Small-town charm
Many companies are locating or expanding in rural Virginia

by Otesa Middleton Miles
for Virginia Business
March 2007

Of all the cities that could have landed the first U.S. manufacturing operation for Swedwood North America — a subsidiary of Swedish furniture giant IKEA — Danville beat the competition. Apparently the competitive strengths of this Southside area tipped the scales in its favor; namely a work force trained in furniture production and a large tract of land with utilities in place that can be developed quickly.

Easy access to the Hampton Roads port and to wood from East Coast locales helped close the deal. A team push from the governor on down to local economic development officials didn’t hurt, either. The upshot: the Danville/Pittsylvania County area snagged a $281 million plant and what is expected to be 740 new jobs, a great catch for an area trying to rebuild its economy since losing its textile and tobacco industries.

Although the deal qualifies for nearly $8 million in state grants and incentives, IKEA spokesman Joseph Roth says state money wasn’t the deal maker as “many states have similar offerings.” Instead, Roth says, “Everything was handled with the utmost discretion and professionalism. The timing and logistics of everything pointed to Danville.”

IKEA’s Swedwood North America facility will be the second largest corporate investment in Southside Virginia — the largest was a $400 million recycling plant built in 1997 by TXI Chaparral Steel in Dinwiddie County. Swedwood, which manufactures and distributes IKEA’s furniture, is building its new facility at Cane Creek Center, an industrial park developed jointly by Pittsylvania County and Danville. The first of three phases of construction is expected to be ready by the end of this year. Employees will need to be travel-ready because there are no other IKEA manufacturing sites in the country. Therefore, some newly hired workers will travel to Europe for training to become familiar with the company’s automated system.

Rural areas across Virginia got the nod last year for corporate expansion. Some companies bypassed traffic-heavy areas such as Northern Virginia and Hampton Roads in favor of more off-the-beaten-path locales that still allow companies to capitalize on Virginia’s mid-Atlantic location.

Nonetheless, cities still saw some action. MeadWestvaco Corp., a Fortune 500 packaging products company, decided to relocate its corporate headquarters from Stamford, Conn., to Richmond, a $25 million investment that will create 400 jobs. Meanwhile, GEICO Corp. in Stafford County plans to add 790 jobs to its existing operation near Fredericksburg.

Altogether, 418 companies ann­ounced $2.15 billion in expansions or new capital investments and nearly 25,000 new jobs in Virginia during fiscal 2006. The figures are down from 2005, when 420 companies announced more than $4 billion in investments and more than 30,000 new jobs. That year benefited from some large projects, such as Micron Technologies’ $1.2 billion expansion in Manassas. Plus, overall growth in 2006 slowed down in Virginia as it did around the nation, says Rob McClintock, director of research at the Virginia Economic Development Partnership (VEDP), the state’s business development arm.

The good news was the strong amount of economic development announced for Virginia’s rural areas. State officials are aggressively showcasing these communities during visits from corporate prospects. During 2006, the VEDP showed communities in the Southern region area 82 times, and paid 50 visits to the Southwest.

Apparently, some of the visits paid off. Amcor PET Packaging chose Wythe County for the state’s second-largest corporate investment in 2006, a $105 million bottle-making plant that will create 144 new jobs. McAirlaid’s GmbH & Co., a Germany-based manufacturer of nonwoven materials, also looked to the Southwest in Franklin County for its first North American manufacturing facility and corporate headquarters. The company plans to open an $85 million manufacturing facility that will employ 160 people.

When Merck decided to produce its cervical cancer vaccine, Gardasil, in an additional location, it looked to its Elkton facility in Rockingham County in Virginia’s Shenandoah Valley. Currently, the vaccine is made in West Point, Pa., says Merck spokesman Patrick Witmer. The company settled on its 65-year-old Elkton plant where it already employs more than 700 people. “The Elkton facility was selected for a number of reasons, including the facility’s growing expertise in vaccine manufacturing, its strong work force, the state’s favorable business climate, the support Merck received from our state and local partners, and the advantage of having multiple sites produce our key vaccines,” says Witmer.

Some of the current employees at the Elkton plant will be retrained. Meanwhile, Merck will invest $57 million to add a new building and equipment. And it expects to hire about 35 additional employees to work on the vaccine’s purification process, at an annual pay range of $50,000 to $75,000. While Virginia was a natural choice for the expansion, Witmer says the state does have room for improvement. “One of the things that can strengthen Virginia’s ability to compete for life science jobs is to expand its science education and work-force training programs that are devoted to this area,” notes Witmer. “Some other states have more coordinated, targeted training programs for life science jobs.”

That point isn’t wasted on Liz Povar, director of business development at the VEDP. “Life sciences is a gap for us,” she says. Yet, Virginia isn’t alone in needing to focus more on work-force training. “It’s a national issue,” adds Povar.

If training lags, workers can suffer as technology advances. That’s a major concern for R.R. Donnelley & Sons, says spokesman Calvin Butler Jr. A Chicago-based provider of printing and related services, Donnelley plans to spend $85 million to expand manufacturing at three Virginia plants in Roanoke County, Rockingham County and Lynchburg. “I work on economic development across the country,” says Butler. “So much is put into new jobs. The focus needs to be on retraining.”

New technology, he says, moves rapidly and leaves some workers with soon-to-be-obsolete skills. More state incentives should be available to keep employees up to date. “Virginia has the opportunity to be the leader in that. A lot of economic development arms haven’t caught up to that,” says Butler.

Like workers, regions across the state fight obscurity. In the past, some areas were known as one-trick ponies, often associated with a single industry such as coal, tobacco or manufacturing. Yet as the lineup of corporate investments shows, many Virginia cities and counties were successful last year in courting varied businesses so that a downturn in one industry doesn’t kill an area’s economy.

Virginia’s regions have “learned that diversity is the key to stabilization,” says McClintock. Small towns and the commonwealth’s large cities have moved beyond former niches to produce what McClintock calls “blended economies.” That’s why small-town Virginia didn’t look so small in the last year.