MACOMB COUNTY AND THE DEFENSE SECTOR: OPPORTUNITIES FOR GROWTH

Prepared for the Cities of Warren and Sterling Heights by The University of Michigan Gerald R. Ford School of Public Policy

Aleta Haflett, Brittany Galisdorfer, Mayela Montenegro and Yann Toullec

December 10, 2010

TABLE OF CONTENTS

1. INTRODUCTION P. 1

2. STAKEHOLDER ASSESSMENT P. 2

3. LOCAL MARKET ANALYSIS P. 6

4. CASE STUDIES P. 11

5. SWOT ANALYSIS P. 15

6. NEXT STEPS P. 18

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INTRODUCTION

As with many counties throughout the United States and especially Michigan, the Great Recession and near collapse of the automotive industry manifested high unemployment, widespread foreclosures and low local government revenues in Macomb County. The defense sector1 presents an opportunity to reverse these trends by offering high quality jobs, generating economic activity and driving innovation. Macomb County is poised to take advantage of these opportunities and become a leader in this sector given its existing defense sector assets and the enthusiasm and support of local stakeholders. However, to ensure success, local defense sector stakeholders must work collaboratively. On behalf of Macomb County stakeholders, the Cities of Warren and Sterling Heights commissioned Master of Public Policy students from the University of Michigan’s Gerald R. Ford School of Public Policy to develop recommendations for a coordinated campaign to attract defense sector investment to Macomb County. The foundation for these recommendations comprises the following elements:

Stakeholder Assessment. After touring local defense sector sites, speaking with individuals from the defense sector, and exploring stakeholder websites and other public information, the students identified stakeholders and summarized their interests.

Local Market Analysis. The students reviewed existing research and survey data regarding the Macomb County’s defense sector companies to describe competitiveness, market size, and key companies.

Case Studies. The students developed three case studies of communities that have capitalized on existing assets to grow the local economy.

SWOT Analysis. Using the aforementioned information, key stakeholder websites and recent newspaper articles, the students identified Macomb County’s strengths, weaknesses, opportunities and threats in terms of attracting defense sector companies from throughout the country.

The report culminates with a section describing suggestions for building the coordinated campaign, starting with the creation of a formalized task force. Building on the existing relationships among Macomb County stakeholders, the task force will provide an internal communications structure as well as a forum for developing a marketing strategy to attract defense sector investment. As a whole, this report functions as a starting point to help Macomb County actors better understand the local defense sector assets and to organize the defense sector stakeholders to work toward coordinated action and, by doing so, retain and attract jobs. It is only by working collaboratively that stakeholders will use their resources most efficiently and effectively to capitalize on the region’s defense sector assets and grow the local economy.

1 The defense sector, as referenced in this paper, is the vast network of federal government agencies, contractors and businesses that supply or have strong potential to supply products or services to the industry, including such sectors as software, robotics, information technology, engineering and automotive. Note that a sector refers to a large segment of the economy, while the term industry describes a much more specific group of companies.

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STAKEHOLDER ASSESSMENT Stakeholder collaboration is essential to maximize the economic growth opportunities that the defense sector presents. Defense sector assets are spread across southeast Michigan, beyond any one stakeholder’s jurisdiction. Therefore, capitalizing on these assets will require commitment to a cooperative strategy development process, a long-term perspective and a willingness to make decisions for the good of the initiative despite a potentially narrow individual interest. While a broad range of public and private sector organizations have already begun communicating and meeting, the stakeholders lack a framework for understanding the participants and identifying those who have yet to participate. On the following page, Table 1 provides a possible framework. The table describes the various stakeholder groups as well as their motivations and roles as they relate to Macomb County’s existing defense sector assets. Within each group, stakeholders are tiered according to how best to involve them:

Category I: those who are already active participants in the defense sector and whose actions should be coordinated to be most effective;

Category II: those in Macomb County who are closely linked to the defense sector and whose buy-in and resources will do much to ensure the growth of the sector;

Category III: those with whom it is important to be communicating now in order to build a foundation of trust and opportunity given that they may end up being key stakeholders in the future; and

Category IV: those who are crucial in building grassroots support for growth in Macomb County’s defense sector, spreading the word about opportunities, and welcoming new companies and people.

While understanding and coordinating the various stakeholders is important, it is also important to have the most appropriate representative, in terms of expertise and authority, from each stakeholder organization. At times, having the most appropriate representative may mean that more than one individual should represent a single stakeholder. In addition to ensuring that the representatives have the necessary expertise and authority, having more than one individual representing a single stakeholder may help protect against the problems that arise when a sole representative leaves his or her stakeholder organization. Another way to safeguard against turnover problems is to ensure that representatives are regularly sharing information about the initiative with others at their organizations.

A stakeholder is a person, group or organization that affects or can be affected by an organization’s

actions

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Table 1: Stakeholder Summary

Stakeholder Motivation Role

Governmental Entities Category I: Cities of Warren and Sterling Heights, Macomb County, Michigan Economic Development Corporation (MEDC) Category II: Michigan Works!, other Macomb County municipalities, Michigan Governor’s Office Category III: Wayne County, City of Detroit, Detroit Economic Growth Corporation, Oakland County, St. Clair County, Washtenaw County

Improve quality of life in the community by increasing the municipality’s tax base and by creating an environment inviting to companies that offer high quality employment to residents

Sets policies that collect and allocate community resources, which impacts the decisions of the other stakeholders

Educational Institutions Category I: Macomb Community College (M-TEC), Oakland University (Macomb-Oakland University INCubator), University of Michigan, Michigan State University, Wayne State University Category II: Lawrence Technical University Category III: Michigan Technological University, Western Michigan University, Eastern Michigan University, Central Michigan University, University of Detroit Mercy, Davenport University, Baker College

Increase the employment opportunities and provide educational opportunities for students; provide research opportunities for faculty

Prepares individuals for employment; offers research and expertise, which can be tailored to specific projects

Military Centers Category I: U.S. Army Tank Automotive Research, Development and Engineering Center (TARDEC), U.S. Tank Automotive Command (TACOM), U.S. Army National Automotive Center (NAC), Selfridge Air National Guard Base, Defense Logistics Agency, Defense Acquisition University

Develop, integrate and sustain the right technology solutions for combat support

Offers employment opportunities for a skilled workforce and contract opportunities for companies; catalyzes and often finances innovation

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Stakeholder Motivation Role

Companies Category I: Oshkosh Corporation, General Dynamics Land Systems, Inc., BAE Systems, Navistar Defense, AM General, Force Protection, Lockheed Martin, General Motors Company, Ford Motor Company, Chrysler Group Category II: Defense Logistics Agency, Burtek, W Industries, Waltonen Engineering, SAIC, VSE Corporation, WTI, Hortsman Defense Systems, Norbert Industries, Rave Computer, Demmer Corporation, Lanzen Fabricating, Green Metal Product Category III: St. John Providence Health System, Henry Ford Health System, Beaumont Hospitals

Increase profits by creating and selling high-quality products and/or services

Offers employment opportunities for a skilled workforce; provides opportunities for product application, which stimulate the sector; furnishes in-kind support and leadership for local initiatives

Industry Support Organizations Category I: National Defense Industrial Association (NDIA), Procurement Technical Assistance Center (PTAC), Defense Contract Coordination Center (DC3), Macomb Community Chamber of Commerce, Sterling Heights Regional Chamber of Commerce & Industry, Automation Alley, Association of the United States Army Category III: Detroit Regional Chamber of Commerce, Tech Town, Ann Arbor Spark

Grow membership/use of their resources by increasing the number of companies in the industry/region

Drives sector innovation and growth by connecting companies to each other and to the military

Philanthropic Organizations Category I: New Economy Initiative for Southeast Michigan *Which includes the Community Foundation for Southeast Michigan, Max M. and Marjorie S. Fisher Foundation, Ford Foundation, Hudson-Webber Foundation, W.K. Kellogg Foundation, John S. and James L. Knight Foundation, The Kresge Foundation, McGregor Fund, Charles Stewart Mott Foundation, Skillman Foundation

Restore southeast Michigan to a position of leadership in the new global economy by fostering entrepreneurism and employment

Funds projects that promote a successful entrepreneurial eco-system, that capitalize on existing regional assets, and that build and employ a more skilled and educated workforce

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Stakeholder Motivation Role

Community-Based Organizations Category IV: nonprofits, faith-based organizations and community associations

Improve the quality of life for those they serve by ensuring they have employment opportunities and nurturing communities

Disseminates information at the grassroots level and fosters a welcoming environment for new companies and people

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LOCAL MARKET ANALYSIS The automotive assets in Macomb County create a significant comparative advantage in the defense sector and, in particular, the defense transportation manufacturing industry. Overall, Michigan ranks fourth among states in terms of number of defense contracts won by companies located in the state.2 Additionally, Michigan companies lead the following defense industries:

Ranking first in engines, turbines and components; Ranking second in electric wire, power and distribution; Ranking third in vehicular equipment components; and Ranking third in electrical and electronic equipment components.

Market Size From 2000 to 2009, the value of defense contracts3 that Michigan companies won grew by a factor of 2.8 while the value of defense contracts that Macomb County companies won grew by a factor of 2.9.4 Combined with the fact that companies located in Macomb County won 61% of the defense contracts awarded to Michigan companies in value, this suggests that local market expansion is driving state market expansion. Companies headquartered in the Cities of Warren and Sterling Heights accounted for about 20% of the number of defense contracts and 98% of the value of defense contracts in Macomb County. This dominance has much to do with the fact that General Dynamics Land Systems (GDLS) is located in Sterling Heights. As the only original equipment manufacturer (OEM) in Macomb County, GDLS wins the majority of defense contracts among Macomb County companies. However, looking at the number or value of contracts that GDLS wins may overstate the importance of GDLS to the local economy since GDLS’s offices outside of Macomb County ultimately may be responsible for the contracts; under such circumstances, payment for the contract would be channeled elsewhere. Since TACOM issues a large number of contracts, many ground vehicle OEM’s highly value locations close to TACOM, which is located in Warren. As such, BAE Systems, one of GDLS’s main competitors, currently is building a 230,000 square foot research and development center to house 700 new employees in Sterling Heights. Similarly, the Oshkosh Corporation, another leading competitor to GDLS, is leasing a 100,000 square foot building in the area and hiring 200 engineers. While Figure 1 suggests that GDLS is driving the market in the city, county, and even state levels, the local market is changing. 2 2006 Macomb Targeted Industry Reports 3 This report refers to contracting activity with the Department of Defense as “defense contracts;” contracts with the Department of Homeland Security or other federal agencies are not included. A contract to a company headquartered outside of Macomb County, but whose Macomb County office is responsible for the contract, is not counted as a Macomb County contract. 4 Estimates are based on federal sources for defense contracting available at www.governmentcontractswon.com.

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Figure 1: Value of Contracts Won in Macomb County (2000-2009)

From 2000 to 2009, a total of 502 contractors located in Macomb County won 9,305 contracts for a total value of $24 billion. This represents about 6.6% of the total value of the defense contracts that the Department of Defense awarded during that period. Figure 2 describes the geographic distribution of the defense contracts within Macomb County. Figure 2: Number of Contracts Won (2000-2009)

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Key Companies A variety of types of companies make up the local pool of contractors. Prime contractors5 represent 32% of the total number of defense contractors in the county. While GDLS dominates Macomb County’s defense prime contracting in terms of the value of contracts, the company ranks third in terms of the number of contracts. Green Metal Product (Clinton Township) and Lanzen Fabricating (Roseville) rank first and second, respectively. From 2000 to 2009, Green Metal Product and Lanzen Fabricating combined captured 43% of the number of contracts awarded to prime contractors in the county. Table 2 and 3 list the top ten companies in Macomb County in terms of value and number of defense contracts secured. Table 2: Top 10 Defense Contractors in Macomb County by Value of Contracts (2000-2009)

Rank Company City Contract Value (in thousands)

Percent of Total

1 General Dynamics Land Systems Sterling Heights $22,553,889 93.98%

2 Campbell-Ewald Company Warren $674,782 2.81%

3 Xmco Warren $89,359 0.37%

4 Minowitz Manufacturing Roseville $76,718 0.32%

5 Greene Metal Products Clinton Township $75,329 0.31%

6 General Tactical Vehicles Sterling Heights $58,661 0.24%

7 Lanzen Fabricating Roseville $57,196 0.24%

8 Technology Ventures Warren $45,067 0.19%

9 Saturn Industries Warren $43,618 0.18%

10 Applied Manufacturing & Engineering International Utica $41,736 0.17%

Table 3: Top 10 Defense Contractors in Macomb County by Number of Contracts (2000-2009)

Rank Company City Number of Contracts

Percent of Total

1 Greene Metal Products, Inc. Clinton Township 1,487 15.98%

2 Lanzen Fabricating Inc Roseville 1,092 11.74%

3 Troy Tube & Manufacturing Co. New Baltimore 633 6.80%

4 Coordinated Defense Supply Systems Inc Clinton Township 575 6.18%

5 General Dynamics Land Systems Sterling Heights 445 4.78%

6 Minowitz Manufacturing Co. Roseville 425 4.57%

7 Wilson-Garner Company Harrison Township 355 3.82%

8 Solid Defense Inc. Harrison Township 286 3.07%

9 Applied Manufacturing & Engineering Internationa Utica 255 2.74%

10 Clark Brothers Instrument Company Utica 225 2.42%

5 A prime contractor is a contractor with an average contract value that exceeds $25,000 for the years 2000 to 2009.

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To better understand the local market’s role in the defense sector, Figure 3 describes the assortment of industry categories that characterize Macomb County companies, and Table 3 reports the top industries by defense contract value. Between 2000 and 2009, manufacturers generated the vast majority of contracting activity. Figure 3: Distribution of the Macomb County Defense Contractors per Industry

Table 4: Top Industry Categories in Macomb County by Contract Value (2000-2009)

Industry Type Contract Value Number of Contracts

Transportation Equipment Manufacturing $22,713,993 1,533

Professional, Scientific and Technical Services $722,125 121

Machinery Manufacturing $181,450 1,421

Fabricated Metal Product Manufacturing $162,889 3,924

Publishing Industries (except internet) $89,645 42

Unknown $25,218 53

Heavy and Civil Engineering Construction $25,205 35

Computer and Electronic Product Manufacturing $17,483 370

Primary Metal Manufacturing $16,538 843

Specialty Trade Contractors $7,261 39

Other $37,687 924

Manufacturing

Construction

Professional, Scientific, and Technical Services

Unknown

Other

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While most of the value of defense contracts occurs in transportation equipment manufacturing, support industries represent a significant amount of contracts won between 2000 and 2009, including professional, scientific and technical services; machinery manufacturing; and fabricated metal product manufacturing. Table 5 describes in more detail the main components of the top four industry categories present in Macomb County. Table 5: Main Industry Categories in Macomb County (2000-2009)

Transportation Equipment Manufacturing (NAICS 336)

Military Armored Vehicle, Tank, and Tank Component Manufacturing (336992)

Aircraft Engine and Engine Parts Manufacturing (336412)

Aircraft Manufacturing (336411)

Other Aircraft Parts and Auxiliary Equipment Manufacturing (336413)

Light Truck and Utility Vehicle Manufacturing (336132)

Professional, Scientific and Technical Services (NAICS 541)

Advertising Agencies (541810)

Direct mail advertising (541860)

Testing laboratories (541380)

Research and Development in the Physical, Engineering, and Life Sciences (541712)

Machinery Manufacturing (NAICS 333)

Mechanical Power Transmission Equipment Manufacturing (333415)

Air-Conditioning and Warm Air Heating Equipment Manufacturing (333613)

Turbine and Turbine Generator Set Units Manufacturing (333611)

Fabricated Metal Product Manufacturing (NAICS 332)

Metal Tank (Heavy Gauge) Manufacturing (332420)

Hand and Edge Tool Manufacturing (332212)

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CASE STUDIES The following three case studies offer regional economic development success stories based on key commonalities:

A slow evolution of the local economy that started with a catalytic investment; At least one strong and engaged university that drove the economic development and educates

workers to meet the needs of local companies; and A community-wide commitment to adapt to meet the needs of companies and the workers they

demand.

Huntsville, Alabama The City of Huntsville’s local market development has been in the works for decades. In the wake of World War II, the federal government was searching for a site for a new chemical weapons plant. Among its site selection criteria were access to rail, water and highway transportation; sufficient fuel and electrical power; and inexpensive land. The federal government selected Huntsville. Over time, the city has grown in prominence as a defense technology hub, specializing in aerospace technology since the late 1950s. Today, as home to the U.S. Army Aviation and Missile Command (AMCOM) and NASA’s Marshall Space Flight Center, Huntsville is the nation’s center for rocket-propulsion research. The University of Alabama in Huntsville (UAHuntsville) adds an additional element of research while also educating the workers necessary to fill the local high-quality, aerospace jobs—about half of UAHuntsville’s graduates earn a degree in science or engineering!6 UAHuntsville also serves as the tenant anchor for Cummings Research Park, the second largest research and technology park in the country and the fourth largest in the world.7 Established in 1962, Cummings Research Park began as a public-private effort to attract and retain the world’s top technology and research development companies. The City of Huntsville created a new zoning district on the site specifically for high technology companies. Today, the Cummings Research Park covers over 3,800 acres, has 175 buildings, and employs 25,000 people in 285 companies focused on aerospace, defense, engineering, biotechnology, advanced manufacturing, software development and information technology.8 Major tenants are Fortune 500 companies including IBM, The Boeing Company, Lockheed Martin and Direct TV. To better address the evolving preferences of high technology companies, in 2002 the City developed the 100-acre Bridge Street Town Centre. Today, Bridge Street is a regional shopping and cultural

6 University of Alabama, Huntsville. http://www.uah.edu/landing/prospective/traditions.php 7 Chamber of Commerce, Huntsville. http://www.huntsvillealabamausa.com/new_exp/crp/about/facts.html 8 Chamber of Commerce, Huntsville. http://www.huntsvillealabamausa.com/new_exp/crp/about/facts.html

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destination, with more than 550,000 square feet of upscale retail, office, and hotel space, and over 70 upscale shops and restaurants along a 10-acre lake, walking trails and a movie theater.9 Huntsville serves as a great example of a city that relied, and continues to rely, heavily on the military and the federal government. Its strong university, UAHuntsville, serves as a major generator of a skilled and talented workforce. Furthermore, the City’s partnership with private entities to create a research and technology park, the Cummings Research Park, has proved to be an investment, serving as the home of a wide array of high technology companies which have contributed to the City’s development as a high technology hub. The City’s quality of life has changed in an effort to keep up with the evolving preferences of a high technology workforce, resulting in the vibrant and lively development of Bridge Street Town Centre.

Silicon Valley, California Long before Silicon Valley was synonymous with high technology, innovation, and Google, it was home to important military research and development. In 1931, the City of Sunnyvale sold a 1,000-acre plot of land to the U.S. government as a base for the Navy airship USS Macon. Later that decade, NASA founded the Ames Research Center on the base to conduct research and develop technology in aeronautics, spaceflight, and information technology. Twenty years later, the U.S. Air Force developed the Onizuka Air Force Station, a center for the military’s satellite communication operations, at a nearby location. But the federal government was not the only early investor in Silicon Valley, Stanford University also played a leading role. During the 1940s and 1950s, Stanford’s Dean of Engineering and Provost encouraged faculty and graduates to start their own companies. However, these new companies needed financing, hence the birth of the venture capital industry. As these companies grew, they demanded services, which attracted and encouraged the development of a network of law firms and other supportive companies. In the 1970s, the research and development investments in the valley and the abundance of inexpensive land drew attention from private sector technology companies for whom San Francisco was too expensive. The companies flocked to the region. Today, Silicon Valley has the highest concentration of high technology workers of any U.S. metropolitan area with almost one in three private sector jobs in the technology industry.10 It is also home to various Fortune 500 companies such as Apple, Cisco, Google, HP, Intel and Oracle. The region’s seventeen colleges and universities, including Stanford University and San Jose State University, have provided local companies with talented engineers and computer scientists. Military research and development also remains a robust component of the local economy. Although Onizuka Air Force Station closed in 2005, Ames Research Center continues to

9 Bridge Street Town Centre. http://www.bridgestreethuntsville.com/index.php 10 TechAmerica Foundation. http://www.techamericafoundation.org/cybercities

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thrive, with over $3 billion in capital equipment, 2,300 research personnel and a $600 million annual budget.11 To adapt to the young, high-technology demographics, the City of San Jose, the Valley’s major city, developed Santana Row in 2002, a neighborhood with upscale lofts, shopping, and dining. Within its 42 acres, it houses 514 residential town homes, lofts and villas, 70 retail shops and boutiques, 20 full service restaurants, and several spas, salons, a movie theatre, and a hotel.12 Silicon Valley is an example of a region that became attractive due to its close proximity to a major city, San Francisco, and the abundance of inexpensive land to develop on. Stanford University played a critical role in the development of the region by not only educating its high-skilled workforce, but also strongly encouraging its students and faculty members to become entrepreneurs. The Valley is also a region that has taken advantage of its federal government assets, such as Ames Research Center, in which innovation and high technology was based upon. In order to continue attracting high-skilled, talented, young entrepreneurs, the City of San Jose developed Santana Row which has served as the vibrant and dynamic entertainment hub of the Valley.

Pittsburgh, Pennsylvania As one of “America’s Most Livable Cities,13” Pittsburgh is thriving because of decades of key investments and a pervasive local identity. The steel era in Pittsburgh endowed a small number of Pittsburgh families with enormous wealth, which they invested in the city. In the 1950s, the Mellon family donated more than $50 million to the University of Pittsburgh to finance the construction of a new medical school and to endow the program. The long-term payoff of this investment has been profound. The University of Pittsburgh ranks among the top 10 universities in the U.S. in total federal science and engineering research and development support, and has a revenue source of research funding of $775.2 million.14 Its clinical program, the University of Pittsburgh Medical Center, ranks among the world’s best. The University of Pittsburgh, Carnegie Mellon University, and the city’s many other institutions of higher education drove the transformation of the city’s economy by attracting students, faculty and patients, and transferring university research into new products and businesses. At the same time, Pittsburgh’s population became better-educated overall, building a workforce ready to fill the high-paying jobs in the “eds and meds.” Voters’ support for regional tax base sharing was key in supporting Pittsburgh's recreational and cultural infrastructure through the city’s renaissance. In 1993, voters approved the creation of the

11 NASA. http://www.nasa.gov/centers/ames/about/overview.html 12 Santana Row. http://www.santanarow.com/ 13 Forbes.com. http://www.forbes.com/2010/04/29/cities-livable-pittsburgh-lifestyle-real-estate-top-ten-jobs-crime-income.html 14 University of Pittsburgh. http://www.news.pitt.edu/news/university-pittsburgh-trustees-approve-2010-11-budget-set-tuition-rates-end-salary-freeze

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Allegheny Regional Asset District to save the Phipps Conservancy, Pittsburgh Zoo & PPG Aquarium, and The National Aviary.15 The district channeled hundreds of millions of tax dollars into one of the region’s most vibrant arts and cultural communities; established the best library system in the country; and cleaned up the riverfront. As testament to the impact of this investment, Pittsburgh’s three major rivers are now bustling multi-use sites, shared by recreation and industry, and in 2009 the once heavily polluted rivers hosted an International Bass Fishing Tournament. Additionally, Pittsburgh now has more walking trails per capita than any other U.S. city. Despite these key events, Pittsburgh’s turnaround is not the culmination of a well-designed plan or PR campaign, but rather a groundswell of momentum. With the unique local yinzer dialect and the Steeler Nation identity, Pittsburgh has always had a unique identity. When people went to the city for the universities or hospitals, they wanted to become part of that community. With the abundance of underutilized and inexpensive land left over from the industrial decline, those who wanted to stay could. The City of Pittsburgh is yet another example of the critical role higher education institutions play in its economic development, particularly the excellent education programs and federal research funding provided to the University of Pittsburgh. This is city is also an example of a city that was victim to an industry collapse and the commitment its residents demonstrated to its revival, completely revamping and rebranding itself as a major city capable of adapting to new challenges and embracing new opportunities.

15 RadWorksHere.org. http://www.radworkshere.org/index.php

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SWOT ANALYSIS This Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis examines Macomb County’s ability to attract innovative, high technology companies from other states and countries, and with existing or potential links to the defense sector. In an effort to focus on mutually beneficial opportunities for Macomb County and the State of Michigan, this analysis does not address specifically Macomb County’s ability to attract companies from other counties within Michigan. The points addressed in this analysis were concluded from the information gathered from site visits, interviews, surveys, newspaper articles, and stakeholders’ websites. The information presented on this SWOT Analysis should be used internally to assist in the formation of Macomb County’s goals and objectives moving forward, keeping in mind that many of these points are perceptions of the region that do need to be addressed. Macomb County has many strengths that stakeholders can leverage to attract companies:

A strong and long-term military presence with TACOM, TARDEC and the Selfridge Air National Guard Base

An existing and growing cluster of defense sector companies A history of engineering and manufacturing excellence, which suggests a highly- and relevantly-

skilled labor force A strategic location, close to a variety of major transportation options, including freeways,

railroads, ports, and the U.S.-Canada border Tax incentives that local and state governments use to decrease the cost of locating or growing

a company in Macomb County Proximity to world-renowned research universities Robust support for entrepreneurs, including a number of business incubators such as the

Macomb-Oakland University INCubator Low cost of living and low violent crime rate, which indicate a high-quality of life Relatively inexpensive land, by national standards Proximity to Detroit, an internationally known city and the state’s primary core city Access to a variety of outdoor activities and green spaces through the Huron-Clinton

Metropark system, Conner Creek Greenway and Lake St. Clair Macomb County’s weaknesses hamper the county’s ability to attract both companies and the highly-skilled workers that defense sector companies need:16

Michigan and especially southeast Michigan’s Rust Belt image A tendency for outsiders to project perceptions about Detroit as a high-crime, politically

corrupt and blighted city onto Macomb County cities Strong labor unions that demand high wages and benefits, which increase companies’ costs Macomb County cities’ lack of vibrant downtowns that have walkable, lively areas of dining,

entertainment and shopping that are desired by highly-skilled workers and some companies, especially small, high technology companies

The trend of well-educated professionals to move out of Michigan and Macomb County, creating a void of skilled labor and business start-ups

16 These weaknesses are not exclusive to only Macomb County, but to regions across the country as a result of the economic downturn. Nonetheless, these are perceived weaknesses of the County that needs to be taken into consideration.

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A lack of skilled workers, as identified by companies located in Sterling Heights in an October 2010 survey

A perception of relatively high property taxes, compared to other states The unpopular Michigan Business Tax Unpredictable changes Michigan’s newly elected leaders may make to the state tax code Economic incentives that decrease local and state government revenues and hamper

governments’ abilities to provide services that improve the local quality of life Lack of readily developable properties in Warren and Sterling Heights Road congestion, as articulated by manufacturing companies located in Sterling Heights in an

October 2010 survey Disjointed economic development efforts Southeast Michigan’s past racial instability which may create the impression that the region is a

less than welcoming location for minorities Opportunities to grow the local economy by capitalizing on existing defense sector assets abound:

The Department of Homeland Security’s recent $30 million investment at Selfridge Air National Guard Base to create an Operational Integration Center

The Base Realignment and Closure (BRAC) realignment of TACOM from Rock Island Arsenal, Illinois to Warren, which is estimated to bring 1,600 new jobs to TACOM’s Warren site in 2010

Chrysler Group’s October 2010 announcement to invest approximately $1 billion in improvements at the Sterling Heights assembly plant

Ford Motor Company’s October 2010 announcement to invest approximately $150 million in improvements at the Van Dyke transmission facility and Sterling Axle Plant

The recent grants that the Macomb-Oakland University INCubator received from the U.S. Economic Development Administration and the New Economy Initiative of Southeast Michigan

U.S. Department of Labor $5 million grant to Macomb County Community College to retrain unemployed workers in new careers in the defense industry

Historical patterns of the federal government’s defense and defense-related spending that indicate the federal government will continue to make significant investments in these sectors and the defense sector is a low risk sector to court to grow the local economy

New community leadership in the form of the county’s first County Executive The enthusiasm of local and state government leaders to grow and support the defense sector A partnership with the City of Detroit to capitalize on international attention on, support for

and the momentum of the City Just as there are opportunities, there are also threats that could prohibit Macomb County from advancing the local economy in robust and sustainable ways:

Competition from regions in other states that also are working to attract defense sector companies and may be better positioned to attract such investments

Funding that Michigan companies receive from federal agencies that may not be used to create jobs in Michigan but instead may be used to outsource to other states

A lack of economic diversification that could severely hamstring Macomb County, if the county develops the defense market without developing other markets

Stakeholder aversion to collaboration A tight lending standards that prohibit economic growth

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Figure 4: SWOT Analysis Summary

Strong military presence Growing defense market with a large existing

pool of contractors Perception of a highly- and relevantly-skilled

labor force Convenient transportation Local and State tax incentives Proximity to world-renowned research

universities Robust support for entrepreneurs Low cost of living Low violent crime rate Relatively inexpensive land Proximity to Detroit, an internationally

known city and the state’s primary core city Intensely active and supportive philanthropic

community Access to a variety of outdoor activities and

green spaces through the Huron-Clinton Metroparks, Conner Creek Greenway and Lake St. Clair

Rust Belt image Perception of high crime Reputation of strong labor unions Lack of vibrant downtowns Brain drain Lack of highly-skilled workers Perception of high property taxes Michigan Business Tax Unpredictable changes Michigan’s new elected

leaders may make to the state tax code Tax incentives that decrease local and state

government revenues Lack of readily developable properties in

Warren and Sterling Heights Disjointed economic development efforts Road congestion History of racial instability

$30 million Selfridge Air National Guard Base Operational Integration Center

BRAC realignment of TACOM Chrysler Group’s $1 billion announced

investment in the Sterling Heights assembly plant

Ford Motor Company’s $150 million announced investment in the Van Dyke transmission facility and Sterling Axle Plant

The Economic Development Administration and New Economy Initiative of Southeast Michigan grants to the Macomb-Oakland University INCubator

U.S. Department of Labor’s $5 million grant to Macomb County Community College to retrain unemployed workers

Significant federal government investments in defense and related sectors

Macomb County’s first County Executive Enthusiasm of local and state government

leaders for growing and supporting the defense market

Partnership with the City of Detroit

Competition from regions in other states Funding that Michigan companies receive from

federal agencies that may not be used to create jobs in Michigan but instead may be used to outsource to other states

Lack of economic diversification Stakeholder aversion to collaboration Tight lending standards

S W O T

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NEXT STEPS Building a coordinated campaign to attract defense sector investment to Macomb County requires a foundation for effective communication among stakeholders and consistent messaging to potential investors. To build this foundation, Macomb County stakeholders should establish a task force. The mission of the task force will be to share information among stakeholders and to promote Macomb County as an attractive community among defense sector companies seeking to locate or expand. It should comprise representatives from each of the Category I stakeholders as well as a representative number of Macomb County’s small defense sector companies. As previously stated, Category I stakeholders are active participants in the defense sector, and their actions should be coordinated to be most effective.

The task force should create a regular and fairly frequent meeting schedule. It will be important that the schedule reflects the frequency with which there is sufficient content for the meeting—so that meetings are not cancelled and stakeholders do not get used to meeting cancellations—and yet offers enough opportunities to meet the information-sharing needs of the stakeholders as well as to develop a bond and commitment among stakeholders. The task force will have a number of short, medium and long term goals. Despite the temporal categorization17, all goals should be pursued simultaneously.

Short Term Goals Establish a clear vision for Macomb County’s defense market and develop a strategy for achieving it.

Given the students’ observations, Macomb County actors’ primary challenge is articulating a shared vision of what the local defense market should look like. The task force can function as the forum for bringing stakeholders together to agree upon a vision and create a name for the initiative. The vision will be the cornerstone for a more detailed strategy for fulfilling the vision.

Choose a platform for the task force to communicate electronically. The task force is a forum for stakeholders to share information, resources, concerns and ideas related to the defense sector as well as an opportunity to build partnerships and brainstorm mutually-beneficial solutions to problems. While in-person, regularly scheduled task force meetings will address some of these needs, a virtual venue, such as Google Buzz or PB Works, will be helpful to insure that stakeholders remain up-to-date on the most rapidly evolving developments. Virtual venues allow authorized users to chat and e-mail individual members or the entire group, view and edit documents, share calendars, post information and other functions that will keep members of the task force connected and informed.

Create a subcommittee to be responsible for communicating with other stakeholders. The task force needs to communicate its goals, accomplishments, and challenges with the Category II and III stakeholders who are not members of the task force. Within the task force, identify a subcommittee of members who will be responsible for writing a monthly or bi-monthly e-newsletter to distribute among the other stakeholders. In addition to the

17 The time periods relate to the durations required to achieve the goal, rather than the appropriate point in time to initiate work toward the goal.

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aforementioned items, the newsletter should include information about the task force’s decisions and initiatives as well as key government actions.

Strengthen relationships with institutions of higher education. As demonstrated by the case studies, simply communicating with universities is not enough. It will be important to develop strong relationships with universities, particularly those with strengths in research, engineering, software development, entrepreneurship and tech transfer, because universities played an integral role in providing the highly skilled labor necessary for a growing market.

Create a Macomb County business registry. To provide for easy data collection and improved communication with local companies, create a business registry of all companies located in Macomb County.

Medium Term Goals Create a subcommittee to increase local awareness about the defense sector and task force.

Among Macomb County residents, on average there is insufficient knowledge about the local defense market. It would be beneficial to have grassroots organizations help in spreading the word about existing assets and opportunities. To create this groundswell of support, the task force needs to communicate with the public. Within the task force, identify a subcommittee of members who will be responsible for creating and implementing a media strategy. Key messages should describe the robust existing assets, recent investments for growth, and the role that the task force envisions the defense sector will play in the county’s future. Vehicles for these and other messages include stakeholder website, twitter and facebook announcements; newspaper articles and editorials; and presentations to community-based organizations.

Long Term Goals Develop and implement a national branding and marketing strategy to attract defense sector investment.

The task force should create and implement a national marketing strategy that rebrands Macomb County as a high technology hub for defense sector investment. The objective would be to increase and improve the region’s visibility while highlighting the county’s assets and opportunities. The best strategies to pursue will depend on the available resources and the task force’s vision. When the task force reaches the strategic point, it should consider hiring a marketing professional to provide advice and support.

Make changes to address the perceived weaknesses that the SWOT analysis identifies.

Since county actors have limited control over many of the perceived weaknesses, it will be important to focus on those weaknesses, or the parts of the weaknesses, that stakeholders can influence. Additionally, it will be helpful to approach Macomb County’s perceived weaknesses from both the perspective of a defense sector company as well as a highly skilled worker considering living in the county. Due to the companies’ needs for highly skilled workers, by including the potential-resident perspective, you will also address companies’ perceived weaknesses of the county. From a company’s perspective, the insufficiently skilled workforce, local tax structure and lack of readily developable land are the paramount concerns. From a potential resident’s perspective—particularly the well-educated, entrepreneurial individuals that

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companies and the county desire—the lack of vibrant downtowns and road congestion will be foremost in their minds.