 

Storm offers real chance

 

While wages in modular housing, electronic components, or steel-frame construction factories may not be quite as high as shipbuilding or oil refining, the storm represents a real chance of increasing the share of manufacturing in the local economy.That's long been a goal.

 

In a sign of just how important manufacturing is, Louisiana's original economic incentive program, the Industrial Property Tax Exemption, is exclusively for manufacturers. That program exempts manufacturers from paying property taxes for the first 10 years if they build a plant in the state or make new investments in existing manufacturing facilities.

 

For the past two years, Greater New Orleans Inc. has been working on developing a 2,900-acre "mega-site" in Tangipahoa Parish north of Amite as a major manufacturing site that the state could market as a potential home for an auto plant or steel mill, Molnar said.

 

Developments such as that park, and new incentives such as the Gulf Opportunity Zone investment incentives created by Congress after the storm could help.

 

"We need to talk more and think about ways that we can brand ourselves as a manufacturing state, because that's where the long-term, value-added jobs are," said Eugene Green, president of the New Orleans Regional Business Park, Hanson's home and the largest concentration of manufacturing in the city. "We just need to talk about it more. We didn't talk about ourselves as a manufacturing state when the firms such as Nissan and Mercedes-Benz and others were considering coming to the South."

 

Because in the past manufacturing potential in the region has also been limited by infrastructure and the abilities of the work force, there are other efforts to develop manufacturing.

 

Earlier this month, the Recovery Authority announced a $38 million Recovery Workforce Training Program in which economic development professionals, employers, trade associations, schools and community labor leaders will work together to devise programs for meeting employers' specific work force training needs. Construction and advanced manufacturing are two of the six target sectors.

 

"Manufacturing is an important part of a local economy. The jobs that are created are very strong because you can go into a facility without any experience, and build a career path," said Robin Keegan, director of economic and work force policy at the Louisiana Recovery Authority. "These are jobs that could give people a living wage and a career path with the right type of training."

 

Greater New Orleans Inc. is also trying to push the opportunity. It has hired the local advertising firm Trumpet to devise an advertising campaign to promote careers in health care and shipbuilding, where workers can earn $70,000 a year after five years on the job. "We think we need to get the word out on that," said Robbie Vitrano, president of Trumpet. "There's some real opportunities there. The jobs exist, the career paths exist."'Not fluffy'

 

At Hanson, the company has about 45 to 50 employees. If its AeroDwell Building System is well-received and cranks out wall panels and roof trusses for about 3,000 homes a year, as Delery hopes, the company's employment could double.

 

"That will expand when we get into the more serious manufacturing," Delery said.

 

Signs are that the idea of turning New Orleans into a hub for construction manufacturing isn't idle talk.

 

"It's not fluffy. It's very real," said Paul Adler, business development manager for the Australian Trade Commission at the Australian Embassy in Washington.

 

Adler brought four Australian construction companies to New Orleans in August to check out the opportunities, and he's bringing six to eight more in December. Australia became a world leader in steel frame and modular construction after Cyclone Tracy leveled the city of Darwin in 1974. The country immediately looked to better building techniques to find ways to rebuild Darwin, and it worked: When Cyclone Larry struck near Brisbane about two months ago, the area emerged relatively unscathed because of the construction methods.

 

"Just as the Dutch have the experience with the levees, the Australian industry has experiences in several areas that could help, and one is modular construction," Adler said. "It's a 30-plus year history of preparing for and responding to storms."

 

The modular industry itself is also pushing the region as a top site for growth: in January, the Modular Building Systems Association held a symposium in Gulfport, Miss.

 

Another major project in the works is Premier Designed Homes LLC , which is trying to bring a massive modular home manufacturing plant to eastern New Orleans. Last week at a building expo, representatives of the company said they planned to invest hundreds of millions of dollars in production plants that could produce thousands of homes a year.

 

In addition, Mayor Ray Nagin has said that he believes at least two modular companies will build factories in New Orleans.

 

Indeed, real estate and economic development officials report that they've been busy shuttling around prospective industrial developers.Other deals have already happened.

 

After a factory building symposium in Baton Rouge in June, an Italian construction company made a $6 million investment in Kenner and opened a construction system factory. M2 Emmedue and its American partner, Advanced Building Systems Inc. , are building a 78,000-square-foot factory that will employ 100 people.

 

The lion's share

 

While the M2 Emmedue deal was in Jefferson Parish, business planners say they're betting that eastern New Orleans gets the lion's share of the business, because land is cheaper and more plentiful than in other areas, and it's zoned for industrial use.

 

"The New Orleans east area is where most of them are looking," GNO Inc.'s Molnar said. "From the land-use perspective, that's where most of the industrial land-space of that scale is available."

 

Not only would such developments benefit eastern New Orleans, but it would put much-needed jobs and investment back into a city that has lost them over the years to the suburbs. Within the New Orleans area, Jefferson Parish is king of manufacturing because of the Elmwood Business Park.

 

According to the 2002 Economic Census, the biggest concentration of manufacturing in the area is in Jefferson Parish, where some 399 firms before the storm employed 15,508 people, many of them working in . fabricated metal product manufacturing, food manufacturing, machinery production and plastic and rubber products manufacturing.

 

The second-largest concentration of manufacturing is in Orleans Parish, according to the census, where before the storm some 225 firms employed 8,584 people. Transportation equipment manufacturing is the largest sector of employment, with 3,549 workers, followed by food manufacturing, which employed 2,114 people.

 

Orleans is likely to make gains.

 

"New Orleans east is where they're going to look," said David Quinn, a partner and commercial real estate broker with Max J. Derbes Inc. , who is working a client looking for sites for manufactured housing. "It would be a big deal if it happened."


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