published Sunday, March 11th, 2012

Chattanooga’s international business expected to boom over decade

Karen Phillips, a "Tech 1" employee with AdTech Ceramics, examines holes which will be filled with paste to create a custom multilayer ceramic package for microchips that will be exported throughout the world.
Karen Phillips, a "Tech 1" employee with AdTech Ceramics, examines holes which will be filled with paste to create a custom multilayer ceramic package for microchips that will be exported throughout the world.
Photo by Dan Henry.
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Move over, China. The world can expect to see more "Made in Chattanooga" in the coming years.

The Scenic City's export value doubled between 2005 and 2010 and is expected to jump another 70.5 percent in the next decade, reaching as high as $1.7 billion.

That growth rate, the second highest among the nation's 150 metro areas studied, is based on the economic growth of Chattanooga's trade partners and rising demand for Chattanooga products, according to a report released by The U.S. Conference of Mayors.

"What's important for any region to do is sell goods outside the metro area," said Jim Diffley, a regional economist for IHS Global Insight who authored the report. "A city needs to have somebody willing to pay its workers and its businesses."

The Chattanooga area, including parts of Georgia, exported more than $1 billion of goods in 2010, according to a report released earlier this month by the International Trade Administration. That amount made metro Chattanooga the third-biggest exporter in Georgia and the fifth-largest in Tennessee.

MANUFACTURING GROWTH

Exports to Europe are expected to slow because of the region's sovereign debt crisis, according to the IHS report. Asian exports are projected to lead global growth, as fast-growing countries urbanize, improve infrastructure and develop a strong middle class.

That export potential is key for economic growth in areas such as Chattanooga, especially as domestic consumers hold back on spending in the face of an uncertain economy. Finding foreign markets supplements any losses and injects new money into local economies.

"We're helping that," said Vince Mish, chief financial officer of towing equipment manufacturer Miller Industries. "We export a lot."

About $56 million of Miller's $412.7 million in 2011 sales were overseas. Most of those foreign sales were exports. Mish said that in some years, exports have accounted for as much as 20 percent of the company's business.

Machinery was Chattanooga's top export in 2010, accounting for more than a fourth of total foreign trade. Between now and 2020, Chattanooga machinery exports are expected to grow by more than 75 percent, according IHS's report.

Miller exports primarily to European countries, with England and France receiving the most. The company also has distribution centers in Australia, Japan, Puerto Rico and South Africa.

As foreign countries improve their transportation systems, Mish expects to see demand for his machines rise even higher.

"We're really looking everywhere," he said.

Astec Industries, which manufactures equipment for mining and road construction, is Chattanooga's biggest exporter. The company had $116 million in international sales during the fourth quarter of 2011, accounting for nearly half of total sales.

EXPORT STRENGTH

President Barack Obama pledged in January 2010 to double United States exports by 2015. That promise, balked at by many as unlikely, is on track to be kept. Exports have grown about 16 percent a year nationally, according to Commerce Department data.

Some potential for future growth comes from weakness in the dollar, Mish said, but the main draw for his business is innovation.

"It's technology," he said. "We've developed a lot of the things that are out there."

China made a name for itself delivering low-cost, high-volume manufacturing, but Chattanooga companies such as Metalworking Solutions, which custom-cuts metal, and AdTech Ceramics, which makes custom microchip parts, find success by bucking the Chinese model.

"We're seeing the reverse side of that same equation," said Bill Hewgley, president of Metalworking Solutions.

Metalworking Solutions exports some to Canada, and is starting to draw interest from other foreign countries. Hewgley attributes the growth to his company's smaller size, which allows for high customization and quick turnaround compared to competitors using similar technology.

AdTech benefits from the same phenomenon, said Bill Minehan, the company's president and chief executive officer.

Microchips are small enough that even a large order can be shipped cheaply, so Minehan's company stresses its ability to accommodate customer needs when competing with other manufacturers around the globe.

"We're truly in a global economy," he said. "With the communication and advertising networks that are available globally now, it's definitely a smaller world. A Chattanooga company should be equally competitive as any other country in the rest of the world."

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