State focuses on growth clusters

State focuses on growth clusters

April 21st, 2011 in Business Around the Region

As a business consultant, White House economic adviser and venture capitalist, Bill Hagerty spent the past two decades analyzing industries around the globe for their strengths and investment potential.

The Nashville millionaire, who joined Gov. Bill Haslam's Cabinet as commissioner of Economic and Community Development in January, now is trying to use his business savvy to focus the state's more limited dollars on the most promising business prospects for Tennessee.

"We need to find those sectors that have the greatest likelihood of having a competitive advantage and figure out how to leverage that advantage so that we get the greatest return on our investment," Hagerty said in announcing the state's new development strategy known as "Jobs4TN."

After a two-month study, Hagerty's staff has identified a half- dozen key industries to target for job growth. All six have shown above average income and job growth and have ties to Southeast Tennessee, officials said.

Automotive: Volkswagen is joining Nissan this year in producing cars in Tennessee. VW's $1 billion plant at the Enterprise South industrial park began making Passat cars for customers this week and already has helped attract 15 automotive suppliers to Chattanooga.

Advanced manufacturing and energy technologies: Alstom Power Inc. added a $300 million plant in Chattanooga last year to make turbines and other high-technology components for nuclear, coal and gas power plants. Wacker Chemical is opening a $1.45 billion Bradley County facility that will manufacture polysilicon used in solar power panels.

Transportation: Chattanooga is home to trucking companies U.S. Xpress and Covenant Transport and one of the nation's biggest privately owned warehousing firms, Kenco Cos.

Chemical products and plastic: DuPont and Invesco have plants in Chattanooga that manufacture nylon. BASF, also in Chattanooga, makes chemicals for the carpet industry. Olin Chemical manufactures chlorine at its Charleston plant in Bradley County and is undergoing a $160 million upgrade.

Business services: Chattanooga is trying to establish itself as a high-tech center with its municipal electric service, EPB, offering one gigabit broadband to residential and business customers alike. Convergys and T-Mobile have major call centers in Chattanooga.

Health care: Chattanooga is headquarters to the state's largest health insurer, BlueCross BlueShield of Tennessee. Fillauer LLC is a leading manufacturer, distributor and central fabricator of orthopedic and prosthetic devices.

Haslam said his administration also will work on three other targeted growth businesses - farming, music and tourism - through the state's Department of Tourism, the Tennessee Film, Entertainment and Music Commission and the Department of Tourism.

Where the jobs are

The governor said he wants to focus more on helping existing businesses in the state, which he said account for about eight of every nine jobs created in Tennessee. Haslam and Hagerty pledged to personally meet with the 100 largest employers in Tennessee and to build more alliances between the Department of Economic and Community Development and local Chambers of Commerce.

Under Hagerty's predecessor, Matt Kisber, the administration of former Gov. Phil Bredesen recruited more billion-dollar-plus investments than any other state with major new plants announced in the past three years by Volkswagen in Chattanooga, Wacker in Charleston and Hemlock Semiconductor in Clarksville.

Haslam said such deals are becoming rarer and account for only a fraction of the jobs created in the state.

"It's a very competitive market and so you need to focus upon those things that are your strengths," Haslam said.

Hagerty said he analyzed more than 900 deals the state has done in the past and looked for what makes the most sense for future investment

"Just over 85 percent of the new jobs created in Tennessee come from existing businesses," Hagerty said. "You're going to see this department focus extensively on existing businesses."

Less money to spend

Like other state agencies, the Department of Economic and Community Development plans to spend less money next year than it is spending this year.

Although Southeast Tennessee led the state in investments from manufacturers locating in the region, Chamber of Commerce leaders in Chattanooga and Cleveland said the state's new development strategy should help the region build upon the new investments and other longtime businesses.

"We all know there are diminished capital resources available at all levels of government and it's incumbent on all of us to sit down together and figure out how we can best promote business with fewer dollars," said Doug Berry, vice president of economic development for the Cleveland/Bradley County Chamber of Commerce.

"We've had great success with new businesses, but we also have enjoyed tremendous investments from our long-term industries here like Whirlpool and Olin Chemical. We're moving down this path already," Berry said.

J.Ed. Marston, marketing manager for the Chattanooga Area Chamber of Commerce, said the targeted industries identified in the Jobs4TN plan include most of those identified in the Chamber's own plans.

"We feel like these targets are very complimentary of our local strategy," he said. "Each and every one of them are things that we have been pursuing at the Chamber for years."

Staff reporter Andy Sher contributed to this report