Featured In Issue: CLT.biz Insights 16.09.08
Jim Rogers has just turned a problem into an opportunity! An important conference in October 2016, Energizing Africa Through Partnerships, being hosted by E4 Carolinas and a number of key sponsors, is purposed to meet the needs of the 1.2…Read More »
“This year marks the most volatile political risk environment in the postwar period, at least…Read More »
The 2016 U.S. presidential campaign has brought renewed focus directly upon the North American Free…Read More »
U.S. Department of Defense
“I believe what we’re seeing in our country, in the world today, is a reflection…Read More »
Through most of the 1800s, immigration came predominantly from Western Europe (Ireland, Germany, the U.K.)….Read More »
Our World Data
In an incredibly important article, economist and media critic Max Roser, known for his research…Read More »
About an hour northwest of uptown Charlotte is the small Gaston County town of Cherryville. With quiet tree-lined avenues and a corner drug store on Main Street, Cherryville is a throwback to a simpler time when life moved at a less frenetic pace.
Formerly a bustling textile center and the home base of Carolina Freight Carriers, once one of America’s largest trucking companies, Cherryville saw its textile mills move offshore and its hometown trucker move out before being sold over 20 years ago. The resulting economic distress has been long lasting, as the still-vacant storefronts on Main Street attest.
But out on the west side of town, in a building once occupied by Bernhardt Furniture, a company named Farris Fab is helping Cherryville participate in the rebirth of American manufacturing. Farris Fab fabricates a wide variety of specialty parts that wind up in a diverse mix of commercial products including heavy trucks, earth moving and construction equipment, and subway cars.
Leveraging an available base of skilled workers with low real estate costs, Farris Fab is showing that by making quality products fast and efficiently at a fair price, manufacturing can once again become an important part of the American economy.
A Second Generation Family Business
Farris Fab traces its beginnings to 1979 when Corwin Farris opened a small 1,200-square-foot machine shop in the rural Gaston County countryside outside of Bessemer City. Initially focusing on fabricating parts for the textile manufacturing industry, the company quickly developed a commitment to quality and customer service that survives to this day.
By the late ’80s, Corwin was planning for retirement, so he looked to his oldest son Bryan to follow in his footsteps. Bryan had worked a variety of odd jobs in the family business since he was 13, but after graduating from high school in 1988, Bryan decided he wanted to work full-time at Farris Fab.
“Right after graduation break, I was back working six days a week for the next 15 years,” chuckles Bryan, who is now owner of the company with his brother Greg, who joined the business four years later. “I was basically self-taught and I learned how to manage by failing and then making it right. My dad let me fail to help me learn.”
Bryan could see that textile manufacturing was leaving the Carolinas, so he knew the company had to move in another direction to prosper. He began calling on larger OEMs (original equipment manufacturers) and began diversifying the customer base away from its roots in textiles.
“We’ve never had a dedicated sales staff,” admits Bryan. “Management handles the sales calls, and I think customers like dealing with someone who can actually make things happen for them.”
As his experience grew in the early ’90s, Bryan began taking over more and more of the day-to-day responsibilities. He can’t pinpoint the specific date when his father officially turned the company over to him, but he does vividly remember the day when he realized Farris Fab was becoming his to run.
“I remember telling my dad I needed some help,” he recalls. “I told him I was unloading trucks, programming parts, and buying lasers, while also trying to help chart the course. I told him he needed to hire somebody to help me. But as he was walking out the door, he turned around just said, ‘Don’t tell me—it’s not my deal.’ He was telling me if I needed help, I was the one who needed to make it happen.”
Today, Bryan is president of a company with three locations, just under $30 million in sales, and just shy of 200 employees. His brother Greg has also been instrumental in setting direction for the company and serves as a vice president while also running day-to-day operations at two other related family businesses—an industrial supply company and a conveyor business.
While contract non-disclosure obligations prevent publication of the names of their major customers, Farris Fab manufactures parts for a diverse range of multi-billion dollar OEMs that are a who’s who of American business, and whose names and logos are known worldwide. Farris Fab-manufactured parts can be found in numerous places including trucks, construction equipment, forklifts, subway cars, and large electric motors.
Specialization Versus Volume
Farris Fab’s specialty is contract manufacturing, with a focus on more specialized jobs. Bryan calls his business a “convenience store for manufacturing,” contrasting it with higher volume manufacturers, many of which might be located in Mexico or China.
“We say you don’t have to order way in advance or in massive quantities,” he explains. “We don’t deal in the millions or hundreds of thousands. We deal in thousands and hundreds. We can make your products faster and more efficiently, and what we do can be more dynamic and responsive to changes.”
Adds General Manager Mike Bumgardner, “A lot of what we make continues going through engineering changes. Whether it is every six months or every year, we see a lot of changes. China or Mexico can’t respond to that as quickly as we can.”
Many of Farris Fab’s projects start on one of the machines that cut sheets of material to pre-programmed shapes. The core of their cutting operation consists of several large laser cutting machines, but they also have a Waterjet machine which uses highly pressurized water to process more exotic or thicker materials that would be difficult to cut on a laser. Bumgardner compares their cutting operation to using a pair of scissors to cut out a shape from a piece of paper.
Once the metal has been cut to shape, it often moves to one of the press brake machines which bend the material to the often complex shapes required to fabricate the customer’s parts. Multiple bends are frequently required for each part.
If parts need to be joined together to create a sub-assembly, the next step is often welding. The company employs certified welders for lower volume welding jobs, but for higher volume and more repetitive tasks, the company’s robotic welders can be programmed to create the required welds more efficiently with outstanding quality.
Many of the assembled parts also require machined components. Farris Fab’s computerized metal lathes remove material from rotating round or cylindrical parts, creating a specified shape for the customer. Their computerized milling machines cut and/or remove material from the surface of a piece of material, creating a part with a specific required shape.
The final steps often include other finishing processes like painting, sand blasting, powder coating, and final assembly before the parts are shipped out to the customer.
Farris Fab works with all ferrous and non-ferrous metals as well as modern plastics, which can also be turned, milled, and even bent. They can also fabricate parts using the new state-of-the-art 3D printing processes.
With five engineers on staff, the company can also help their customers with part design and requirements definition, including reverse engineering and 3D modeling.
“It’s sort of like LEGOs,” laughs Bryan about their overall workflow. “We’re just making the blocks to put this puzzle together. We join it up or fashion it in some way and send it on down the line.”
A Big Bet Pays Off
Farris Fab’s main facility in Cherryville is 110,000 square feet and contains corporate offices as well as laser cutting machines, the machining area, press brakes, and both human and robotic welders. A secondary 50,000-square-foot facility in nearby Bessemer City contains assembly operations, metal prep and clean up, and powder coating. A third 35,000-square-foot facility located between Cherryville and Dallas contains their Waterjet cutter, another press brake, and their wet painting operation.
Cherryville’s long-standing local economic issues, coupled with the Great Recession of 2008-2009, allowed Farris Fab to acquire its Cherryville facility for a fraction of what it might have cost otherwise. With no external debt to weigh them down during the recession, the Farrises took the gamble to invest heavily in the business, positioning the company to profit from the eventual economic rebound they believed would come.
“We spent a million and a half dollars for this building and spent another million and a half updating it,” says Bryan. “We bought machinery, we bought crane systems, we bought lasers, we bought press brakes—we invested in engineering software, office software, and computers—but it was all at bargain basement pricing.
“We were looking at a 10-year plan, so that when the recession ended, we would be the best on the block. Other companies would be damaged with no advancements and no engineering, and we would be ready to take over a lot of business.”
Bryan says they were also able to gain market share during the recession by being willing to take smaller orders without raising unit prices as many of their competitors were doing.
“Our competition was increasing their prices 20 percent to 50 percent because of smaller production runs, but we were willing to take the small quantities for the larger quantity price,” explains Bryan. “When we came out of the recession and everything got back to normal, our name was out there. We took over hundreds of thousands if not a million dollars of new business. It was an investment in our future.”
Both Bryan and Greg see many of Farris Fabs’ customers beginning to bring manufacturing back to America as other countries begin to see their own standard of living rise and the wage advantages they have enjoyed versus America begin to erode. He also says that the pro-business climate in North Carolina is a big positive for his company, as is his location in Cherryville.
“Cherryville’s downfall makes it great now,” says Bryan. “There is low cost land, and the county and the state really want to work with you here. This is considered an out-of-the-way place, but how out of the way is it really? We’re only just a little over 40 minutes from the Charlotte airport.”
The Cherryville location also allows them to tap into a pool of experienced skilled labor in Gaston, Lincoln and Cleveland counties. Bryan says the company can even attract workers from as far away as Rutherford, Catawba, and Mecklenburg counties. But he goes on to say that finding employees with the skills they need is still the biggest challenge they face today—even more than increasing operating costs and increasing health care costs.
“A lot of manufacturers have big buildings and great equipment, and we have all of that,” adds Bumgardner. “But we truly believe in our people and building teams. It’s not just a buzzword for us. We know about the people that work here. We know about their husbands, wives and their kids. We’re concerned about them. So it truly is a big family.”
Looking to the future, Bryan wants to diversify without straying too far from their core expertise. He sees growth opportunities in the aerospace industry as well as potential opportunities from future natural gas exploration and production activities in North Carolina. Farris Fab may also explore building products of their own rather than just supplying parts for other companies’ products.
“There is great opportunity here because the South is a growing place,” says Bryan. “Probably 95 percent of our business is done within five hours of Cherryville. Manufacturing is not that big in the Charlotte area itself, and we need more emphasis on manufacturing here, but it is still growing, you just don’t see it on every corner.”
“Companies are starting to bring operations back from overseas for greater control,” Bryan concludes. “Mexico does a great job when they can set up something repetitive, but when you need to make it fast, efficient, with high quality, and in smaller quantities, you can’t beat America. We are the best in the world.”
A polymath, derived from the Greek polumathçs “having learned much,” from polu- “much” + the stem of manthanein “learn,” is a person of wide knowledge or learning, whose expertise spans a significant number of different subject areas. Such a person is known to draw on complex bodies of knowledge to solve specific problems or, as here, to bring broad perspective to the interpretation of historical events.
While the term is most often used to describe great thinkers whose expertise spans a significant number of different subject areas, in less formal terms, a polymath may simply be someone who knows a lot about many different things.
In either case, it would aptly describe Chase Boone Saunders. A Charlotte native and a fifth generation North Carolinian, Saunders is an attorney with the McNair Law Firm and experienced mediator, a retired N.C. Superior Court judge, a savant of many subjects, and an accomplished artist.
He graduated from UNC Chapel Hill, where he studied history and English, obtained his law degree from UNC as well, and has taken various financial planning and real estate courses at local universities and business schools.
In addition to practicing law, Saunders is a volunteer or otherwise involved in a number of professional, historical, business, civic and charitable activities, and has been widely recognized for his achievements in his profession and in the community. In his “spare time,” the passionate historian watercolors “the changing face of the two Carolinas.”
He is one of a growing number of Charlotteans heralding the zeitgeist to position Charlotte as the global hub for international trade on the East coast of the United States, advocating that increased commerce means greater prosperity for the region—more business, more jobs, more wealth, more innovation, more opportunities for all.
“We have the opportunity to build a new city—and that happens rarely in someone’s lifetime,” Saunders says straightforwardly and profoundly.
A Rare Opportunity
In his series of watercolors titled UPTOWN FROM, Saunders describes the city thusly:
“Charlotte is a work-in-progress, Information Age City ever creating its future by coupling a mid-East location astride pre-Columbian, Indian trade routes to the energy of her people. Named by her founders for the English Queen Charlotte, and later called the Queen City, her towers of commercial power are visible over a verdant forest canopy as the center of a region with significant business activity.
“Charlotte is a city built on hard red clay which only the value of hard work made productive. And it is no different today! Charlotte continues to welcome and acknowledge the successes of those who come here to work hard, live, and play.”
This Renaissance man has a clear vision and enthusiasm for Charlotte that is as evident as the sparkles in his eyes—and contagious.
“Charlotte is on the threshold of another boom driven by its strength as a logistics center. Representative of that is the new intermodal facility at the airport which makes Charlotte a ‘city of ports’ rather than a singular port city.
“And we have the opportunity to build that new city,” he maintains.
Saunders is a member of the Charlotte World Affairs Council and Charlotte World Trade Association, and a presenter and promoter of Regional Development Initiatives and the Charlotte 2030 vision theme: Create It, Make It, Move It with Central Piedmont Community College (CPCC) President Tony Zeiss and nationally-recognized urban planner Michael Gallis. He is founding member of the global vision leaders group, community and civic leaders who believe that time is of the essence.
He characterizes the group as a “21st century, open-source entity”—a collaborative forum linked by a common goals, common interests, and digital communications. Described more from the wealth of materials amassed at www.CLTglobal.com, and referenced with respect thereto, various group leaders have made and can be scheduled to make presentations of CLTglobal materials and updates can be requested and resources shared at the website.
This grassroots group is aptly named. Its goal is to advocate, promote and stimulate Charlotte and its surrounding region as a global hub of international trade—a great inland port that’s an economic powerhouse.
In the Create It, Make It, Move It initiative, the group highlights three key components of that goal: innovation and entrepreneurialism; manufacturing, especially advanced manufacturing; and a distribution infrastructure that moves goods efficiently and for a lower cost around the world.
While the goal may seem a stretch to some, there are real indicators that support the global vision for Charlotte. Charlotte is already a growing center of energy, finance and health care, and its standing as a transportation and distribution hub has been elevated exponentially with the merger of American and US Airways, the improvements to the airport and the new intermodal distribution facility.
Charlotte has also been recognized for its global competitiveness in an IBM and Site Selection magazine report which named Charlotte as one of only 12 U.S. cities to make its Top 100 Global Cities.
The seed of the global vision leaders group began simply enough two years ago, when Saunders shared his visualization of Charlotte through four distinct booms and busts with Zeiss at a Rotary Club meeting. Together, they decided that the time was right for Charlotte to be proactive and create a model for the city’s next 50 years—a vision for a new city. But what would that new city look like?
“To determine that, you first need to pull back and say where has Charlotte been? What is its history?” explains Saunders, a former president of the Mecklenburg Historical Association.
A Perspective on Charlotte
“Charlotte is a story of place and people,” Saunders starts out.
“At its most fundamental, Charlotte exists because of its location. It’s located at a crossroads of trading paths which were Indian paths, and before that, most likely, animal migratory paths.
“Charlotte was built on the high ground between two creeks. In Europe, castles would have been built on the location, but in America, we built towns. The crossroads of what is now Trade and Tryon was situated on a trading path called the Great Wagon Road that ran along the Piedmont from Philadelphia through Lancaster County on the east side of the Appalachians.
“The trading path, about 745 miles long, ran through Charlotte on its way to Augusta. In the early 1700s, it was the path that the new immigrants took south after they arrived in either New York or Philadelphia.
“In the 1740s and 1750s, the British had worked out a peace with the Cherokees so that the path could be enlarged into a road. And relations were friendly with the Catawba Indians, so the area around Charlotte and South Carolina was available for settlement.”
Saunders points out that the people who settled in the Charlotte area were independent and self-reliant—a defining force for its future.
“In the Battle of Culloden in 1746, the Scots were wiped out as a power in England,” Saunders explains, “and 40,000, 50,000, maybe even 60,000 Scots immigrated into America, settling in western Pennsylvania.
“Other settlers in the Colonies were the Scots-Irish, driven from Northern Ireland because of wool tariffs and other economic privation. They were Scots and Presbyterians. America was the place where everyone who wasn’t an Anglican was sent or was encouraged to go, and that included Puritans, Anabaptists and many different sects. All the religious dissenters—the people who thought differently—came here. When all the land in Pennsylvania had been acquired, they migrated south along the Great Wagon Road and settled our region.
All you have to do is look at the names of present-day South Carolina counties: York, Chester and Lancaster. All of those counties were named after western Pennsylvania counties.
“So if you think about the people who settled here, they were oftentimes run out of their countries. They had to travel across the sea, and then they had to travel down a wagon path with whatever they could carry. Only the toughest of people who had no other choice would do that,” remarks Saunders.
“That gave rise to a highly independent, fairly well-educated, self-reliant group of religious dissenters. And they also had no great love for the English. The end result was the Mecklenburg Declaration and Resolves in 1775 when Charlottetown left the Crown.
“This dislike of the English and the control the Crown exerted over the colonies led to widespread tensions and gave rise to the Regulators in Alamance County who rebelled against excessive taxes, dishonest officials and the building of the Royal Governor’s palace in New Bern. Locally, the major source of contention was the Vestry Act.
“That was a damnable piece of legislation,” asserts Saunders. “The Vestry Act required all landowners to pay money to the Anglican Church to support local Anglican preachers who were basically reporting back to the Crown on the status of things. Presbyterians were paying preachers from another faith to impose their practices on the Presbyterians—spying on them, performing their marriage and death ceremonies, and educating their children to be good little Anglicans.
“That didn’t sit well with the people. They decided they should create a town that would allow them to have a charter and be a political entity which could negotiate with the Crown. So in 1768 they created Charlottetown.
“By this time the Regulators were in open revolt and Governor Tryon needed a military force, provisions, and guns to fight them. So the people of Charlottetown struck a deal and provided troops and provisions with the agreement that the Royal Governor wouldn’t enforce the Vestry Act—and the people of Charlottetown could educate their children and have religious freedom.
“But afterwards, the English Parliament, who had to approve the agreement, refused to honor the deal. So the people decided they couldn’t trust the British. By 1775, concurrent with the Battle of Lexington, Charlotte declared itself independent through a declaration and a number of resolves; the event was called The Mecklenburg Declaration of Independence.
Boom No. 1: Gold!
“Charlotte’s location along the Great Wagon Road made it an important supply center throughout the Revolutionary War, but its first real economic boom came in the 1790s as gold was discovered in Cabarrus and Mecklenburg counties. The largest deposits of gold were found in rock from which it had to be extracted. That took skill. That brought in miners, financiers, and mining engineers and a mining industry began.
“There was enough gold here that it became the local specie and until the California Gold Rush, Charlotte was the leading gold producer in the nation. Charlotte petitioned for and received a branch of the U.S. Mint in 1838.”
At the turn of the century, the economy also depended upon the movement of raw materials and produce along the rivers where they could enter the Landsford Canal. Saunders cites canals as the area’s way to transport goods in the early 1800s but by the 1840s high technology was carriage by rail…the new transportation of the day.
“So forget canals,” Saunders says. “Charlotte had to have a railroad. Eastern North Carolina already had a railroad. Initially they didn’t want to extend it all the way to Charlotte, so folks from Charlotte started talking to people in Upstate South Carolina. Camden, which was the richest part of the Upstate, didn’t like the idea but Columbia was just getting started and they said it looked good to them.
“That caused the businessmen in eastern North Carolina to rethink running a railroad to Charlotte and, by 1856, Charlotte became the intersection of both a North-South and an East-West railroad—each of a different gauge—but we were nevertheless at the crossroads. Salisbury, the largest city in western North Carolina at that time, missed out on that important opportunity. It made Charlotte part of the East Coast supply chain and reinforced our logistical position.
“Cotton had been a significant crop in Charlotte, as it was in the rest of the South,” Saunders continues. “In the 1850s, cotton factors sprung up to handle the financial transactions, warehouses were built and the population of Charlotte doubled between 1850 and 1860. This was the real beginning of Charlotte as a center of commerce.
“The existence of two railroad lines meant that a factor could sell his goods—primarily cotton—either to the North or to the South, wherever the price was better.”
Charlotte’s railroads also featured prominently in the Civil War. “The North blockaded all of the Southern ports on the East and Gulf coasts,” Saunders explains, “and they could bombard any of the factories in the coastal cities, so the Confederacy had no safe place to make engine shafts for their blockade runners, or cannon balls or gun shells.
“Charlotte was inland but it was on the railroad, so the naval arms industry with its engineers set up the naval works for the Confederacy in Charlotte. After the war, Charlotte had some assets to restart its economy. Charlotte wasn’t burned down by Sherman’s troops like Columbia, S.C., and other southern cities, so we had a leg up on growth and the emerging new technology—electricity.
“Electricity allowed you to build and power cotton mills wherever there was a decent body of running water, but you needed engineers to set them up. Because of the Confederate Naval Yard, the engineers were already here.
“J.P. Morgan had the monopoly on electricity in New York and the Middle Atlantic States. In the South, James B. Duke, who made his first fortune in tobacco, decided that he would invest in the same technology and build a regional economy with it. Electricity powered mills, lighted buildings, lighted streets, and powered street cars and electric trains.
“As events unfolded, he was helped in this effort by the governor.” Saunders explains, “In 1916, North Carolina was hit by two Category 4 hurricanes causing more than three days of downpours. Tremendous flooding destroyed most of the bridges on the East Coast and in the mountains and flushed any of the towns along rivers. Just west of Charlotte, the Catawba River crested 47 feet above flood level.
“It was so bad that food had to be brought in by railroad to keep people from starving. As a result, the governor determined that couldn’t happen again and proposed to Duke that if he dammed up all those rivers, he could develop steam plants at the dams to help pay off the expense.
“So that’s how Duke came to control the authority of the dams from the mountains to the county line and ultimately down into South Carolina. It was the beginning of the energy business in the Carolinas. It was a wonderful stroke of luck for Charlotte. It gave us an energy business which is critical to our regional economy.”
Booms No. 2, 3 and 4: Military Base, Textiles and Banking
World War I brought Charlotte’s second economic boom. “With war clouds inevitably coming,” Saunders says, “Charlotte sensed an opportunity, sent a delegation to Washington and persuaded Congress to give Charlotte a military base.”
Camp Greene is built in just a few months on the acreage of the Dowd Farm and 60,000 men from all over the country arrived by train into Charlotte. “Each one of these soldiers,” says Saunders, “was getting $8.00 a month and $4.00 had to go home, but he had $4.00 he could spend here.
“The military base was a real boon to Charlotte. It brought in a lot of cash and all the support businesses associated with it but it also, importantly, brought awareness to the rest of the nation. Now there was a place called ‘Charlotte,’ and it was where their sons were.
“Because of the base and the growth of the local textile businesses, local banks thrived and a branch of the Federal Reserve was established in Charlotte in 1927. This meant that Charlotte was a financial player and was able to affect the flow of money through its branch of the Fed throughout the region.”
So by the 1930s Charlotte had regional roads, trains, electricity, telephones, radio, automobiles, and trucks. Commercial aircraft were the next technology.
“In the early 1930s,” Saunders continues, “planes are the ‘the next new thing’ and Mayor Ben Douglas decided that Charlotte was a growing city and needed an airport. By this time Charlotte was in the Great Depression and Douglas had to figure out how to put people to work. He got a grant from the Works Progress Administration and put the word out that Charlotte was going to build an airport and anybody who wanted a job should show up. People walked, thumbed and drove to the west side of Charlotte and built an airport.
“In the beginning there wasn’t much traffic at the airport, but it was important because of its location. Airmail and travelers moving between Florida and New York were the primary source of business. The airport would expand during World War II when it was taken over by the U.S. Army and made an essential part of the war effort. After the war, it would service a number of traveling salesmen selling goods manufactured in Northern companies and abroad throughout the region. By the 1950s, the airport joined the list of logistical resources which would contribute to the economy. Mayor Belk led efforts to expand it.”
“By the 1950s Charlotte was in its third economic boom as a leading regional textile center,” Saunders continues. “Threads, elastic, fibers, and fabric were being produced. Some of the materials were sent to Michigan to be put in automobiles. Some were used in North Carolina cities for the furniture upholstery. And much of it was used to make articles of clothing ranging from socks to pants to sweaters.
“The expansion of the textile industry led to growth in the area’s trucking. Charlotte’s location, which allows access to half the U.S. population within a day’s drive, gave Charlotte a tremendous advantage in distribution…another logistical, supply chain asset.
“You overlay that with the development of the interstate highway system in the 1950s and Charlotte gets I-85 and then I-77 with its easy to access I-40. About the same time, WBT led the way in building a huge transmitter with East Coast range and WBTV later came on to make Charlotte the broadcasting center for the region.
“Because of good transportation, a favorable labor environment and the airport, foreign companies start to make Charlotte their home. Especially German companies, which produced machinery and chemicals used in the textile industry, located in Charlotte and all of the surrounding counties in North and South Carolina.
“Charlotte’s fourth and most recent economic boom resulted in the city becoming the second largest banking center in the country. But it all started because some very entrepreneurial bankers decide they had to get bigger, and to do that they had to cross state lines.
“Hugh McColl smartly took advantage of a Florida loophole at a time when interstate banking not the law of the land, acquiring a trust company in Florida. Thereafter, he was instrumental in getting federal laws changed to permit interstate banking and began to aggressively acquire bank after bank in the Southeast and then, nationally. He led local bankers in perfecting this expansionary model. The Charlotte banking community grabbed market share and surprised the nation by becoming a huge force in the industry.
“There’s synergy to banks,” Saunders says. “Once you have banks, people and businesses start moving to where the money is. And they could do this by air.”
In 1979, the airport became a hub servicing many cities. Another piece of the logistics story fell into place.
“But the airport still had a modest model,” explains Saunders, “so in 1997, Airport Director Jerry Orr and transportation and logistics expert Michael Gallis started thinking of ways to grow the airport and increase freight flow to build revenue. They met with Norfolk Southern executives and decided, with city support, to build a state-of-the-art, 21st century intermodal facility…the most efficient location for the exchange of cargo among trains, trucks and planes. Norfolk Southern agreed, invested $92 million, and the intermodal facility opened at Charlotte Douglas International in 2013.
“With this intermodal facility, Charlotte has a unique asset for moving goods faster. This means the city is now a player in the global logistics supply chain. Outside of Long Beach, California, the three largest intermodal facilities are Chicago, Houston, and now, Charlotte, North Carolina. The new intermodal facility is a logistical Lamborghini. It is designed to race. It is designed to compete. Now it just needs a driver to realize its potential.”
The Age of Fulfillment
“The next big age is going to be the Age of Fulfillment driven by logistics,” asserts Saunders. “It’s the age of ‘I want it,’ ‘I want it now,’ and not only that, ‘I want it to spec.’ Silicon Valley is designing the software that will allow the customization of mass to make this a reality.
“Ford today can make a million variations of its F-150 truck because it can design and test all those variations on a computer. They want to let you determine the features you want and the computer sends the instructions to the machines that make the truck customized to your needs. And once it is made, today’s consumer wants it delivered tomorrow so that he or she is fulfilled!
“What’s also important about this customization revolution is that it is part of another movement, that of the end of inventory. Inventory has costs associated with handling, spoilage, deterioration, damage and storage. Ideally, a manufacturer wants to make it and move it to the end user without delay. That places a premium on locations where you can do that.”
“All of this is part of the re-shoring and next-shoring of American industry. That is what the new industrial revolution is all about. ‘Real nations make things,’ says Chris Anderson in his cutting edge text Makers. And it matters where you are located.
“The driver of Charlotte’s this next boom will center on logistics. Logistics means flow. The faster and less expensive the flow of anything, the more successful a business or a city can become. To do an inventory of local ‘flow’ assets, we need only consider our regional crossroads location and the companies involved in the ‘flow business’ using highways, planes, rail to Eastern, Gulf and West Coast ports, oil and gas pipelines, communications platforms, financial data pipelines, and big data pipelines moving all of the information supporting the cloud and streaming content to our smart phones. (This is why Google, Apple, Amazon, and Disney are in the region.)
“Add to that a critical, human resource pipeline, a ‘workforce pipeline’ to provide a trained workforce, which is being built by Heath Morrison of the Charlotte Mecklenburg Schools, Tony Zeiss of Central Piedmont Community College, Bill Anderson of MeckEd, and Phil Dubois of UNC Charlotte,” confirms Saunders.
“Access to these pipelines means businesses can operate smarter, faster and cheaper. Successful 21st century businesses, manufacturers and distributors must locate where they can get their stuff to the largest markets the fastest and the cheapest without inventory. Charlotte is one of those singular locations on the planet with all essential pipelines.
“Remember cities like Tyre, Athens, Corinth, Venice, Pisa, Genoa, Carthage? All of those places used their logistical assets to grow as acknowledged by the history books. Logistics matters.
“The country has been divided into seven economic megaregions. Not only is Charlotte in the center of one of them (the PAM or Piedmont Atlantic Megaregion), but she is also the only major distribution location midway between the North and South and the East and Midwest.
“We’ve got to leverage these assets to attract new domestic and international businesses. We’ve got to educate everyone and explain to them the opportunities which they present. This needs to be in the consciousness of our business and civic leaders,” says Saunders, clearly a man on a mission.
“We’ve got to have a strategy to leverage all business sectors with these assets because we are in a global competition for jobs and opportunity. Other cities are aggressively positioning themselves for the future. We have to realize we’re in a global competition,” Saunders emphasizes.
“And we need leadership with local solutions, because we can’t count on anybody to do this for us. We can’t count on Raleigh or on Washington to solve all of our problems. Charlotte’s going to have to come up with its own solutions. Business people have done it before.
“The task is doable. All we have to do is look how we got here. We started a city. We started a gold mining industry. We started a military base. We started a manufacturing and textile powerhouse. We started a banking center. We started an energy hub. These and other things were started by the people of this community who had a dream, who had a vision. All of it was the result of individual and collective creative energy!”
Creating a Global Crossroads of Commerce
As part of this focus on global commerce, the U.S. Commercial Service and the North Carolina District Export Council are gathering the U.S. Commercial diplomats from 14 countries in North and South America here in Charlotte in October to provide information about access to world trade.
From Saunders’ perspective, this is a propitious time in the history of this community because we now have the opportunity to play on a global scale. This has never happened before. The event in the fall will more formally introduce the foreign trade community to Charlotte, to be followed next year by the completion of the Panama Canal expansion allowing transit by the huge post-Panamax cargo ships.
They will deliver the commerce of the world to the ports (in most cases the newly expanding Port of Charleston) where it will transit by rail to Charlotte’s intermodal facility for further distribution. That will help make Charlotte a true inland port city in the center of a thriving global commercial marketplace.
“Creative energy, making things and moving things is what we have done in Charlotte since the beginning. Our tradition is summarized in the phrase “Create It, Make It, Move It.” It is the elevator pitch that sums it all up. We can use it to attract business and investment capital to the region and aggressively pursue domestic and international trade and business opportunities.
“There is no reason we cannot build a 21st century economic city-state with our assets to create a new city with new trade routes, using new technology and new energy to become a major player in this new age.
“It is time for Charlotte to envision how she will become a new regional city in a global marketplace. It is all about thinking BIG,” emphasizes Saunders. “Charlotte—a place where we create it, make it, and move it better and faster than anyone else. Why not here and why not now?”
When the nation found itself in a mortgage nightmare after 2008, American Security Mortgage Corp. held on tight and persevered.
It might have been the Charlotte-based firm’s sense of attitude and excellence. It might have been the ethics and strong banking reputations of both founders Jim Abbott and Phil Mahoney. Or it might have been the free hugs.
Yes, employees at the mortgage banker participate in endless hugs when they come to work each morning, all part of an “unwritten” rule of sorts that has done wonders to boost morale and employee support.
“Our employees are the best in the business, and basically most come to American Security Mortgage and stay. We have longevity—people stay and even retire with us,” says Mahoney, the 63-year-old president and CEO of the company.
The difference between American Security Mortgage Corp. (ASMC) and other mortgage groups is also the fact that they are mortgage bankers as opposed to brokers. Mortgage brokers traditionally receive any number of rate sheets for a vast array of mortgage products from wholesale lenders. However, mortgage bankers issue mortgages from their own bank account.
Employees of ASMC closely watch pricing every day to stay competitive, and, they know their products. That’s what enables ASMC to secure and provide the most favorable mortgage financing products and pricing to meet the unique needs of each borrower customer.
Celebrating 15 years of in the mortgage banking business, Abbott and Mahoney are proud of their book of business and the company’s strong referrals and repeat financing.
They are at the top of their game. As a mid-size mortgage banker they are continually ranked in the top 10 of mortgage companies in the Charlotte metro area. Mahoney says it all began by paying their dues in the Carolinas’ corporate banking world and having a strong work ethic.
A Powerhouse Pairing
Both Abbott and Mahoney began their mortgage banking careers upon graduating from college. They worked “in the trenches,” they are proud to say, calling on Realtors and homebuilders and assisting customers with mortgage financing.
Chairman Jim Abbott was with First Union Mortgage Corp. for 34 years and from 1980 to 1995 as president and CEO. During his tenure, First Union Mortgage was generally ranked in the top 10 in the United States in home loan originations and loan servicing.
Abbott had hired Mahoney straight after his graduation from East Carolina University in 1974, when inflation reigned and jobs were scarce.
“I graduated on a Friday and was at work on Monday,” remembers Mahoney. “I actually had the job three and a half months before graduation. Just having a job during the recession was very lucky. I’d say 60 to 70 percent of those I graduated with didn’t have a job. My father also helped me with a strong work ethic—he worked 12 to 14 hours a day.”
Mahoney’s stint at First Union lasted 10 years with Abbott serving as a strong mentor, good friend and occasional golf partner. Mahoney went on to serve for another 10 years at Wells Fargo as Southeastern U.S. regional loan production manager and later as group head of mergers, acquisitions and joint ventures.
“At that time,” says Mahoney, “I was flying about 100,000 miles a year. Jim approached me and said, ‘Let’s start a mortgage banking business so you can see your son grow up.’ Frankly, that sounded very appealing. The banking corporate world had given me a great platform and experience, but I was ready for something different.”
So in June 1999, the duo fronted the funding for ASMC and opened their doors in a 4,000-square-foot suite in the same glassy office building in SouthPark on Rexford Road in which they are located today. They had six employees.
Today, the company employs 143 altogether—64 in their Charlotte headquarters and loan office and the rest in their other locations in Fayetteville, Gastonia, Hickory, Indian Trail, Jacksonville, Clayton, and Lake Norman.
They handle residential mortgage lending in South Carolina, in Wilmington and Morehead City, and also have a satellite office in Northern Virginia. ASMC holds licenses in the District of Columbia, Maryland, North Carolina, South Carolina, Tennessee, and Virginia. They now occupy 18,000 square feet at their Rexford Road headquarters.
Together, Abbott and Mahoney have been a good match. Both have served as president of the Mortgage Bankers Association of the Carolinas. Abbott also received the Distinguished Service Award in 1990 from the Mortgage Bankers Association of America, its highest honor.
Given their breadth of experience, Mahoney says they are intimately familiar with all the lending and customer service components necessary for all parties in a home sale.
Mahoney is also frequently quoted in area publications about the mortgage industry, and its highs and lows. In December, he served on a panel at UNC Charlotte about the current stabilization in housing markets across the country and the role played by the government takeover of Fannie Mae and Freddie Mac, as well as the Federal Reserve’s investment in mortgage-backed securities during the recession.
Finding Their Balance Quickly
When U.S. home prices declined steeply after peaking in mid-2006, it became more difficult for borrowers to refinance their loans. As adjustable-rate mortgages began to reset at higher interest rates (causing higher monthly payments), mortgage delinquencies soared. Securities backed with mortgages, including subprime mortgages, widely held by financial firms globally, lost most of their value.
“In 2008, frankly if you survived, you were lucky,” says Mahoney. “Only the truly good people made it. We had clean balance sheets, no repurchase risks. We found our balance quickly.
“We understood that the world was changing and we had better be able to work within government regulations. We never ran our ship ashore. We’re smaller, more nimble, and we adapted quickly.”
In response to stricter mortgage requirements that stem from the 2010 Dodd-Frank Act, Mahoney says his company is working hard to, as he says, “figure out the new system and work it.”
“We’re a good size for Carolinas; nationwide we’d be small. We’ve probably added seven people just in compliance areas—just checking the checkers,” he adds. “The rules are just now being promulgated; the full effects are yet to be determined. It’s made credit more restrictive. But has it made mortgages impossible to get? No. People have to jump through a few more hoops now.”
After the 2008 financial crisis, many mortgage lenders introduced guidelines that went beyond requirements for mortgages backed by the government. Some now appear to be relaxing those guidelines.
Mahoney says, “The pendulum had swung too far. Now we’re just trying to find that equilibrium. As a matter of fact, we’ve even been able to drop the minimum credit score a number of points for a government-backed loan.”
Loyalty and Longevity
Mahoney says loyalty and longevity are the two factors that contribute to employee buy-in to the mortgage banker. ASMC is doing its best to keep customers happy and to keep employee retention high. The principals believe happy employees who can process and approve loans at great rates and good credit scores make for loyal employees.
The tone in the Charlotte headquarters is collegial. Three larger-than-life headshot posters of Mahoney are mounted in the hallway, his contribution to the office for hugs while he is traveling, he says, laughing.
All three of them have been defaced with a red grease pencil. In one he is an angel with halo and feathered wings, in another he is a devil with horns, mustache and pointed chin; in the last one he is a pirate, complete with eye patch and missing tooth.
“I’m not sure which one I like the best, but I hope they like that one,” he says, pointing to the angel. “We have tried to have fun, and when I say that I mean business fun.”
During the real estate turndown last fall, ASMC laid off six employees. “Then we then went to our top-earning 18 employees and said, ‘Will you take a 10 percent pay cut so we have no more layoffs?’ And they did, and we did.
“Those people were underwriters, supervisors, people in processing, closing, financial,” he says. “We allow people to have the whole story of what is going on here. We are good communicators. They gain real insight into this business.”
And his favorite way to gauge employee success? “We have a litmus test for them. When I put my arm around them and introduce them to a customer, when that employee walks away I don’t have to apologize for them. That’s been very successful for us,” he says.
“In this industry people tend to move around. The ups and downs of real estate finance and trends affect them,” Mahoney adds. “Look at the big banks—they have lost thousands of people in the last five to six months.”
“If you look at our company, we have a lot of longevity. When people come here they tend to stay,” he says. “We offer an opportunity to move up, good pay and good benefits. They have the kind of jobs where when they wake up the look forward to coming to work. I truly believe that.”
Doing It Right
American Security Mortgage doesn’t exactly rely on advertising for customers. Their one brochure for potential residential homebuyers is relatively spare. Web presence? They are everywhere, it seems.
Their message: AMSC was founded on the core belief that home loans need to be handled by a team of in-house professionals and that by controlling each phase of loan processing, underwriting and funding, they are able to provide clients with exceptional customer service and on-time closings.
They are strong words of promise, but they appear to be performing to them. Customers come to ASMC looking for variety of mortgage products, including conventional, jumbo, FHA, VA and USDA loans.
Customers seem to be as loyal as the group’s employees. Kathy Adair of Charlotte says it was ASMC’s quick work and Mahoney’s attitude that spur on the popularity of the company. “I think Phil’s customers believe he is a fair and reasonable mortgage banker, and that is hard to find in this day and age.
“Customers might not realize this, but he still uses common sense,” she says. “He is a very caring and compassionate man. His customers are his employees, his borrowers, Realtors, builders, and mortgage peers.”
Abbott is very purposeful about the company’s vision: “To be recognized by our borrower, Realtor, and homebuilder customers, our employees and our competitors as the model of excellence in residential mortgage banking.” He encourages employees to keep that vision in mind at all times. By keeping it top of mind, he believes it helps employees to better participate and act on it.
“We’re so grateful to be where we are now,” Mahoney says humbly. “There was a time when American Security Mortgage was an unknown. Although Jim and I are both fairly well known in the industry now, we still appreciate it when we pick up the phone and people allow us some time. We are so thankful to the people that have helped make it happen.”
Mahoney doesn’t think ASMC will ever make the mistakes so many mortgage bankers made six years ago. “It’s obvious now that some of the Wall Street crowd thought they had they had assessed the risk in different types of lending, and guess what? They were wrong. They didn’t assess different types of risk,” he says.
Both Abbott and Mahoney, and their hugging employees, see a brighter future in processing and underwriting home loans.
“We will continue to expand the business until we hit our ‘sweet spot,’ which is a size that still allows us to know all of our employees and customers,” says Mahoney.
Charlotte-based building supply company Tucker-Kirby has been a well-known and respected name in the Charlotte business community for many years now. Founded in 1920 by W. F. Tucker Sr. and Robin S. Kirby Sr. as Tucker-Kirby Hardware Co., it was originally located at the corner of W. Ninth Street and Railroad.
“You can still see a portion of the foundation of the building,” beams Terry Ward, vice president of Tucker-Kirby, who recently located the exact site.
A couple of years later, the company moved westward to Palmer Street and Railroad, where it remained for over 80 years before eventually losing the property to railroad acquisition. In 2004, it moved to its present location anchoring the Wilkinson Park Business Center. Says Ward, “We’re still on the same route, just farther down.”
Bill McKinnell IV, company president, explains, “We needed to expand, but we needed to still be in the vicinity of uptown. Much of our business is generated by uptown construction, and being close to uptown is good for ‘pickup business’—work that can be handled by pickup truck.”
Set in Cement
For more than 90 years, Tucker-Kirby Co. has been a recognized provider of concrete, masonry, waterproofing and geotextiles for the residential, commercial and industrial building markets in the Carolinas. It sells to general contractors, subcontractors and top masons involved in the building of high-rise buildings, schools, medical and sports complexes, dormitories, supermarkets, big-box stores such as Wal-Marts and Sam’s Clubs and others.
It has been a supplier for a major Camp LeJeune military project, the largest masonry project in North Carolina’s history, the Apple Data Center in Lincoln County, and the Charlotte Motor Speedway’s zMAX Dragway Complex.
In addition to its headquarter facilities in Charlotte, Tucker-Kirby now has two other branches, one in the Raleigh/Apex area and the other in Columbia, S.C. These expansions have allowed the company to continue to grow its presence in the Carolinas and to follow its contractor clients into other states including Georgia, Tennessee, Mississippi, Kansas, Nebraska and Colorado.
The products Tucker-Kirby sells represent six divisions of the 16 divisions of construction as defined by the Construction Specifications Institute’s MasterFormat. They are: Site work and Drainage, Concrete, Masonry, Waterproofing, Finishes, and Specialties. The bulk of the company’s multi-million-dollar revenue comes from sales related to the concrete, masonry and waterproofing divisions.
Products include such items as ADA mats, concrete stains, curing and sealing compounds, epoxies, expansion joint material, concrete form materials, reinforcing mesh, rebar, vapor barriers, masonry cement and mortar, reinforcing wall bracing materials, flashing, anchors and ties, silicone and urethane caulk systems, rubberized asphaltic sheet membrane, fire safing insulation and rigid foam insulation.
“We don’t sell ready mix concrete, but we sell all the accessories—everything that’s below that concrete—and we don’t sell brick and block, but we sell the accessories to make them work,” explains Ward.
“When you see a concrete or masonry building, it’s not just a box,” continues McKinnell, “there’s quite an infrastructure to it. You have to tie that masonry in with metal ties and anchors and waterproof it. On a typical project, we could have $100,000 in materials in a building and none of it would be visible once the building is finished.”
Currently, approximately 60 percent of revenue comes from masonry-related sales and 40 percent concrete-related sales. Tucker-Kirby also sells pre-mixed bag goods, primarily for construction projects in urban areas too tight for the big concrete mixer trucks to get on site. “Ten days out of the month we are sending tractor trailer loads to Wal-Mart construction sites,” says McKinnell.
The bids that Tucker-Kirby prepares and the products it sells are “spec-driven,” or specified by the architectural plans and specifications of a given construction project.
“For this reason, our sales people are well-trained; many are certified in masonry and/or tilt wall casting,” says McKinnell, who credits much of the company’s success to its knowledgeable sales force. “Our people know the product line, the industry and they can read the plans and specifications. Our customers can feel confident that our quotes reflect the plans.”
“We don’t have order takers,” adds Ward. “We have true salespeople and we truly want to be a partner to our customers.” He says that Tucker-Kirby works closely with the North Carolina Masonry Contractors Association and participates in its certification programs: “They used to be just for masons; now we send our people to them.”
With regard to competition Ward says, “Everybody’s prices are basically the same. There’s not a nickel’s worth of difference between our prices. It boils down to us having the knowledge and the service to get the business,” says Ward. “Some of our competitors have tens of branches; others have hundreds, but we—with our three branches—are the workhorse for the masonry and the tilt side of construction in the region.”
A Cohesive Block
The Tucker-Kirby sales force starts out in the warehouse. “I came up through that route,” says McKinnell. “It makes a difference. The average person wouldn’t know anything about this business. We have 10,000 different products to learn about.”
Between the three branches, Tucker-Kirby employs 28 people. “A business is no better than its people and we have great people,” affirms McKinnell
Tucker-Kirby is the quintessential family business. While none of the company’s ownership, management or staff have been related to either the Tucker or Kirby families since the McKinnell family bought the business in 1984, a significant number of them are related to the McKinnells as spouses, in-laws, siblings, sons and daughters.
“We have lots of family members who work here, not just our family but multiple members of other families,” says Ward, who is married to McKinnell IV’s sister who also used to work for the company.
“Nepotism laws don’t apply here,” assures Bill McKinnell III, who represents the second generation of McKinnells to own Tucker-Kirby. “We like it this way. We operate as a family and it works smoothly.”
His father, Bill McKinnell Jr., attended The Citadel in Charleston and went to study at Kings Business School in Charlotte. Mr. Tucker and Mr. Kirby approached the school for possible candidates to work in their company.
“The school recommended my father,” says McKinnell III. “He came in 1930 and stayed for 45 years, moving up the ranks from sales to management to part-owner of the company in 1964.”
McKinnell III then came on board in 1966. “My Dad said he would continue to call me Billy but everyone else had to call me Bill and I was expected to carry my own weight. I didn’t want to be just like everybody else; I wanted to do better,” says McKinnell III.
Before retiring in 1975, McKinnell Jr. witnessed the sale of the company in 1974 to a Florida-based entity that had a building supply division.
“It was a good marriage for a while but the Florida company got into financial trouble and started draining the cash assets of the former Tucker-Kirby,” says McKinnell III. The company was involved in Florida real estate and went under, forced to turn the business over to the bank in 1984. By this time, Bill McKinnell IV had been on board since 1977. McKinnell III and McKinnell IV, father and son, bought out the company in 1984. Ward started work at Tucker-Kirby in 1985.
“We refer to that time prior to buying the company as ‘the dark days,’” says McKinnell IV. “It was a learning experience and a bump in the road.”
It was more than a decade later, in 1997, that McKinnell IV and Ward describe how they helped prompted McKinnell III’s retirement in a good-natured way. “He had been talking about it for a number of years, but hadn’t set a date or planned anything,” says Ward. “So, Bill and I got together and threw him a surprise retirement party with 300-400 people in attendance, including customers.”
Nowadays, McKinnell III admits, “I don’t come here much anymore, but I’m always interested in what they’re up to.”
Ward and the McKinnells are all natives of Charlotte. Ward came to the company straight out of high school. McKinnell IV was just 15 credit-hours shy of earning a degree from UNC at Charlotte. “A job opened up that I wanted and I promised my folks that I would go back and finish,” says McKinnell IV. That didn’t happen but the company presidency ultimately did.
“Very few of our employees have four-year degrees but they are highly trained professionals; knowledgeable in their jobs,” affirms McKinnell IV.
Strength in Construction
For Tucker-Kirby, the downturn in the economy hasn’t inhibited their growth. In 2008 when the downturn began, the company was able to increase staff in the Charlotte office and expand into the Raleigh/Apex market.
“Luckily for us, we had a good bit of work coming in from projects with Duke University Health System, Durham Bulls Stadium and dormitories and other buildings on the campuses of UNC at Chapel Hill, N.C. State University and UNC at Charlotte. Plus, we had branched out to military work,” says Ward. “Federal monies were made available for military and civic work. This pretty much kept us going through the slowdown.”
“Our sales staff had to expand on their core territories to find additional work, but we didn’t suffer any loss of staff due to the downturn,” says McKinnell IV.
Importantly, Tucker-Kirby had also begun to get involved with tilt construction projects, here in Charlotte, the Raleigh area and states outside the Carolinas.
Tilt construction is essentially concrete wall casting for large construction projects. Massive walls are built (poured) sideways on top of the building’s concrete floor slab or pad before being tilted (lifted) into place by a crane.
“We sell the release agent that is applied so the wall won’t stick to the pad,” explains Tim Stewart, Tucker-Kirby’s tilt specialist. The walls are built with lifting inserts that enable the crane to erect the walls without breakage. Walls can be stories high or several walls stacked on top of each other.
“One of our vendors has recently come out with an insert capable of supporting 24,000 pounds,” continues Stewart. Only two companies in the nation are authorized to sell these—we are one of them.”
Tucker-Kirby also owns bracing equipment that can be taken to construction sites. “That also gives us an advantage in the marketplace,” says Ward.
The expansion to Raleigh has paid off.
“Since opening the doors in 2007, the Tucker-Kirby Raleigh location has focused heavily on the service aspect of contractors’ needs along with a great sense of urgency on delivery schedules. Growing the product offering has also been a major focus aligning the company with top-ranked equipment lines in the industry like EDCO Masonry Saws, EZ Grout Mixers and STIHL,” says Guy Harrigan, operations manager of the Apex office.
“This, in addition to the material inventory levels in stock, speaks volumes about Tucker-Kirby’s partnership commitment to the contractor and has allowed the company to grow even in a very sluggish economy,” he adds.
Looking down the road, Ward expects the company to expand to other areas. “We’ll do our research on places and figure out where we need to be.”
A Uniform Mix
The masonry industry has its fun and competitive side. One of Tucker-Kirby’s vendors sponsors the Spec Mix Bricklayer 500, an annual fastest bricklaying trial competition between regions. The winner enjoys a trip to Las Vegas for the company’s annual convention, and has the opportunity to compete for the World’s Best Bricklayer title against winning masons from around the globe.
“Last year we were asked to host the trial competitions,” offers McKinnell. “Well over 200 people were in attendance at our facilities. We’ve been honored to be chosen to host the event again this year,” says McKinnell.
Despite the ownership changes from the original lineage, the McKinnells were never tempted to change the name of the company. “The Tucker-Kirby name was so well known when we bought the company,” says McKinnell, “that changing the name would have been a big mistake; it would have required a total rebranding. It was a case of ‘If it’s not broke, don’t fix it.’”
“We’ve even had the same phone number for decades,” adds McKinnell III with a chuckle. “Customers know us.”
It’s not surprising that the company has an adage that says, “If people come to work at Tucker-Kirby, they retire at Tucker-Kirby.”
“It’s always been like that,” attests McKinnell. “It’s a good solid company with a good reputation and fair pay. I think that’s what’s made it so successful.”
John Norman thought he was in college studying to become an engineer, when he realized he had a proclivity for accounting. He completed his bachelor’s degree in business administration and a master’s in taxation from the University of South Carolina, and joined up with Charlotte’s PricewaterhouseCoopers as a tax consultant. That was the early ’90s and already he was developing a passion for small to mid-sized companies doing business internationally.
Unraveling the complex tax laws governing foreign-owned businesses became his niche. He enjoyed solving problems while developing business relationships. When Norman learned of GreerWalker LLP and its focus on middle-market companies and international affiliations, he realized its business model closely aligned with his interests and joined as a senior associate in 1993.
Today, he has overall responsibility for the firm’s global services and manufacturing and distribution practice, and is managing director of its exit planning and investment bank affiliate, GreerWalker Corporate Finance, LLC. In short, he specializes in resolving international tax issues for foreign firms doing business in the U.S., as well as U.S. firms doing business in foreign countries. He is considered an expert in mergers and acquisitions, transfer pricing, entity selection, entity structure and ownership changes.
With just a receptionist, Charlie Greer and Kevin Walker started the firm in 1984 primarily to serve manufacturers and distributors. The practice has changed drastically in 35 years. Today, GreerWalker has 12 partners and over 100 associates, and is one of the 10 largest CPA firms in the Charlotte region and considered among the top 200 CPA firms in the nation. It is also the exclusive Charlotte member firm of PKF International, one of the world’s largest networks of independent accountant associations.
“It’s been all organic growth,” says Greer. “We’ve never had a merger.” About 25 percent of the firm’s clients are international.
When Norman joined GreerWalker 20 years ago, he says, “Everybody was doing total quality management, which is looking at your processes to determine how to become viable and independent.”
That’s when it became evident to Greer and Walker that they needed to delve into international markets, to offer global services, to avoid losing business. “Now we’re on the offense with it,” he asserts.
“Nowadays,” Norman emphasizes, “there’s no such thing as international business. If you’re in business, you’re going to have to deal globally. But,” he insists, “being effective in a global arena requires team effort.”
Klaus Becker, honorary consul of Germany, has worked with Greer and Walker for over 30 years. “They go out on a limb to be good corporate citizens and to interact with people,” says Becker.
Becker, president of Nirosteel LLC, considers the firm’s close ties with the community instrumental in developing strong business relationships. The three met when both companies operated out of 112 S. Tryon Street.
“They really do an excellent job of supporting the German community,” offers Becker. GreerWalker also supports the consul and the German American Chamber of Commerce. The firm’s generous investments include organizing seminars and supporting German-related speaking events.
“I really admire Kevin and Charlie,” admits Becker. “They’ve worked very hard to become the largest privately-held CPA firm founded in Charlotte.”
Under Norman’s leadership, the firm’s global services have steadily grown. About 80 percent of Norman’s time is dedicated to tax planning, compliance and consulting services for a wide range of international businesses.
While global business is essential to the firm’s continued growth, the company also specializes in real estate, construction and motor sports. Greer says, “It’s a rarity for a firm our size to have such a strong international tax practice.”
Greer credits the firm’s team model with setting it apart from other CPA practices. “Every client is a client of the firm and not the individual partner, so there’s a sharing of clients that you don’t see at other firms,” explains Greer. “Whenever a client gets into an international situation or is going to Germany and Italy,” comments Greer, “we automatically get John involved.”
“John’s always focused on what’s best for the client in everything he does,” says David Jones, a fellow partner who specializes in manufacturing, distribution and international business. “He creates relationships with clients that are more than just professional and client. They’re friendships,” he says.
“John’s very practical and has dealt with a lot of different businesses over time and not only helps people make tax decisions, but also helps with general business planning,” adds Jones. “There are many professionals that approach taxes and assurance as if they were a product, but have very little interaction with their clients. We as a firm, but John in particular, strive to be a lot more than that—we constantly talk what else we can do to help our clients.”
For example, it’s not unusual for GreerWalker advisors to discuss buy-sell agreements with clients, life insurance for owners and other non-tax or assurance-related business transactions. According to Jones, companies must take into consideration several aspects to succeed in global business, and Norman is extremely thorough in covering all the bases.
Client loyalty has been a key factor in the firm’s steady growth. Repeat business long-term from middle-market companies has been essential. “One Chinese company was about $2 million when they started with us,” says Norman. “Now they’re about $200 million.”
Over the last decade, changing economic circumstances necessitating doing business outside the country have contributed to growth. A decade ago, East Coast residents viewed California as a foreign country, jokes Norman, a native of Akron, Ohio. Today, his practice has dozens of U.S. privately held middle-market companies that have survived by globalizing.
In the mid-1990s, U.S. textile and apparel companies made up the first big wave of outbound work. “To remain competitive, they had to go south,” Norman says. “To get around intensive labor costs, they produced in Mexico, Honduras and Guatemala. Those that didn’t, closed.”
Before setting up shop in another country, small privately-owned firms need someone who understands the impact structures can have on company profits and navigate through complex U.S. international tax laws. That’s Norman’s specialty.
“The U.S. international tax law is really written for the old multinationals in the ’60s, and it hasn’t really been upgraded,” comments Norman. “For privately-held businesses, there are some really unfortunate hoops and quirks that can result in seriously negative effects.”
In terms of global markets, the international arena is broken into two categories: Inbound is when companies originating outside the U.S. come here; outbound is when U.S. companies do business in other countries.
When engaged globally, it is important to realize it is not a level playing field. For example, one major mistake businesses make is assuming they’re eligible for indirect foreign tax credits. “If you pay taxes in another country on your income there, that credit does not naturally flow back to you as a U.S. owner,” explains Norman. “So you end up paying twice on that same income unless you do some tax planning.”
That is the type of situation where clients need skilled tax advisors who understand international tax laws, effectively tax planning to ensure clients receive all the credits to which they are entitled. Through market analyses, advisors also help clients avoid setting up facilities in jurisdictions that are heavily taxed.
By staying abreast of international market trends in distribution and manufacturing, the firm helps clients operate more profitably. For example, in the global apparel manufacturing business, the high fashion industry has 13 seasons, rather than four. Fashion industry colors rotate every month to keep apparel trends fresh. If it takes designers six weeks to finalize color schemes, manufacturers aren’t able to produce apparel in China and get it to U.S. stores in time.
As a result, over the last several years, much of the high fashion production has shifted back to the western hemisphere. Some has returned to the U.S. while some has gone to nearby Honduras, where there’s only a three-week turnaround. But more of the higher-end products are being made in North and South America.
While relocations of giant manufacturers like BMW, Siemens and Boeing make headlines, small family-owned foreign businesses bring their share of jobs to the region. They may create 20 to 30 jobs at a time, but it’s not insignificant.
Norman and his colleagues get a lot of new clients from working with the Charlotte Chamber of Commerce and the Charlotte Regional Partnership as they bring companies to the area. They also get business referrals from local law firms, bankers and PKF International. When companies express interest in Mecklenburg County, GreerWalker advisors sit down with them to review tax structure, business structure and incentives to come.
Norman points out that Charlotte’s central geographic location makes it extremely marketable. The accessibility to Charleston ports, a major airport and the trucking industry make the Charlotte region a prime location. The area’s well-educated, well-trained workforce and openness to diverse groups is another plus, he says.
“When I came to Charlotte, basically what I was told was it didn’t matter where you came from or what you did,” recalls Norman. “Just get involved in some community organization and give back to the community, and you’ll be accepted.” He finds that attitude equally applicable to the community’s broad acceptance of foreign firms.
“It doesn’t matter if you’re from Germany, Japan or China; the expectation is that if you give back to the community, you’re going to be accepted,” says Norman.
International business inevitably depends on relationships at the local level. For example, a foreign manufacturer inbound has to ensure a continuous production cycle for dependable distribution of its product. That means it has to have local resources readily available—repair parts and service technicians—for its production processes, otherwise production stops.
“So the only way to increase sales and be accepted in the U.S. market is if you have spare parts and technicians that are available right away, not days away,” says Norman.
Norman points to a German machine tool maker for textiles that actually set up sales and service companies in the U.S. The same thing is happening now with Chinese companies. Being local also lowers shipping costs. One client that makes machines used in nonwoven textiles noted its customer moved all of its production from the U.S. to China five years ago to save on labor cost, but recently brought it back because the savings in the cost of electricity to run the machines far outweighed the labor savings overseas.
According to Norman, location says it all. Two thirds of the U.S. population is one trucking day away, and Charlotte is half way between New York and Miami. Quick access to U.S. Interstates 85 and 77 running north and south and 26 and 40 running east and west are major sellers.
“We are at the center of the hub to reach U.S. markets from a distribution standpoint,” says Norman. “From the airport, service technicians can get anywhere in the world within 24 hours.
“In the ’60s and ’70s, mostly German and other European companies were drawn to the area. Chinese companies mostly settled on the West Coast. But the West Coast is only a third of the U.S. population,” continues Norman, “and going west to east with transportation doesn’t make sense.
“There’s just so much that’s right about Charlotte. I always question when they don’t choose this region. I think we will continue to see more direct investment from Asia.”
Typically, it’s not cost effective for U.S. companies to invest directly in China, but in Hong Kong through Wholly Owned Foreign Entities, known as WOFE’s. Norman says, “It’s a weird thing between China and Hong Kong—same country, but different rules.”
Since Hong Kong has no currency restrictions, U.S. companies can send currency back to the U.S. or anywhere at any time. China has restrictions on getting money out of the country. But there are no restrictions going between China and Hong Kong. Hong Kong has no tax treaty with the U.S., but China does. Because Hong Kong has a 17 percent tax, U.S. companies have to decide if they want to pay the tax and not get a credit, or set up the business to get a flow-through credit and do the surplus.
That’s the type of tax challenge Norman thrives on helping clients understand the implications. “I love problem-solving and thinking outside the box,” he admits. He likens the necessary acuity to math word problems. “If you’re a word problem person, you belong in tax,” says Norman. “That describes tax people.”
Today, there are seven Class I freight railroads in the U.S. that account for 69 percent of freight rail mileage, 94 percent of revenue, and 90 percent of rail employment. The remainder of the rail activity is undertaken by over 550 Class II and Class III regional and short line railroads.
Railroads transformed American life. They opened vast new areas of the American interior to settlement while stimulating resource use, commercial farming, and manufacturing. There is no doubt that they were particularly important to economic development in the South.
Taking On a Challenge
Revitalization of a Railroad
One of his first recollections upon arrival in Star, Menzies says, was looking at 30-some miles of dilapidated track that were pretty much scrap metal, abandoned years earlier. “Just moving the freight car alone, the tracks would literally move or spread. That’s how run down they were,” he describes.
Known for its distinctive hunter green color with cream and magenta accents, the short line visage is as regal and dignified as its Carolina Route logo. Rail fans can catch the 90-car, 4-6 engine, 10,000-ton unit corn train as it winds through the Sandhills through Aberdeen, up the 2.8 percent hill beyond, and then through the countryside and curves to the ACWR headquarters in Candor.
Carl Hollowell, vice president of operations and general manager, describes usual operations: “Most weekdays, we’ve got a ‘miscellaneous’ freight between Aberdeen and Candor and often up to Star, or the reverse. The big draws, and the most important financial impact on the railroad, however, are the 90-car unit grain trains that come from the Midwest via CSX at Hamlet to Aberdeen. These trains supply the major poultry feed processing plants in Candor: Perdue and Mountaire.”
Short Line Goes Long
Last spring, ACWR located and acquired an existing building in Candor, just eight miles away from is Star location, and began retrofitting the 91,000-square-foot warehouse facility to turn it into a locomotive repair shop facility, installing 4,600 feet of track leading to the building and a locomotive pit which allows access to the underside of engines for repairs.
Last fall, the company also moved its headquarters there. It maintains refueling and locomotive repair operations at its Star location.
“It’s common for us to take a locomotive worth $30,000 in scrap and turn it into something worth $300,000,” attests Dale Parks, vice president of mechanical and chief mechanical officer.
“Dale has been building the locomotive, freight, and passenger railcar repair business for years now,” says Menzies. “In fact, Dale and his team have built the business to the point where we had greatly exceeded our capacity in Star to keep up with it. Interest has only increased since we’ve located to our new facility and we expect this to be a key part of our future business.”
Parks says the repair facility is the only one of its kind in the state and one of the few on the East Coast. He firmly believes that he and the team are tasked with saving an important part of Americana by restoring vintage railcars such as the “Roamer.”
ACWR’s longer term goal in Candor is to develop the rest of the 78-acre rail-served industrial site that will offer manufacturers easy access to rail and bring jobs and a stronger tax base to Montgomery County, says Smitley.
The company is marketing a 70-acre business park and multimodal facility dubbed the Midland Multi-Modal Industrial Park in southern Cabarrus County, just seven miles east of Charlotte, with highway access to I-485, rail access to both Norfolk Southern and CSX, and all utilities.
The industrial park is a piece of a larger development strategy the company calls RailVantage East (Moore, Montgomery) and RailVantageWest (Charlotte, Midland) to develop other available properties as logistics centers along the ACWR short line. Unabashedly, Smitley touts it as “Connecting North Carolina’s freight to the rest of the world.”
Connecting With Strength
Menzies views trucking companies as partners more than competitors: “While ultimately dependent on short haul trucking for distribution, railroads are making a comeback in the long hauls. Over the last 15 years, highway congestion, higher fuel costs, driver shortages and pending safety regulations are moving shipping from trucks back to rail.”
Of their relationship with the Class I carriers, he says, “It’s common for short line railroads to have issues with bigger rail companies because the interchanges are often undersized and inadequate, but fortunately with both CSX and NS, ACWR has substantial track at their interchanges with their Class I partners that result in a seamless transfer of customers freight.”
Menzies admits he took a risk by purchasing ACWR knowing that it would require tremendous capital investment, but he says the rewards have far surpassed anything imaginable. They are now focused on keeping up with the projected 30 percent population growth over the next few years.
He says they continue to look for opportunities to collaborate with adjacent landowners as well as communities that seek to attract new industry, jobs and tax base to North Carolina. As a result of these strategic partners and acquisitions, ACWR has sites and partners across its network that position it very well for long-term future growth.
Menzies’ vision for the Aberdeen Carolina & Western Railway Company was to strengthen and enhance the fabric of American industry. In fact the ACWR’s tagline touts with “Connecting with Strength.” Menzies has been able to bring together diverse and competing interests that includes trucking, logistics companies, Class I rail carriers as well as state and local political leaders that has resulted in new industry on his network that not only touches North Carolina but also the global economy.
Plastics are an important component in thousands of the products that we use everyday. From the alarm clock that wakes us in the morning, our coffee maker and toothbrush, and the container from which we pour the milk for our cereal, to the car we drive and the pump that puts gas in it, the computer and smartphone we use at work, and even the protective wrap around the food we’ll eat for dinner, plastics improve our lives and bring us convenience and efficiency.
Because the flexibility and adaptability of plastics enables them to provide many different solutions in an increasingly complex world, the plastics industry is today the third largest manufacturing industry in the United States. It employs nearly 900,000 workers and contributes more than $380 billion in annual shipments, making a significant impact on the country’s economy.
One of the nation’s largest plastics companies is located in the Charlotte area. Wilbert Plastic Services is headquartered in Belmont with seven manufacturing facilities in five states—North Carolina, South Carolina, Kentucky, Ohio, and Minnesota. It employs over 1,400 workers and manufactures and assembles products in 12 different markets. These markets include automotive, consumer products, commercial equipment, appliances, heavy trucks, health care, aerospace, agriculture and recreation.
“Wilbert Plastic Services is a leading supplier of plastic injection molded and heavy gauge thermoform products and assemblies in North America,” attests Greg M. Botner, president and CEO. “Our ability to produce small to large plastic parts and assemblies to a variety of industries in multiple and strategic locations throughout the country is unique.”
The history of Wilbert Plastic Services goes way back to the middle of the 19th century when a German immigrant, Ferdinand Haase, acquired 55 acres along the Des Plaines River outside Chicago.
In 1874, Ferdinand and his two oldest sons, Emil and Leo, opened Forest Land Cemetery, which included a museum displaying Native American artifacts found on the Haase property. In 1880, Ferdinand’s son Leo founded the L.G. Haase Manufacturing Company and began making concrete burial vaults and covers, as well as cemetery lot markers, benches, tiles and irrigation basins.
In 1902, Leo retired and moved to the West Coast, leaving the Haase company to be run by his nephew Wilbert. When an influenza outbreak spread through the Midwest in 1918 and 1919 causing the death of thousands, the L.G. Haase Company was one of the few companies able to meet the demand for funeral products. In 1919, Wilbert bought L.G. Haase from the family for $19,000 and renamed it American Vault Works.
Wilbert Haase was a worldwide traveler and was fascinated by the preservation techniques of the ancient Egyptians. He was determined to make an airtight, waterproof burial vault and, after two years of trial and error, he succeeded by lining a concrete vault with asphalt. In 1930, he formed the Wilbert H. Haase Company to license the waterproof burial vault technology.
By 1938, the American Vault Works was the world’s largest manufacturer of asphalt-lined concrete burial vaults. In 1955, the company marked its 25th anniversary by producing its one millionth Wilbert burial vault.
In 1948, a group of multiple shareholders bought the W.H. Haase company and introduced a new vault liner to escape the dangerous and superheated use of asphalt. “Plasco,” a hybrid of the words plastic and coating, became the liner of choice for the company’s vaults until the 1960s when the company, now renamed Wilbert, Inc., bought Thermoform Plastics, Inc. and produced a new polystyrene vault liner, which was not only strong, but when bonded with an epoxy formed an airtight seal.
By 1977, Wilbert, Inc. was operating with two distinct divisions, Thermoform Plastics, Inc. and Wilbert Funeral Services.
Over the following decades the company thrived through natural expansion and growth. By the mid-1990s, Thermoform was booming, providing plastic liners for Wilbert’s vaults as well as handling lucrative contracts for a wide range of products in the plastics industry. Through a series of acquisitions, it grew to one of the top five plastics manufacturing companies in the country with sales topping $55 million in 1999.
In 2002, the company acquired Morton Custom Plastics in Harrisburg, N.C. and renamed the Thermoform division to Wilbert Plastic Services.
In 2008, Wilbert Funeral Services was spun off as a separate company, leaving only Wilbert Plastic Services under the operating under the corporation of Wilbert, Inc. Today, the companies operate as independent entities with no corporate relationship.
“Not many companies in the plastics industry have the deep roots and longevity of Wilbert Plastic Services,” says Botner, who began working with the company in 2004 during a period of financial change. As president and CEO—a tenure that began in 2008—he guided the company through another reorganization and set in motion a number of operational adjustments.
Botner was an ideal choice to take the plastics company into the new millennium. Growing up in Michigan, he was no stranger to the manufacturing industry. After attending Wayne State and Oakland Universities, he landed a job with an autoparts company. He soon began a 30-year career in the plastics industry with manufacturing companies serving various markets throughout North America, Europe and Asia.
Immediately prior to joining Wilbert Plastic Services, Botner served as president and CEO of Titan Plastics Group, a private equity-sponsored plastics processing company headquartered in Portage, Michigan.
When Botner joined Wilbert Plastic Services, it was still calling Chicago “home.” In 2010, Wilbert executives decided the company’s headquarters should be in the Southeast and moved to Belmont, N.C. The Gaston County location offered all the right elements—sufficient space for a headquarters building, a professional labor force, a good business community and quick access to the airport.
“Our major share of business was in the South and Southeast,” explains Botner. “And we already had a manufacturing facility in Belmont, so it just made sense to locate here.”
Today, Wilbert Plastic Services supplies 12 major industrial markets with seven manufacturing facilities, totally over 1,300,000 square feet. Its annual sales volume is approximately $260,000,000. It makes everything from washing machine agitators for Whirlpool, fenders for BMW, and hoods for John Deere, to the cowling for GE Medical Systems’ MRI machine.
With automotive products making up 39 percent of its production, along with another 6 percent in the heavy truck market, Wilbert’s customers include BMW, Hyundai, Ford, Volvo, GM, KIA and Daimler trucks. It makes covers for Mercury boat engines, child car seats for Britax, and service station pumps for Gilbarco Inc., a Greenville, S.C., company.
“We’re an American company with American-made products. We don’t have operations outside of the U.S.,” says Botner. “We believe the manufacturing capabilities here are the best in the world and we’re investing heavily in that.”
Wilbert Plastic Services has also positioned itself to create products for the aerospace industry by acquiring the mandatory AS9100C certification in the fall of 2013. This certification establishes an international quality management standard for the aerospace industry. The certification demonstrates a manufacturer’s ability to meet various regulatory requirements, including legal and safety standards.
“The AS9100C expands our manufacturing capabilities within the plastics industry,” explains Botner. “It also offers aerospace customers a new option, one with more than 50 years of plastics experience, to choose when considering plastic products. We’re ready to explore these avenues and move into this industry.”
Botner observes that the plastics industry has evolved dramatically over the last several decades, moving from a substitute for other materials in a product to a material that many designs revolve around. Consequently Wilbert has added more engineers to its staff, currently employing around 50, and expanding the services it provides to customers.
“As the demand for our plastic products increases, so does the demand for design and engineering support,” says Botner. “We can manage our customer’s product from concept through production, if desired. We have the capability to take the design intent and provide all of the product.”
While many of its competitors went out of business during the economic recession of 2008-09, Wilbert Plastic Services has survived and is now growing again. Botner suggests that the reason Wilbert survived was that it was already in trouble before the recession impacted the national economy. In 2005-06, the company had lost 20 to 25 percent of its sales volume. Botner was charged with turning things around.
Botner worked on reducing the company’s debt, by closing several manufacturing plants and making reductions in the number of employees. In 2009, the company had cut down to 830 employees and sales had dropped to about $150 million. When the recession hit, Wilbert was ahead of the curve. It was already retrenching and consolidating.
“We were already in the mode when the recession hit,” explains Botner. “Consequently, we were well positioned to weather the downturn. Now we have turned ourselves around and are benefiting from a recovering marketplace.”
Botner believes that Wilbert has been successful over the past four years by investing in its own business growth through careful acquisitions, putting capital into new facilities and new technology, and increasing the levels of productivity. The company has grown to 1,450 employees and Botner expects sales to reach $320 million in 2015.
“I hope we’ve learned our lesson,” cautions Botner, speaking for both his company and the industry. “The answer to success in manufacturing goods is not the pursuit of cheap labor, but rather an investment in the workforce.”
He points out that the Southeast region of the county has always been a center for manufacturing and even though the products may have changed from the traditional textiles and furniture, he believes that the region will continue to dominate the industry for the foreseeable future.
“This is a multi-state community that believes in business,” he asserts. “However, we must continue to attack the cost of doing business here by keeping corporate taxes and utilities low and making sure that the place where we do business is a place where people want to live.”
Another problem that Botner believes the region must attack is a growing skills gap between the labor force and the job demands of the manufacturing industry. Botner says high schools no longer focus on vocational training; instead they put the emphasis on preparing for college. As a result students are coming out of high school without the advanced math and basic programming skills they need to succeed in plastics manufacturing. Many also have a false idea of what the industry is all about.
“Over time manufacturing has gotten a bad reputation,” says Botner “People see it as a shrinking field and one where you have to get your hands dirty working in a factory. They don’t realize that this is a different era of manufacturing. It’s clean work with more use of the head than the hands.”
To help fill the skills gap, Wilbert Plastic Services is initiating its own training programs. In 2013 it launched the B.E.T.T.E.R Workforce Program to provide employees opportunities for training, recognition and a career path within the company. The launch included new training centers and training computers at all of Wilbert’s manufacturing sites.
At the injection molding facilities it installed the Paulson Training System, an interactive computer program which provides employees with a wide range of plastics knowledge from basic safety to advanced problem solving simulation. Injection Molding employees who participate in the Paulson Training lessons not only gain knowledge, they also earn extra pay for the courses completed and receive certificates representing specific job titles.
Wilbert Plastic Services is now working closely with the Paulson Training staff to develop a set of thermoforming courses. It hopes to install this type of training in all its thermoforming sites during 2014.
“We have great employees,” stresses Botner. “The decisions we make affect them everyday. I take that very seriously. When we turned the business around in 2008-09, we were laying off people. That was an awful feeling.”
In addition to the new training programs, Wilbert offers medical insurance and health plans that affect 4,000 people. It provides an opportunity for employees to progress in their careers with the company. And, it encourages all its employees to gain the knowledge necessary to perform their job effectively.
Botner believes these steps will help build a stronger company and a more knowledgeable workforce. “I believe we can recreate the growing middle class,” he says.
The winter of 2014 was one for the record books in Charlotte and the Carolinas. Thanks to the polar vortex, January 2014 was the coldest January in 37 years and the seventh coldest since record keeping began in 1878.
While the exceptionally frigid weather and icy conditions may have hindered our day-to-day activities, it didn’t daunt Piedmont Natural Gas, the energy services company that serves over a million customers in portions of North Carolina, South Carolina, and Tennessee. As a matter of fact, on January 7, the company set a single-day record for natural gas volume at 30 percent greater than its previous daily record set in 2010.
While keeping us all warm may be the most visible role Piedmont Natural Gas plays in the Carolinas, the products and services they provide are also becoming increasingly important to our region’s competitiveness in the global economy.
Natural gas is proving to be one of North America’s most abundant and affordable energy sources, one that has great potential to boost economic growth, help our balance of trade, and reduce the geopolitical risk that is often associated with energy-related products.
Over the last decade, America has seen natural gas emerge as a leading source of domestic energy. Technological advances such as 3D seismic technology have allowed geologic formations to be examined with greater accuracy, reducing the frequency of dry wells. Advances in horizontal directional drilling and hydraulic fracturing, (commonly called fracking) have allowed new supplies of natural gas to be extracted from shale formations deep underground.
Ten years ago, shale accounted for less than 5 percent of America’s 50 billion cubic feet per day (bcfd) of natural gas production. But now, shale represents a full 40 percent of today’s 65 bcfd domestic gas production. As a result of these new resources, the cost of natural gas has declined significantly in the U.S., giving America a competitive advantage over economies in Europe and Asia.
“This game-changing era of natural gas abundance has transpired at a time when our country and our economy really needed some infusion,” says Thomas E. Skains, chairman, president, and CEO of Piedmont Natural Gas. “This abundance of supply has lowered the price of natural gas from, conservatively speaking, $7.50 per million BTUs prior to the recession, to about $4.50 per million BTUs today. That’s a $3 savings on the 25 trillion cubic feet of natural gas that are consumed annually in the United States, representing $75 billion in energy savings per year.”
Skains goes on to say that it still costs over $10 to buy a million BTUs of natural gas in Europe and over $15 in Asia. As a result, many global companies—particularly chemical companies—now have an economic incentive to move manufacturing back to the United States to take advantage of America’s cheap natural gas.
In years past, energy experts believed the U.S. would need to import foreign natural gas to meet our needs. Now, as a result of shale production, efforts are underway to liquefy U.S. natural gas and sell it abroad as liquefied natural gas (LNG). While the certification and approval process for LNG facilities is long, LNG export has the potential to boost domestic job creation, help the balance of trade, and positively impact global energy security by reducing Europe’s dependence on Russia for its natural gas supplies.
While there is no shale production currently taking place in the Carolinas, preliminary studies indicate that the Sandhills region between Southern Pines, Fayetteville and Raleigh may have the right geology for shale production. Work is currently underway by the N.C. Energy and Mining Commission to evaluate an appropriate regulatory framework for possible shale development in North Carolina.
While fracking is controversial because of potential environmental risks—including ground water contamination, air pollution and chemical spills—the natural gas industry believes that hydraulic fracturing is safe when performed in a responsible way and with proper oversight. Skains agrees, and says the economic benefits to our region are significant.
“If we can convert N.C. from an energy-importing state to an energy-producing state, over the long term, we can create lower wholesale energy costs, which would be an added incentive for firms to locate here,” he explains. “The cost of energy at a retail level in N.C. is on average competitive with other regions of the country, but I think we would be even more competitive if we had wholesale supply and production here.”
A Foundation for Transition
In addition to being abundant and cheap, natural gas combustion is highly efficient and emits less carbon dioxide and pollutants compared to other fossil fuels. Burning natural gas emits about half of the carbon dioxide of coal combustion, and natural gas is 30 percent cleaner than oil and 15 percent cleaner than propane. Natural gas is also a very efficient fuel to transport from the source of production to the end consumer, delivering about 90 percent of the energy produced at the source to the customer. By comparison, electricity delivered over wires captures only about 35 percent to 40 percent of the raw energy produced.
One way that natural gas is helping reduce carbon emissions is by helping electric utilities transition their power production away from coal. Historically, coal has represented about 50 percent of the electric power generation in the U.S., with both natural gas and nuclear trailing at about 20 percent each. But with the dramatic drop in natural gas prices over the last decade and the increasing regulatory requirements to clean up old coal plants, natural gas has made huge inroads into coal’s dominance. Today, natural gas serves about 30 percent of the power generation market and coal has declined to about 40 percent.
“If you look at what natural gas has done for our country’s carbon emissions, CO2 emissions peaked in about 2007,” remarks Skains. “By 2012, CO2 had declined back to 1995 levels, with coal to natural gas conversions by power plants being a major contributor to that decline.”
The natural gas industry has also benefitted from increasingly efficient residential energy use, as a result of more energy-efficient homebuilding standards as well as more energy-efficient appliances. In 1970, the U.S. natural gas industry served about 38 million residential customers. By 2010, that number had grown by 70 percent to 65 million customers, but the annual amount of natural gas consumed by those 65 million customers—about 5 trillion cubic feet—was the same amount that 38 million customers consumed in 1970. That’s a 40 percent efficiency improvement over 40 years.
Piedmont Natural Gas is converting one out of every three of their 900-vehicle fleet to natural gas and is adding compressed natural gas fueling stations that will be used by the fleet and also made available to the public. Skains says the company foresees a potential role as an infrastructure enabler for the vehicular natural gas market—building, owning and operating fueling stations where and when it makes economic sense to do so.
Skains is quick to add that, while they think the ultimate market potential is huge, they believe the vehicular market will develop slowly because of the infrastructure required and the need for vehicles to come off the assembly line ready to burn natural gas rather than relying on more expensive conversion kits.
Natural gas is often described as a bridge fuel—a cleaner fossil fuel alternative that will help bridge the gap until truly renewable sources such as wind and solar are more widespread and economically viable. But Piedmont’s Skains says that he sees natural gas playing a much larger role in our energy future—heating our homes, generating electricity and running our vehicles—in partnership with renewables for decades to come.
“We think natural gas is actually a foundation fuel, or if it is a bridge, it’s a bridge too long to see the other side,” he suggests. “Natural gas is a long-term foundation for that transition to a lower carbon energy economy. The sun doesn’t always shine and the wind doesn’t always blow, so natural gas generation of power can be the primary backup to fill those valleys. We are very complementary to the renewable effort, but we are an important low carbon primary energy source as well.”
A Real Value Proposition
In its three-state market area, Piedmont Natural Gas owns and operates over 22,000 miles of distribution pipelines and about 3,000 miles of transmission pipelines—the larger diameter, high pressure lines used to transport the gas between main distribution points. The company operates in about two-thirds of North Carolina’s 100 counties; the Anderson, Greenville/Spartanburg, and Gaffney markets in the upstate of South Carolina; and the Nashville, Tennessee, metro area. The company also has a number of joint venture investments in interstate pipeline projects, storage facilities, and other strategic energy-related activities.
Of the company’s one million customers, about 900,000 are residential customers, about 100,000 are commercial customers, and 2,500 are industrial/manufacturing firms. In terms of revenue margin, residential demand contributes about 55 percent, commercial 25 percent, and industrial and power generation markets each contribute about 8 percent to 9 percent.
This new era of abundant, low cost natural gas is also having a profound positive impact on the growth of Piedmont Natural Gas’s business. Despite the recession, the company has enjoyed 4 percent compound earnings per share growth over the last five years, and EPS growth accelerated further to 7 percent in fiscal 2013. They are forecasting annual customer growth of 1.5 percent, or about 15,000 customers, primarily driven by new residential construction.
The fastest growing market in terms of revenue contribution has been power generation. Duke Energy has been actively decommissioning older coal plants and replacing them with new combined cycle natural gas plants generally located on the same site as the old coal plant. Since 2010, Piedmont has invested over half a billion dollars to build infrastructure to support Duke’s new plants. As a result, serving Duke Energy’s needs now comprises almost half of the annual natural gas throughput in the Piedmont Natural Gas system.
In addition to investing to support new residential, commercial, industrial, and power generation markets, Piedmont Natural Gas is also investing to maintain, rehabilitate and modernize their existing pipeline and support infrastructure. They have already replaced or retrofitted over 40 percent of their 3,000 miles of transmission pipelines and have an annual program in place to continue that process for years to come.
As a retail energy service provider, Piedmont Natural Gas has a vested interest in promoting the success of the communities that it serves, believing in the notion that if you help grow the communities in which you operate, you will also grow your company.
“We are joined at the hip with the success of all the communities that we serve, and we actively support those communities’ economic growth and development activities,” affirms Skains. “We want our pipeline facilities to help attract manufacturing investment decisions. We ask what kind of enhancement or expansion would we need to do to serve that new plant, and can we do it economically?”
In the residential market, the company says 90 percent of the new homes being built on or near their gas mains are built as gas-served homes. But Skains says that despite their status as a regulated monopoly energy service provider, there isn’t a single potential customer that has to use their product.
“We have to compete our way into every home, business or manufacturer,” admits Skains. “Natural gas is a discretionary product and the customer has a choice. But when you look at the attributes of our product and our services, we think the choice to go natural gas is compelling.”
“Natural gas is abundant, it’s domestic, it’s clean, it’s efficient, and it is affordable,” he concludes. “Our track record as a service provider is also delivering safe and reliable service. So when you put all of that together, we feel that we offer a real value proposition for our customers.”