Embed Size (px)
Citation preview
ED 044 188
TITLE
INSTITUTIONSPONS AGENCYREPORT NOPUB DATENOTEAVAILABLE FROM
DOCUMENT RESUME
RC 004 206
Industrial Location Research Studies: Summary andRecommendations.Fantus Co., Inc., New York, N.Y.Appalachian Regional Commission, Washington, D.C.ARR-4Dec 66115p.The Fantus Company, Inc., Fantus Area ResearchDivision, 430 Park Avenue, New York, N.Y. ($2.50)
EDRS PRICE EDRS Price MF-$0.50 HC -$5.85DESCRIPTORS Development, *Economic Development, Education,
Employment, Human Resources, Industrialization,*Industry, Job Development, Labor, *ManpowerDevelopment, *Regional Planning, *Rural Areas
IDENTIFIERS *Appalachia
ABSTRACTMany branches of manufacturing industries have been
highly successful in the Appalachian region; others have failed toachieve anticipated operating and employment results; and stillothers have suspended operations after a short time. This mixedhistory of accomplishment and failure has not been satisfactorilyexplained by traditional analyses. The solution of regional problemsrequires earnest and careful study and the development of programssuited to the particular conditions in each case. The importantobjectives of a regional development program should be (1) investmentof those public facilities which are most likely to promote privateinvestment and thereby employment in the region and (2) utilizationof general and vocational education in manpower development programs.The appropriateness of recommendations will vary from one subarea cfAppalachia to another since priorities within a given area aredetermined by its prospects for industrial development. The intentionof general recommendations is to cut across industry lines andspecify public activities which are generally useful in making areasattractive to public employers. (Related documents are RC 004 210 andRC 004 211.) (EJ)
oaCQv-4
APPALACHIAN RESEARCH REPORT NO. 4
INDUSTRIAL LOCATION RESEARCH STUDIES :
SUMMARY AND RECOMMENDATIONS
U.S. DEPARTMENT OF HEALTH. EDUCATION& WELFARE
OFFICE OF EDUCATIONTHIS DOCUMENT HAS BEEN REPRODUCEDEXACTLY AS RECEIVED FROM THE PERSON ORORGANIZATION ORIGINATING IT. POINTS OFVIEW OR OPINIONS STATED DO NOT NECES-SARILY REPRESENT OFFICIAL OFFICE OF EDU-CATION POSITION OR POLICY.
Reprint of a Report prepared for the
Ai.2alachian Regional Commission1666 Connecticut Avenue NW
Washington, D.C. 20235
by
The Fantus Company, Inc.Fantus Area Research Division
430 Park AvenueNew York, New York
December 1966
x2 so_
Appalachian Research Report No. 4
INDUSTRIAL LOCATION RESEARCH STUDIES:
SUMMARY AND RECOMMENDATIONS
TABLE OF CONTENTS
Page No.
I. INTRODUCTION 1
II. SUMMARY AND CONCLUSIONS 3
III. IMPROVING THE COMPETITIVE POSITION OF APPALACHIAFOR INDUSTRY 22
Priority No. 1 - Manpower Development 24
Priority No. 2 - Transportation 37
Priority No. 3 - Industrial Site Planning 52
Priority No. 4 - Industrial Water Development 57
Priority No. 5 - Sewage Treatment and EffluentDisposal 60
Priority No. 6 - Federal, State, and LocalIncentives to Industry 62
Priority No. 7 - Community Environment 70
APPENDIX A 77
I - INTRODUCTION
Many branches of manufacturing industry have been highlysuccessful in the Appalachian Region. Others, however, havefailed to achieve anticipated operating results, a sustainedlevel of new investment, or optimum employment. Still others havesuspended operations after a short period. This mixed historyof accomplishment and failures--often involving the same branchesor similar branches of industry-- has not been satisfactorilyexplained by traditional statistical analyses, economic modelsor theories.
Many efforts to fit answers to the problems of economicgrowth in the region have been at the level of what Philip Sporncallz "bromidic prescriptions". As Mr. Sporn points out inTechnology and the American Economy, "there is a great deal ofdiversity among regions, and even in the case of Appalachia, theregion is characterized more by diversity among its several partsthan by any uniformity. The solution of regional problems, there-fore, requires earnest and careful study and the development ofprograms at the regional and local level to develop solutionssuited to the particular conditions in each case."
This statement is fully consistent with the belief ofexperienced area development groups and the plant locationconsultant that economic development programs can be designed toinfluence the location, timing, or growth rate of private business- -i.e., where, when and on what scale it will operate. From thevantage point of the plant location consultant, there are twoprerequisites for successful programs:
(1) an incisive understanding of how the locationalsearch for specific industries operates under conditions prevailingin the competitive marketplace, and
(2) an awareness of how communities can selectively improvetheir response to the needs of site-seeking businessmen.
For an area or a community to anticipate the needs ofall types of industry ib infinitely difficult. For action groupsto systematically and selectively pursue development: opportunitiesbased on specific industry insights and a knowledge of recentlocational strategy is eminently practicable. Accordingly, theAppalachian Industry Location Studies Program was conceived:
(1) to identify industries which can be expected to havesignificant growth potential in the region;
(2) to select industries which offer multiple locationopportunities within the framework of economicdevelopment programs for the region;
-1-
(3) to specify the locational characteristics of theselected industries;
(4) to evaluate the relative commercial importance ofthe specified locational determinants; and
(5) to determine the extent to which the competitiveposition of the region for the selected industriescan be enhanced by coordinated programs of publicinvestment.
In its totality, the program embraces 25 individualindustry location studies. The purpose of these studies is notto identify industrial prospects for specific planning regions ofAppalachia, nor is it to predict that a specific type of firm willlocate in a specific small area of the region. Instead, the purposeis to convey to planning and action groups a systematic rationalefor evaluating the locational attributes of an area for the selectedindustries.
This Summary Report is an overview of the 25 industries,an account of how and why they were selected, a summary andsynthesis of major findings and conclusions and, finally, theformulation of a series of recommendations designed to makeAppalachia more attractive to these industries.
It is significant to note that while these recommenda-tions were formulated from the findings of the 25 individuallocation studies, actions taken on most fronts will serve sub-stantially to improve the overall competitive position of theRegion for all industries.
-2-
II - SUMMARY AND CONCLUSIONS
introduction
One of the principal objectives of a regional develop-ment program should be to invest in those public facilities whichare most likely to promote private investment and thereby employ-ment in the region. The 25 industrial studies completed by thisconsultant were selected because of their peculiar relevance tothe future prospects for industrial development in Appalachia.Insofar as possible the locational requirements of such indus-tries should be taken into account in planning the developmentprograms for each of the sub-areas in the region.
The first step to take in developing an understandingof why industry makes investments at particular locations is torecognize that the decision-making unit is a company. In otherwords, the location decision is an aspect of business adminis-tration that must be resolved--like other issues--in the frame-work of the prevailing market conditions and forces. It is acommunity function to cooperate in the decision-making process.
Many location decisions result in unbalanced growth forthe local or regional economies they affect. Some may propel theeconomy forward in a jerky manner but also more quickly than anypreconceived theories of balanced growth. Subsequent recommenda-tions in this report are designed to enhance, most effectively,the competitive position of Appalachia for all of the industriesstudied. However, to determine the impact of any single recom-mendation on a specific industry, one must turn to the individuallocation studies.
All Industry Location Studies follow a prescribed format.It is designed to define the industry (size, markets, concentra-tion, prevalence), indicate where and how it is growing, and todescribe pertinent technology and trends. The heart of the re-port is contained in a subsequent section which defines, describes,and quantifies to the extent possible, the locational realitiesof the industry today--that is, those factors of significantinfluence in the locational decision. Moreover, each such fac-tor contains an indication of the relative weight afforded itby the site-seeking executive.
In the typical discussion of locational factors,sufficient information is included to allow an evaluation ofany given area's potential for the industry. As an example,Report No. 11 "Mobile Homes and Special Purpose Vehicles"
-3-
establishes general criteria On the market orientation of newplants--the basic factor delimiting that industry's initial search.Within that framework, transportation expenses are related tooutbound shipping charges and the resultant cost effect per unit.Labor requirements are defined in terms of skills, supply, andthe relative cost of wages and fringe benefits. In addition tothe foregoing major considerations, the requirements and relativeimportance of such factors as sites, transportation services,utilities, taxation, financing, and others are discussed.
Labor, as the element most common in the location de-cision, is usually presented in terms of a desired "selectivityratio"--that is, the number of basically qualified candidatesfor each position, necessary to allow selection of an acceptable,productive work force. The ratio can further be related to anarea's supply potential. This latter factor reflects a statis-tical evaluation of the total potential based on normal partici-pation rates, employment shifts sand the like. Thus, as anexample, to achieve a 4 or 5 to 1 selectivity ratio, the supplypotential may have to be in the area of 5 or 12 to 1.
In the last section of each report, specific publicactivities are evaluated for their impact and ability to assistdirectly in attracting new private investment of that industry.
Distinctive Industry Characteristics
As has already been remarked, the 25 industries singledout for individual analysis are ones which (1) have significantgrowth potential in Appalachia, and (2) offer multiple locationopportunities within the region. These, then, are the first twocommon denominators to be noted for the 25 industries, definedand described in Table 1 of Appendix A.
Other common characteristics come into view when obser-vations are made from various vantage points. The first of theseconcerns production of durable goods and nondurables.
-4-
Durables-Nondurables Mix
Sixteen of the Appalachian Industry Location Studiesconcern the production of durable goods. These are:
Electrical component partsTextile machineryOffice machineryMotor vehicle partsMaterials handling equipmentMobile homesInstruments and controlsMetal stampingsAircraft and aerospace partsPrimary aluminumNonferrous castingsMalleable and ductile iron castingsNonferrous rolling mill productsPlastic and powder metal partsRefractory metalsPrimary steel and steel mill products
The 9 nondurable goods industries are:
Paper and allied productsTextile mill productsApparelPrinting and allied industriesChlor-alkaliesNoncellulosic synthetic fibersFoamed plastic productsMeats, dried and frozen producePlastic resins
Appalachian Specialization in the Industries
Industries which already have relatively large sharesof their productive capacity in Appalachia include pulp and paper,textiles, ch].or- alkalies, primary steel, synthetic fibers, mal-leable and ductile iron casting and primary aluminum (see Appendix A,Table 2). In this sense, Appalachia can be said to have a highdegree of specialization for these industries. From another pointof view, Appalachian specialization cannot be considered partic-ularly high since operations of these 6 industries are not welldispersed throighout the 12 states of the region.
-5-
Industries which thus far have only a limited footholdin Appalachia comprise printing, electrical component parts,office machinery, materials handling equipment, motor vehicleparts, mobile homes, instruments metal stampings, aircraft andaerospace parts, nonferrous castings, and plastic resins. Special-ization is low both in Appalachia's share of the industries' plantsand the number of states in which they operate.
The remaining 7 industries have about average represen-tation in Appalachia. That is to say that the region's share ofthe nation's establishments is roughly proportionate to regionalpopulation (9% of U.S.).
Industry Growth Trends
From the accompanying Table 1, it can be seen that mostof the 25 industries analyzed can expect somewhat lower annualrates of growth in the 1965-75 decade than those experienced inthe five years preceding. Nevertheless, all 25 industries willgrow faster than the national economy--as, indeed, they have inthe past.
Growth rates differ not only among the industries butalso within various branches of the same industry. In paper andallied products, for example, a compound annual percentage increaseof 2 percent for newsprint contrasts with an expected 6 percentannual gain for book, magazine and similar printing papers.
The ranges shown, therefore, reflect industry expecta-tions for specific product lines. Many of these products are fullyestablished in the marketplace. Still others, such as some newsynthetic fibers, will spurt sharply, achieving growth rates ashigh as 30 percent.
There is no way of forecasting at a fine level ofindustry detail exactly what these increases in sales or consump-tion will mean in capital investment commitments over the 1965-75decade. One measure of the scale on which the industries spendin a year of good business conditions is provided by Column 3 ofTable 1.
Economic Impacts
No single yardstick is suitable for measuring the eco-nomic benefits of an industry to a region, much less a community.Townspeople and merchants, however, are the first to feel theimpact of new paychecks in a locale. This impact can be quantifiedin several ways.
-6-
Table 1.
Selected Growth and Investment Characteristics 1/
Growth
Industry
Column 1:Column 2:
Column 3:ProjectedAverageAnnual
Growth Rate1965-1970
(%) 2/
AverageAnnual
Rate1960-1965
(%)
CapitalExpendituresEstimatedfor 1964($ Million)
1. Paper & Allied Products 6.4 2.0-6.0 8862. Textile Mill Products 5.9 7.0-17.4 4923. Apparel 6.1 3.5-8.2 1244. Printing & Allied 4.1 3.5-9.0 463
Industries5. Electrical Component, 7.2 7.0-14.0 889
Parts6. Textile Machinery 7.6 7.0-10.0 100
Pumps & Valves7. Office Machinery 7.2 5.0-12.0 1138. Motor Vehicle Parts 7.2 3.0-4.0 5299. Chlor-Alkali Industry 7.6 5.0-8.7 7210. Materials Handling 7.6 12.0-15.0 20
Equipment11. Mobile Homes 9.2 10.0-15.0 2012. Instruments & Controls 5.2 7.0-17.0 6213. Noncellulosic Synthetic 15.5 7.3-30.0 164
Fibers14. Metal Stampings 7.3 7.0-8.0 15615. Aircraft & Aerospace 5.1 7.0-12.0 59
Parts16. Primary Aluminum 5.8 7.0-10.0 52
Industry17. Nonferrous Castings 9.4 6.0-7.0 4518. Malleable & Ductile 6.1 5.0-14.0 12519. Foamed Plastic Products 10.1 7.0-10.0 2520. Rolling, Drawing, and 9.4 7.0-8.0 194
Extruding of NonferrousMetals
21. Meats, Dried & Frozen 6.8 5.0-7.0 56Produce
22. Plastic & Powder Metal 10.1 10.0-15.0 184Products
23. Refractory Metals 5.8 5.0-17.0 12524. Primary Steel & Steel 5.3 2.5-5.0 1,363
Mill Products25. Plastic Resins 15.5 6.7-40.0 20
1/ Sources: Fantus Area Research files; 1964 Annual Survey ofManufactures
2/ Growth projections based on industry consensus of rise insales and/or consumption. For further discussion of growth,see "Industry Growth Characteristics" in Appendix A.
-7-
1
One such method is to examine the expectable size of asingle new payroll in each of the industries. Of course, thereis no such thing as an "average" size plant. The most usefulapproximation is to compute payroll amounts for establishmentsthat are of sizes which to the location analyst are fairly repre-sentative of recent location trends. This has been done in Table2 (column 2). It is immediately apparent that differences inannual payrolls reflect not only establishment sizes "typical" ineach industry but also wage and salary patterns representative ofthe industry.
It would be easy but erroneous for a community to con-clude that attraction of a steel works is a more "desirable" goalthan locating an apparel plant, because the former disburses muchlarger wage and salary payments than the latter. The soberingconsideration here is the demonstrable fact that many new apparelplants open their doors each year, while the location of a newsteel works, even a smaller branch of the industry, is a compar-atively rare event. Hence, the apparel industry, one which ishighly mobile, is a goal to which more communities can realistic-ally aspire.
There are other good reasons, too, for consideringeconomic impact and "desirability" within a much broader framework.These are variously designated as multiplier, leverage and rippleeffects created by a new industry coming to a community, or anestablished industry expanding. Tnput-output analysis, developedby Leontief for national economic measurement's, is one. Theprospects for attracting satellite industries is another.
Column 1 of Table 2 presents selected measures of inter-industry impact derived from input-output analysis of the 1958inter-industry relation study. Four measures are given inColumn 1. Two will be considered in the following discussion.
In general, industries which purchase a fairly largeproportion of their requirements for output from a number of otherindustries tend to create rather large ripple effects in theeconomy. Experience with the automobile industry on the nationalscene confirms this observation. This is also true in the manu-facture of aircraft and aerospace parts.
The table (row 15) tells us that for each dollar ofoutput the aircraft and aerospace parts industry must make directpurchases of 33.9 cents from other industries and 19.2 centsfrom other firms within its own industry--a total of 53.1 centsworth of direct purchases. Significantly, it takes six industriesto supply the first half of the purchases from others. Further,7 industries in all are involved in supplying the 53.1 cents worthof direct purchases.
-8-
Table 2.
Selected Measures of
Economic Impact
Report
No.
Industry
Inter-Industry
Impact
1/
Annual
Wage
Impact
(millions)
2/
Purchases
From
Leading
Supplier
3/
Major Supplying
Industry
4/
Potential Satellite Industries
5/
1.
Paper and Allied Products
2.
Textile Mill Products
46.3(4)/18.9(3)
39.8(2)/34.6(11)
$ 8.1
4.1
189-432
165-347
Paper
Textiles
Chlor-Alkalies, Sodium Silicate. Rosinc. Resins,
Tree Farming
Mill Supplies, Machinery Repair, Chemical
3.
Apparel
4.
Printing and Allied
44.2(1)/17.2(1)
1.2
273
Textiles
Distributors
Machinery Repair, Distribution Warehousing
Industries
5.
Electrical Component Parts
49.8(3)/13.0(1)
53.8(8)/2.2(1)
3.5
4.7
172
72
Paper
Nonferrous Metals
Platemaking, Repair Services, Paper Merchants
Industrial Gas Distributors, Tool and Die,.
6.
Textile Machinery/Pumps
Electroplating
and Valves
51.4(6)/4.9(1)
5.6
193
Iron and Steel
Machine Shops, Tool and Die, Milk Suppliers,
Foundries
7.
Office Machinery
34.6(6)/9.1(2)
20.0
91
Office Machinery
Tool and Die, Die Casting, Mill and Electrical
8.
Motor Vehicle Parts
41.5(5)/29.5(9)
4.4
295
Motor Vehicle
Suppliers, Metal Stampings
Parts
Tool and Die, Metal Stampings, Rubber and
Plastic Parts
9.
Chlor-Alkali Industry
10.
Materials Handling
42.0(7)/19.4(6)
3.4
194
Chemical
Organic Chemicals, Herbicides, Plastics,
Contract Motor Carriers
Equipment
11.
Mobile Homes
59.3(5)/4.0(1)
41.5(5)/29.5(9)
2.6
2.2
107
110
Iron and Steel
Lumber
Foundries, Mill Suppliers, Tool and Die
Sheet Metal, Wheel and Axle A
bly, Unitized
Fixtures
12.
Inatruuents and Controls
47.8(8)/6.7(2)
10.5
67
Instruments
Metal Distributors, Electroplating, Tool and Die
13.
Noncellulosic Synthetic
Fibers
57.8(1)/2.7(1)
21.6
341
Chemicals
Corrugated Containers, Chemicals
14:
Metal Stampings
52.0(2)/4.0(1)
1.9
199
Icon and Steel
Mill Supplies, Machine Shops, Tool and Die,
klectropiating, Steel Distribution Centers
15.
Aircraft and Aerospace
Parts
33.9(6)/19.2(7)
10.1
190
Aircraft Parts
Machine Shops, Tool and Die, Research and
Development
16.
Primary Aluminum Industry
41.2(4)/30.4(11)
19.3
304
Nonferrous Metals
Electrical Repair, Machine Shops, Cookware, Auto
Parts
'
17.
Nonferrous Castings
41.2(4)/30.4(11)
2.6
304
Nonferrous Metals
Patternmaking, Electroplating, Tool and Die
18.
Malleable and Ductile
Castings
37.8(7)/22.7(11)
6.1
227
Iron and Steel
Patternmaking, Machine Shops, Tool and Die
19.
FeameC Plastic Products
51.4(3)/3.1(1)
1.4
143
Plastics
Contract Motor Carriers, Chemical Distributors
20.
Rolling, Drawing, and
Extruding of Nonferrous
Letals
41.2(4)/30.4(11)
6.4
304
Nonferrous Metals
Wire Product Fabricators, Tool and Die, Metal
Treating Chemicals
21.
Meats, Dried and Frozen
Produce
57.7(2)/16.7(1)
5.6
16L
Livestock
Fertilizer, Eggs, Hatcheries, Feed Lots, Truck
Farming
22.
Plastic and Powder Metal
Products
51.4(3)/3.1(1)
1.4
143
Plastics
Tool and Die
23.
Refractory Metals
41.2(4)/30.4(11)
8.8
175
Nonferrous Ores
Aircraft Parts, Fabricated Products, Ore
Dressing
24.
Primary steel and Steel
Milk Products
37.8(7),22.7(11)
21.8
227
Iron and Steel
Machine Shops, Refractories, Cookware, Kitchen-
ware
25.
Plastic Resins
57.8(1)/2.7(1)
1.0
341
Chemicals
Chemical Suppliers, Contract Motor Carriers
Table 2. - cont'd
NOTES:
1/ Inter-Industry Impact:
A four-factor numerical expression.
A(C)/B(D) based upon the 1958
OBE input-output study of the interindustry structure of the
United States:
A.
Input of direct requirements from other industries per dollar
output in the named industry.
B.
Input of direct requirements from the named industry itself.
C.
Number of other industries providing 50% of the other
industries direct input.
D.
Number of other industries needed to approximate the direct
input of the named industry.
2/ Annual Direct Wage Impact based
on the 1965 average annual wage for production workers,
typical employment size, and an economic velocity
of 3.
3/ Dollars (1958) per $1,000
gross output going to purchases trot] the leading supplier.
Source:
1958 Interindustry Relations Study.
4/ Source:
1958 Interindustry Relations Study.
5/ Industries most likely to be attracted by
new manufacturing facilities.
It is impossible to predict from these input-outputrelationships that all of the benefits of these direct purchases(or ripple effect) will accrue to the community where the industryoperates. More than likely they will not, because much of themoney will be spent in other parts of the country. Nevertheless,input-output figures are valid as a means of indicating possibili-ties for turnover of money in an area which goes well beyond thesize of a payroll.
Likely satellite industries which might eventually locatein the general vicinity of a primary industry are listed in Table2. Some are clearly near-term candidates, as for example, paper-making chemicals to supply the pulp and paper industry. Others,such as tool and die shops, may take yerrs to materialize.
Whatever the probable size of the ripple effect createdby any single industry, Table 2 clearly indicates that any ofthe 25 industries will exeii: considerable leverage on the localeconomies of Appalachia.
Locational Requirements and their Significance
Each of the 25 Appalachian Industry Location Studiesexamines and evaluates all factors which firms in those industriesconsider when selecting a location. Table 3, which follows,attempts the impossible task of recapitulating the relative im-portance of those factors which recur most often in the locationdecision. This is done for the express puipose of bringing intosharper focus Section III of this report, which formulates recom-mendations for improving Appalachia's competitive position.
With the cautionary note that the individual locationstudies should be consulted for the nuances of location decision-making, it is still possible to reach certain useful conclusionsand a synthesis of findings and opinion from Table 3. To beginwith, the table is constructed with recognition that certainlocation requirements of an industry may be relatively inflexiblewhile others may be compromised within limits. The economistrefers to this latter aspect as "substitutability of factors".The businessman speaks of ''trade- offs ".
Accordingly, Table 3 indentifies the relative importanceof primary locational factors with the following scale of values:
C - Critical, inflexible factors required for locationalconsideration.
P - Primary, relatively inflexible factors weighingheavily in the locational decision.
Table 3.
Comparative Summary of Primary Locational Factors
Report
No.
Industry
Manpower
Training
Assistance
Labor
Supply
Labor
Cost
Advan-
tage
Unique
Site
Require-
ments
Transportation
Utilities
Urban
Orientation
Proximity
to
Customers
Proximity
to Raw
Materials
Other
(See
Footnote)
costs
Services
1.
Paper and Allied Products
PC
IP
Ep F1 Sc Mc
P(7)
C(7)
C1,2.5
2.
Textile Mill Products
PC
CP
PP
Ei Fi Sp Wp
3.
Apparel
CC
CI
P4.
Printing and Allied
Industries
IP
I_
IP
pC
5.
Electrical Component Parts
PC
P1
CC
66.
Textile Machinery/Pumps
and Valves
CP
11
Ei
Ip
3
7.
Office Machinery
PP
PC
3,4,6
8.
Motor Vehicle Parts
PP
PI
CI
p1
9.
Chlor-Alkali Industry
CC
CE
Wp
C1
10.
Materials Handling
Equipment
PC
II
pI
P6
11.
Mobile Homes
IP
PC
Ii
C
1
12.
Instruments and Controls
13.
Noncellulosic Synthetic
PP
II
P1
4,6
FaND
Fibers
IC
IC
PI
Ep ei Wp
11
1.4
I14.
Metal Stampings
15.
Aircraft and Aerospace
PI
PI
CP
1
Parts
PC
II
PI
I3,4,6
16.
Primary Aluminum Industry
IC
CC
Ee Fp Si Iti
11,3,4
17.
Nonferrous Castings
18.
Malleable and Ductile
PP
IC
IP
1,3
Castings
1P
CC
EP
IC
1,4
19.
Foamed Plastic Products
20.
Rolling, Drawing, and
IC
PP(8)
C(8)
Extruding of Nonferrous
Metals
IP
I1
CP
Ep Fp Sp
Pp
I1,3
21.
Meats, Dried and Frozen
Produce
IC
I1
CP
Ep Sc Wp
IC.
3,5
22.
Plastic and Powder Metal
Products
IP
1p
El
p
23.
Refractory Metals
PC
PP
EP
Ip
il
24.
Primary Steel and Steel
Mill Products
IC
CC
Ep Fi Sc Mc
CP
1.3
25.
Plastic Resins
II
IP
Ei Sp Wp
4
Table 3. - cont'd
NOTES:
(1)Highly sensitive to state and local taxation.
(2)Requires woodland ownership.
(3)Requires supporting services.
(4)Prefers proximity to community colleges.
(5)Desires active program of soil and land development.
(6)Desires community services and improvements.
(7)Applies only to corrugated container manufacturing.
(8)Applies primarily to producers of foam packaging.
Key to Locational Factor Evaluations:
C(c)
- Critical, inflexible factors required for locational consideration.
P(p)
- Primary, rea.Erinflexible factors weighing heavily in the locational decision.
I(i)
-TIIT:qaET11E-5577qms.TETtrintigT-Ue considered in determining new locations, but
may be
subject to trade-off against other elements of the locational equation.
1
(Blank) - Space indicates factors which generally are of minor or no importance in locational
decisions.
Utility Codes:
E- Electric power
F- Fuel (gas, oil or coal)
S- Sewerage treatment and disposal
W- Water for processing
W- Subscript denotes locational evaluation of utility requirements.
I - Important factors which must be considered but whichmay be traded off for other compensating advantageswhen the final locational decision is rade.
This scale of values is valid reading across the rows.It does not, however, have any validity reading down the columns,since cruciality in one industry seldom has equivalence withcruciality in another.
In the discussions which follow each of the primarylocation factors is considered with the insights of the locationanalyst. Particular attention is paid to the number of industriesfor which each factor has relevance (but not equivalence).
Manpower Training
Something more than a question of semantics separatescommunity spokesmen and location-seeking businessmen when theyboth talk about manpower training programs. Increasingly, thebusinessman, starting up a new plant thinks in terms of what thePernisylvania Governor's Council of Business and Industry calls"training by requisition"--that is, public, on-the-spot trainingof a work force for specific jobs that must be filled when a newfacility is about to be established.
Among the 25 industries in Table 3.this kind of trainingis crucial in the location of apparel and textile machinery plants.It weighs heavily in the location decision for 9 other industries.In most instances firms in these industries would be unwilling tocompromise this locational objective when alternatives are avail-able, since start-up costs would be adversely affected.
Labor Supply
Only 7 of the named industries can afford to consider alocation where an abundant and close-in supply of employable laborcannot be demonstrated locally. These industries tend to be oftwo types: (1) high wage industries which create their own labormarkets, and (2) establishments with a relatively small laborrequirement.
In contrast a demonstrably large supply of employablelabor within a few miles of the proposed plant location is crucialfor these industries: textiles, apparel, electrical componentparts, materials handling equipment, synthetic fibers, aircraftand aerospace parts, and the processing of meats and produce.
-14-
Likewise, the existence of a sizable labor pool is only a degreeless important to 11 other industries.
Labor supply has many parameters. From a hiring stand -point, it includes education levels, age profiles and previousexposure to industrial discipline.
Labor Cost Advantage
Community groups often lose sight of the fact thatlocation moves are made to reduce costs. There are a number ofavenues to lower costs. For some industries, textiles for one,wage differentials have primacy. Such differentials also haveparamount importance in the following industries: electricalcomponent parts, motor vehicle parts, mobile homes, metal stamp-ings and the fabrication of plastic and metal powder parts.
Frequently the search for a location offering favorablewage differentihls will be shaped by the type of union membershipprevailing in a community, male -female employment ratios inestablished manufacturing., and expectable responsiveness to incen-tive wage patterns and shift work.
Wrapped up in the manufacturer's persistent search forfavorable hourly wage differentials is concern for other factorswhich bear heavily on his total employment costs. These includefringe benefits, work rules, turnover and absenteeism. Communitieswhich appear to offer equivalence of average hourly earnings mayin fact be separated by a big dollar gap because of theseotherfactors.
Further, apparent equivalence in occupational job ratesmay hide the more basic fact that job titles and labor grades arenot similar. If, for example, an electrician in a metal fabri-cating plant receives a lower wage rate than one in the basicsteel industry, the proof is far from conclusive that the overallrate structure in the fabricating plant is lower. It may simplymean that the duties and skills for that particular job are lower.This, indeed, is the case if the fabricator is committed to useof the Steelworkers Job Evaluation Plan with identical (to basicsteel) payments for each labor grade.
Thus even in those industries assumed to operate on"national" wage patterns there can be substantial differences inunit employment costs from one community to another. AccordinglyColumn 3 of Table 3 must be read with a judicious eye.
-15-
Unique Site Requirements
Of the industries analyzed in this program, only pulpand paper, chlor-alkalies, synthetic fibers, primary aluminum,refractory metals and primary steel can be said to have siterequirements which are exceptionally large (hundreds of acres)or otherwise unique. In one sense or another, these can be called"wet" industries because they must be on or near a waterway forbarge transportation, water intake or effluent disposal. Thelatter two uses of water will have primary inportance for sometextile mills, which also have become increasingly large usersof land.
For those industries where "unique sites requirements"are not indicated it cannot be assumed that site selection is amatter to be relegated to subsidiary importance. In the finalselection of one location over another the community which canconvey an attractive, serviced 40-acre "general-purpose" site hasa major advantage which quickly may erase other so-called trade-offs.
Transportation Costs
Labor costs and total transportation costs (inboundand outboupd freight charges) frequently are paired in trade-offs.For example, in considering alternative locations the manufacturermay accept somewhat higher freight costs if compensating wage ad-vantages are available to him. Thus a large user of sheet steelfor metal stampings can accept the freight penalty that goes withmoving, say, 200 miles farther away from his mill source of steel.He can do this because the wage differential needed to offset thefreight penalty may amount to only 4 or 5 cents an hour, if his isa fairly large operation.
Seldom in Appalachia, however, will the manufacturer bewilling to consider this kind of trade in a reverse sense--thatis, accepting a wage penalty because there appears to be an off-setting freight advantage. In short, the trading-off process forlabor costs and transportation costs usually operates in only onedirection, given the competitive realities of the marketplace.
From Column 5 of Table 3 it can he seen that transpor-tation costs are designated as "crucial" (C) for 8 industries andas "primary" (P) for 4 industries. More often than not, it isoutbound transportation charges that control in these industries(e.g. caustic soda and chlorine, mobile homes, primary aluminum,iron castings, foamed plastics, nonferrous rolling mill productsand steel mill products).
-16-
This tends to be true whether the product is soldF.O.B. producing point, with transportation charges prepaid bythe manufacturer, or purchased on a "delivered pricing" or freightequalized structure. Whatever the basis, the amount of freightthat must be charged or absorbed affects the producer's competi-tive position.
Transportation Services
Both the availability and quality of transportationservices add up to a cost element distinct from freight charges.Poor delivery service to customers is a major cause of lost busi-ness. It is also one that is frequently masked by other factors.On the inbound side, sluggish deliveries of raw materials and sup-plies make it necessary to stock excessively large inventories.Carrying charges on inventories add 20 to 30 percent or more tothe cost of raw materials.
The cruciality of transportation services should benoted for these industries: electrical component parts, motorvehicle parts, caustic soda and chlorine, metal stampings, primaryaluminum, nonferrous castings, malleable and ductile iron castings,and primary steel. Note also that there are 12 additionalindustries where only limited compromises of this factor may beaccented.
The thicket of transportation problems which confronts thesite-seeking businessmen in many parts of Appalachia is givencomprehensive analysis in Section III of this report under"Transportation Policies."
Utilities
The number of industries for which energy, water andwaste disposal are crucial location factors is relatively small.The cost of energy has primacy in the production of caustic sodaand chlorine, primary aluminum,and electric furnace operationsfor ferroalloys and some refractory metals. It has greater-than-average importance for pulp and paper, malleable and ductile ironcastings, the rolling of nonferrous mill products, meat packingand steel production.
The theoretical economist tends to approach the cost ofenergy as a percentage of total manufacturing costs. In contrast,the businessman thinks of absolute costs and cost differentials.To put the matter another way, a cost differential of, say, $200,000a year has far great significance for him than the percent this
-17-
represents of his total manufacturing costs. Much the same canbe said of his view of fuel bills.
Water and waste disposal tend to loom as key cost factorsonly when there is a large use of water for consumptive and pro-cessing purposes. This is certainly true for pulp and paper, tex-tile dyeing and finishing, the production of caustic soda andchlorine, rolling mill operations, poultry processing and variousbranches of the steel industry.
Waste disposal costs have several implications. For one,they may mean excessive land acquisition and development coststo provide lagooning, as in the pulp and paper industry. Foranother, they are often a limiting factor in deciding whetheran industry can expand at an existing site, as in textile finishingand broiler processing. Then, too, there are thorny legal questionswhich may have interstate significance, which to resolve, wouldrequire extensive time and money.
With stricter Federal standards now in effect, an in-creasing number of industries which normally consider treatingtheir own wastes will be looking for community situations wherepublic sewage disposal systems can take over.
Urban Orientation
From one firm to another there is a broad spectrum ofideas on the meaning of urban orientation. For some it signifieslocation within a sizable city. For others, it connotes suburbanoperations. For still others, the urban orientation requirement,if there is any, can be satisfied with an exurban site that hasfairly close orientation to a large urban area.
If it is possible to generalize--and doubt exists onthat point--the only industries in the Appalachian Industry LocationStudies Program for which urban orientation has a high degree ofsignificance are paper boxes and corrugated shipping containers,various branches of printing, office machinery, the larger estab-lishments in the instrument and controls industry, plastics forpackaging, and the production of plastic resin compositions andadhesives.
Urban orientation is, indeed, a trade-off factor. Pairedwith it in many trade-offs are land acquisition costs and a femalework force needing supplementary family income.
-18-
Proximity to Customers
Many branch manufacturing plants are established toachieve deeper penetration of a market than can be won by servingthe market from a headquarters plant or distribution warehouse.The "market" may be a single customer, a compact cluster ofcustomers, a region, or a subregion. Additional business pickedup by moving closer to the buyer may have far greater significancethan any savings in freight costs.
Industries for which these considerations have overridingimportance include paper containers, business forms, certain elec-trical component parts, textile machinery, pumps and valves, someautomobile parts, caustic soda and chlorine, many types of materialshandling equipment, mobile homes and school busses, metal stampings,many metal castings, aluminum rolling mill products, refractorymetals, steel mill products and plastic resin compositions.
For all its importance, proximity to customers can oftenbe traded off from one community to another. Important exceptionswhere flexibility is more limited include chlor-alkalies, colitractmetal stampings, foamed plastic packaging and industrial gases forprimary steel. In these exceptions proximity to a customer fre-quently means an across-the-street or over-the-fence relationship.
Proximity to Raw Materials
Among the glittering generalities of Appalachian liter-ature is the one that the region's extractive resources are thekeystone of its industrial future. Indeed, Appalachia does haveimpressive resources of timber and energy. Except in a few in-stances, however, it is difficult to establish any crucial rela-tionship between these resources and the needs of manufacturingindustries which now operate in the region or are likely candidatesfor new operations.
The pulp and paper industry is a major exception, ofcourse, as are meat packing, poultry processing and .other branchesof agribusiness, as well as some aspects of the primary metalindustries. But for the large majority of industries it must beconcluded that human resources rather than extractive resourceswill shape the majority of industrial expansions.
Other Factors
The common denominator of Column 10 in Table 3 is state
-19-
and local taxation. While this conjures up many aspects ofbusiness taxes, it can in.many instances be reduced to tax burdenson machinery and equipment or inventory, or both.
No factor in plant location is more difficult to pindown. Tax rate schedules and manuals say one thing. Surveysof government finances convey other ideas. Arms-length bargainingwith the tax assessor gives still different answers.
As in the case of utility bills, the businessman tendsto look at the dollar amounts of dollar differences rather thanthe percentages of his total operating costs these might represent.For the capital intensive industry, taxes on machinery and equip-ment obviously are a great deal more important than real estatetaxes.
Further tax burdens are determined not only by ratesand assessment ratios but also in the manner of assessment. Thelatter prominently involves allowable methods of depreciation.
Some Appalachian States give their communities consider-able leeway in exempting the machinery and equipment of industrialnewcomers. Others have sharply reduced the tax take on inventories.It is not the intent of this report to argue the merits of individ-ual state actions. Instead, the purpose is to make clear that thevarious states operate under different philosophies. Accordingly,it cannot be said that taxation is a regional issue. More to thepoint is the observation that the 12 states do not choose tocompete on equal footing in dealing with what to the businessmanis an important cost element subject to conscious locational choice.
Summary
Obviously the appropriateness of these recommenda-tions will vary in importance from one sub-area of Appalachiato another The priorities within a sub-area are determinedprimarily by its prospects for industrial development. Thus,in an area which already possesses good transportation accessand where there is some existing potential for attracting marketsensitive industries the highest priority for public policiesmay fall on the development of certain skills in the labor forceor the upgrading of municipal water supplies rather than trans-portation investment which might normally be assumed.
-20-
The individual industry monographs should be examinedto ascertain the importance of various public actions in attract-ing a given industry. The intention of the following generalrecommendations is to cut across industry lines and specifypublic activities which are generally useful in making areasattractive to public employers. These recommendations are botha distillation of the individual industry studies and a list ofadditional actions which, though common to some of these indus-tries, are also probably attractive to industries not studied.The recommendations have been sequenced in terms of our judgmentwith respect to their overall priorities. These will necessarilydiffer for any given industry and for a particular area that maybe studied in terms of assessing the probability of location orexpansion of these industries or industry in general.
-21-
III - IMPROVING THE COMPETITIVE POSITION OFAPPALACHIA FOR INDUSTRY
Introduction
Experienced observers of the industrial developmentfunction are the first to note that there are always some commu-nity action groups which do a conspicuously better job than theircompetitors year in and year out. Suspicion exists in enviousquarters that these are the "lucky" communities--lucky enough tohave .the right geographical location, lucky enough to have anoven lowing industry-getting war chest, lucky enough to have in-spired leadership at the helm.
Actually each of these explanations is meaningless.There is no "right" geographical location in an absolute sense.Further, even the more successful industrial development effortstend to be chronically underfinanced and inspired leadershipusually can be equated with nothing more than the disciplineimposed by demanding hard work.
On closer analysis the "lucky" communities turn out tobe those who have made priority decisions. They have, in theirindustrial development programs, decided what to concentrate onand what to abandon. They have places emphasis on what to dorather than on how to do it. In short, they have become opportu-nity-focused rather than problem-focused. Implicit in these act-tions is the allocation of scarce resouvzes--people, money andtime--to results.
If .tppalachia is to move faster economically, if moreof its communities are to be successful in attracting favorableattention from industry, there must be similar allocation ofscarce resources to industrial development opportunities ratherthan "problems". In short, the Federal Government, the 12Appalachian States and their communities are at a fork in the roadto industrial development where the basic and correct choice iswhat public actions and policies to adopt--not how to do them.
Farther down, the road there is, for the theoreticaleconomist at least, a sumptuous menu of choices and a super-abundance of calories, all of which in one way or another cannourish the industrial outlook of the region. For the plantlocation analyst, however, the needs of the region narrow down toa dietary intake which will give more Appalachian communities theglow of health that catches the eye of the site-seeking business-man.
-22-
In what follows the significance which the locationanalyst attaches to each dietary item is given explicit meaningand formulation as a series of recommended actions and policies.The first five series of recommendations have been assigned thehighest priorities. These actions and policies are crucial.Other recommended actions which follow in sequence cannot be as-signed equally precise orders of priority. They comprise, how-ever, the elements necessary to balance out the total industrialdevelopment effort.
-23-
Priority No. 1
MANPOWER DEVELOPMENT
Academic Education and Manpower Training Programs
The literature in economic growth policies abounds in de-clarations about the need to train and retrain manpower for occupa-tions of the future. Too much emphasis on preparation for thefrontier occupations, however, takes attention away from thelengthening agenda of everyday recruiting problems faced by indus-try when it starts up new operations in Appalachia.
In selecting Appalachian locations, the mere existenceof vocational and technical training programs is less a compellingconsideration in the decision-making process than local or areaquick-start capabilities for providing personnel, equipment andservices critically needed in the anxious first months of breakingin a plant. As a competitive reality, the burden of proof is onthe community to demonstrate that there is present responsivenessof a kind geared to minimizing start-up risks and costs.
At the local level--and indeed often at state levels--inAppalachia there is faulty understanding of the essential differ-ences between furnishing down-to-earth manpower assistance duringstart-up operations and providing programs which assure a reliablesupply of salable skills for support and social satisfaction ofalready established industry.
This faulty understanding stems from a belief that thelarge corporation, usually the one most closely identified with lo-cational activity, trains its own people and therefore needs onlyassurances (no matter how generalized) that the local labor marketcan provide numbers of people believed to be trainabie. In the tra-dition of the national economy, intermediate and higher work skillshave indeed been created in the factory or office.
Two fallacies underlie this belief, however. One is thefact that over the past decade the burden of training the unskilledand teaching intermediate skills has been shifting from business togovernment. This shift is understandable and even inevitable in anexpanding economy which demands an unprecedented number of new fa-cilities, and imposes new strains on managerial capability.
A second fallacy is failure to recognize that in Appala-chia, as elsewhere, the relatively small business is the one whichprovides the largest number of work opportunities--and the onewhich now, as in the past, is most in need of outside trainingaids. For all their importance, particularly in manufacturing, thenation's very largest corporations carry Oil their payrolls onlythree out of ten nonagricultural (and nongovernmental) wage andsalary earners (see below):
-24-
Employees (000):1964
500 largest U.S. industrial corporations 10,46450 largest commercial banks 21850 largest life insurance companies 28350 largest merchandising firms 1,48150 largest transportation companies 83450 largest utilities 978
Total employment of above 14,258
Total U.S. nonagricultural employment (excludinggovernment) 48,686
Large corporation employment, percent of U.S.nonagricultural employment 29.4%
Sources: The Fortune Directory of the 500 LargestU.S. Industrial CorporationsManpower Report of the PresidentStandard & Poor's Register of CorporationsDun & Bradstreet's Million Dollar Directory
Both observations--the need for quick-start manpowertraining programs and public acceptance of economic responsibilityfor teaching intermediate skills--accurately reflect the thinkingof industry with recent locational experience in Appalachia. More-over, many of these industrial newcomers, plus perhaps an evenlarger number of location-seeking businessmen who have chosen towait out further developments before venturing into Appalachia, willbe more encouraged to locate in the region if they see greaterprogress in combating illiteracy and upgrading academic education.
The latest evidence to attract business attention comesin the form of newly released Department of Defense data which showthat in Appalachia, as elsewhere, there is an alarmingly closecorrelation between most generally accepted measures of state edu-cational performance and results from the Armed Forces Qualification Test (AFQT), which the Armed Forces use in connection withpersonnel assignment as well as in acceptance of draftees and en-listees. Rejection rates for young men from the 12 Appalachianstates, based on the largest and most homogeneous population stud-ied so far, are given below:
-25-
Armed Forces mental testfailures, 18-year-olds:
Draftee failures on Armed Forces June 1964-December 1965mental tests (by percent) study (by percent)
Aug.1958-Dec.1965 1965
U.S. AVERAGE 23.4 20.2 25.3
South Carolina 53.2 48.2 54.6North Carolina 42.5 41.1 53.0Alabama 42.3 38.5 44.5Georgia 41.3 41.2 43.2Tennessee 36.3 31.8 49.0Virginia 33.8 28.9 45.3Kentucky 33.5 26.5 39.1West Virginia 31.3 27.8 35.5Maryland 27.1 24.1 27.8New York 24.4 20.4 24.9Pennsylvania 15.5 13.9 13.7Ohio 14.7 14.0 13.9
"In general," says a report from the Surgeon Generalof the Army," them: is a positive correlation between AFQT scoresand education. The youth's score on the AFQT depends on severalfactors: on the level of his educational attainment, on the qual-ity of his education (quality of his school facilities), and onthe knowledge he gained o_ his educational training otherwise,in and outside of school. There are interrelated factors, whichvary with the youth's socio-economic and cultural environment, inaddition to his innate ability to learn."
Viewed in this context, the doubts whichpresses for the manpower outlook in Appalachia canthe economic questions which the engineer asks forservice: is it competitive in cost?; is continuityliable?; is the system capable of adjusting to newunforeseeable demands?
industry ex-be likened toelectric powerof supply re-and sometimes
In taking this economic view of education, the business-man finds himself in close agreement with nationally prominentspokesman Caudill for the Cumberland Plateau in Kentucky and econo-mist Denison, who documents a strong case showing that increasededucation is not only one of the largest sources of past and pros-pective economic growth, but one of the elements most subject toconscious social decision. Denison demonstrates t1.t adding oneand one-half years to the time that will be spent in school byeveryone completing school between now and 1980 would be three
times more important for national growth than shifting to otheruses the resources that are going into "unwanted or littlewanted farm products."
If the Appalachian States are to dispel the misgivingsand reservations of location-seeking businessmen, if the regionis to exploit what, statistically at least, is its greatest re-source for new industry (unused manpower), then it becomesabundantly clear that education should be given number one pri-ority in any program to make more communities in the region moreattractive to industry.
Relatively little can be accomplished at the communitylevel without the benefit of bold steps by the states. According-ly, we recommend that the states give priority to programs forstrengthening their educational resources. From the standpointcf the location-seeking businessman, the following principlesshould govern:
General Education
(a) Continued upgrading of community colleges withemphasis on area technical institutes of ,junior college status.If experience is any criterion, industry is partial to thejunior college or the area technical institute with junior col-lege status. Businessmen base this belief on the convictionthat (1) the junior or community college is consistent withlong-term objectives for improving academic education, (2) stu-dents in vocational or technical training at such colleges enjoythe same prestige as four-year college-bound students, (3) theseinstitutions are more likely to retain the best manpower resourcesin an area for at least a year or two longer, (4) technical train-ing programs are never frozen in content but are adjusted to thechanging needs of industry and (5) there is flexibility on a largescale for setting up additional programs that may be needed toprovide trained manpower for new industry.
(b) Establishment of business advisor committeesfunctioning at the secondary school level of educat on.
(c) The promotion and implementation of innovativeinstruction programs with built-in provisions or evaluation.
(d) Systematic and uniform measurement of what chil-dren actually learn and when and how well they learn it.
-'27-
Vocational Education
(a) Development of capabilities for activating quick-start manpower training programs. In principle, this idea of themobile training program brought to the community where a new in-dustry is starting up is not new. It has been used for years intraining and staffing sewing and footwear operations. Extensionsof the concept to any type of industry and its local applicationunder state auspices is a relatively new development. One formof the quick-start program,. utilized by South Carolina, embracesthe following key elements:
(1) A state committee for technical education com-posed of experienced industrial engineers,educators, methods analysts, recruiters, andother industrially oriented staff.
(2) A rather large equipment pool which can bemoved from location to location for equippingspecial schools in the community where a newindustry is starting up.
(3) Temporary training quarters supplied by thecommunity.
(4) Surveying the labor market, recruiting, screen-ing and testing of applicants.
(5) Assignment of teaching personnel and methodsengineers to the temporary school.
Added features designed to make the overall plan attrac-tive to industry are close liaison with both the home plant andlocal management of the industrial newcomer, undivided responsi-bility, and lack of red tape.
It is obvious from the foregoing that the quick-starttype of training cannot and should not substitute for more ,balancedvocational education having the aims of achieving continuous' up-grading of manpower capabilities. It is equally obvious, fromthe viewpoint of the location-seeking businessman, that quick-starttraining supplies what, all too often, is lacking in conventionalvocational education--tailor-made help, provided when it is mostcritically needed by the manufacturer: the staffing and start-upperiod for a new plant. Adding further appeal for the industrial-ist is relief from cumbersome procedures, such as applying forgrants, allotments, multiagency approvals and, not least of .all,joint community and state involvement in seeing that all goes well.
-28-
(b) Generating business incentives for in-plant train-ing at established plants. As pointed out earlier, the burdenof training the unskilled and intermediate skills has been shiftingfrom business to government. No reversal of that trend can beanticipated, particularly in the location of new industry. Thereare good reasons to believe, however, that the force of this trendcan be diminished, if not halted, with provision of suitable in-centives that would make it financially attractive for expandingindustry to shoulder a greater burden of in-plant training. Thisidea has taken tangible form in proposals for tax credits, advancedby First National City Bank of New York, among others. Grantinga tax credit on business investment in the training and retrainingof workers would create a more mobile and flexible labor force,raise productivity, ease skill shortages, and slow down wageescalation among workers in short supply, according to Citibank.
Obviously, metropolitan areas and urban centers inAppalachia would be the ones to benefit directly from such measures.Over the long run, however, benefits could be expected to filterout to the rural areas, particularly those within the labor shedsof the cities, by raising future productivity of commuting workers,who then would be more employable by new industries which mightlocate in the home communities of such workers.
Two observations should be given weight in these recom-mendations. One is that ultimate success in vocational andtechnical training efforts is inextricably bound up in achievingan overall level of excellence in the educational system. Thesecond is that policies which encourage superior education arelikely to have greater effect on enhancing community environmentthan any other single policy which might be adopted in Appalachia.
(c) Greater use of industry-oriented advice (experiencedindustrial engineers, methods analysts and recruiters) in statebodies administering vocational-, industrial and technical educa-tion programs. States making effective use of this principle in-clude South Carolina (State Committee for Technical Education)and Pennsylvania (Governor's Committee on Education and the newCouncil on Higher Education).
(d) Preparation of uniform directories of occupation-centered curriculums in each state. The uniform directory can benot only an aid to the prospective employer but also a diagnostictool to pinpoint the balance of training effort with evolving in-dustry requirements in the area.
-29-
Providing Better Local Labor Market Information
On the basis of it industry mix and underemployment,Appalachia as a region undoubtedly haS a larger reserve of unusedmanpower than any other region in the nation. Undeniably, thisobservation has statistical significance-und socio-economic import.Unfortunately, it carries with it little practical meaning forbusinessmen, who do not locate plants in regions but in communitieswhich can provide employable manpower.
Intraregional differences in labor supply and costs turnout, more often than not, to be greater than interregional factors.The site selection process always must get down to making precisecomparisons of individual labor markets, taking into account thefollowing factors, among others:
(1) Population size, age profile, and education(2) Labor force size(3) Industrial base and employment(4) Industrialization trends(5) Recent expansion programs(6) Wage patterns(7) Fringe benefits(8) Turnover(9) Absenteeism(10) Commuting patterns(11) Employer and employee attitudes012) Union leadership(13) Extent of incentive-rated jobs(14) Seasonal operations(15) Use of part-time workers(16) Output and quality of vocational schools(17) Output of high schools(18) Personal income and spending patterns(19) Response to shift work(20) Influence of surrounding labor markets
Some of these factors lend themselves to precise measure-ment. Others do not, but their probable effects on new industrycoming to town can be gauged fairly accurately, nonetheless.Measurements and evaluations can be made only after intensive in-vestigation by the site-seeking businessman or his location consul-tant. The screening process, however, frequently starts from anexamination of information already available in published form.
Reasonably good, comparable employment and earnings infor-mation is available over various spans of years for 16 metropolitan-areas in Appalachia. From the simplified tabulation given on thefollowing page, it can be seen that these metropolitan areas range
-30-
in size of nonagricultural employment from 37,000 to 828,000, inmanufacturing employment from 14,600 to 299,600, and in averagehourly earnings of manufacturing production workers from $1.98 to$3.29.
Labor market areadesignation
Altoona, Pa.Binghamton, N.Y.Birmingham, Ala.Charleston, W.Va.Chattanooga, Tenn.-Ga.
Elmira, N.Y.Erie, Pa.Greenville, S.C.Huntington-Ashland,
W.Va.-Ky.-Ohio
Johnstown, Pa.
Knoxville, Tenn.
Pittsburgh, Pa.
Scranton, Pa.Wheeling, W.Va.-Ohio
Winston-Salem, N.C.Wilkes-Barre -
Hazleton, Pa. Luzerne 114.2 52.2 2.09
Employment1964(000)
Averagehourlyearnings
Counties included Nonag. Mfg. 8/66
BlairBroomeJeffersonKanawhaHamilton, Tenn.Walker, Ga.Chemung 37.0 16.6 2.73Erie 89.9 43.7 2.81Greenville 104.8 53.1 1.98Cabell, W.Va. 79.2 27.6 3.07Wayne, W.Va.Boyd, Ky.Lawrence, OhioCambria 76.2 27.5 2.90SomersetAnderson 135.7 47.8 2.44BlountKnoxAllegheny 827.8 299.6 3.23WashingtonWestmorelandLackawanna 81.9 34.6 2.14Marshall, W.Va. 56.4 16.8 2.87Ohio, W.Va.Belmont, OhioForsyth N.A. 38.8 N.A.
44.5 14.6 $2.29101.7 47.4 2.58220.5 66.4 2.9383.6 22.6 3.29
118.0 50.7 2.38
The above labor markets embrace a total of 27 counties outof a total of 373 counties in all Appalachia. For the 346 countiesnot regularly reported in Employment and Earnings, issued by theU.S. Department of Labor, there are other sources of information ofone kind or another. These include individual state publications,employment security statistics, County Business Patterns, andvarious types of local data.
-31-
This information, where it is readily accessible andavailable (as is often not the case), has a much lower level ofutility. It suffers froth incompleteness, lack of continuity, non-comparability, and other defects. It places immediate obstacles inthe path of location-seeking executives undertaking realistic com-parisons of labor market factors in rural and small urban areas ofAppalachia. In short, regional statistical surpluses of labor andpresumed wage advantages of Appalachia cannot now be given localfocus without detailed investigation on the spot. And often thereare no incentives for making these field investigations withoutsome prima facie evidence that they will be economicallyjustifiable.
These observations can be summed up by saying that themost basic of all plant location needs, regardless of the type ofindustry, is reliable, up-to-date local labor market information,readily accessible. Despite public announcements or declarationsto the contrary, much of the industrial development in rural andsmall urban areas throughout the country has been the result of asearch for improved labor conditions. Manufacturers have attemptedto reduce labor costs, improve labor conditions, and avoid restric-tive union practices.
While there may be no valid reasons for questioning thequantitative supply of labor, there are indications that merenumbers of people in rural and small urban areas of Appalachia areless meaningful than in other regions. For a number of reasons,including educational level, commuting problems in the mountains,machine adaptability, and even social attitudes, it would appearthat greater selectivity would be needed in Appalachian areas thanin many others. What this means is that a higher ratio of appli-cants per job opening is probably required.
Given the fact that many large parts of Appalachia cannotdemonstrate the availability of employable manpower in terms thatare satisfactory to the industrialist, the question arises as towhat the Federal Government, the states, and local groups can do tomeet present and future needs. A second question concerns whatpriority should be assigned such actions.
We recommend the following:
(a) Action by the Bureau of Employment Security in eachstate to make available to the U.S. Department of Labor data forsmaller labor markets for inclusion in Employment and Earnings.We propose that coverage include employment and earnings data forthe following new small labor market areas:
-32-
AlabamaAston (Calhoun County)
Florence-Sheffield-Tuscumbia-Muscle Shoals (Colbertand Lauderdale Counties)
Huntsville SMSA (Limestone and Madison Counties)
GeorgiaRome (Floyd County)Gainesville (Hall County)Dalton (Whitfield County)
KentuckyMiddlesboro (Bell County)Corbin-London (Knox and Laurel Counties)Pulaski (Somerset County)Winchester (Clark County)
MarylandCcumberland-Hagerstown (Allegany and Washington
Counties)
New YorkNone
North CarolinaAsheville (Buncombe County)Lenoir (Caldwell County)Winston-Salem (Forsyth County)
OhioSteubenville- Weirton SMSA (Jefferson County in Ohio)Chillicothe (Ross County)Portsmouth (Scioto County)
PennsylvaniaJohnsonburg-St. Marys (Elk County)Sunbury (Northumberland County)Williamsport (Lycoming County)
South CarolinaAnderson (Anderson County)Spartanburg (Spartanburg County)
TennesseeElizabethtown- Johnson City (Washington and Carter
Counties)Kingsport-Bristol, Tenn.-Va. (Sullivan County inTennessee)
McMinnville (Warren County)
-33-
VirginiaCovington (Alleghany)Pulaski-Radford (Pulaski City, Radford City, and
Pulaski County)Kingsport-Bristol, Tenn.-Va. (Bristol City andWashington County in Virginia)
West VirginiaSteubenville-Weirton, Ohio-W.Va. (Brooke County
in W.Va.)Clarksburg (Harrison County)Parkersburg (Wood County)
Obviously, all small labor market areas in Appalachiacannot be covered. Those proposed, however, fill in many yawninggaps on the Appalachian map and provide a sizable number ofbenchmarks for economically active counties from which smallersurrounding counties can be surveyed as needed.
The usual arguments against small labor market coverageare ones of costs and the fact that political boundaries often cutthrough homogeneous wage areas, while concealing important wagecontrasts within the political unit. The latter observation, ofcourse, has equal validity in metropolitan areas now reported andis therefore not sufficient to rule out smaller areas.
The Bureau of Employment Security, U.S. Department ofLabor is actively pursuing a "Smaller ComMunities Program." How-ever, its utility for the location-seeker is limited, since itis a "one-time" report for individually selected counties and doesnot include employment, hours, and earnings data.
The proposed program might be regarded by some as beingtoo expensive. The expense is indeed worthwhile, considering theurgency of bringing Appalachia's manpower resources into sharperfocus. Employment and Earnings, which is regularly cow:ulted bycorporate management in advance of making location decisions, pro-vides one of the best possible mediums for giving this focuspraiseworthy exoosure.
(b) Development of systematic and uniform state plansfor collecting and updating labor resources information on a countybasis. Various states issue individual county data books orcompendiums. Often much that is extraneous from a labor recruitingpoint of view is included; often much that is essential is omitted.Some contain standard Census of Population data with 10- and15-year projections (e.g., Georgia). Still others contain propri-etary income and current population estimates (e.g., SalesManagement, and Editor & Publisher Market Guide). In a fewinstances (e.g., Alabama) authoritative employment data forcurrent and earlier years are presented.
-.34-
Only one Appalachian state, Kentucky', has instituted asystematic program for 'bringing together in cue place enough demo-graphic and socio-economic data from which independent estimatesof the recruitable labor supply can be made on either a county ormulti-county basis.
The Kentucky program, prepared with consultative help,presents 16 items of population information, some 20 items of laborforce and employment data, 12 items of income and spending patterns,and more than 2 dozen items relating to education and student devel-opment. All of this information is of sufficient quality to estab-lish a reliable basis for estimating male and female labor supplywithin certain age brackets, when the county industry mix is givenits proper weight.
As an effort supervised by the state, the Kentucky pro-gram makes available to the industry and the local community datawhich are germane to the complex problems of labor market analysis.Initiation of similar programs in other Appalachian states may notbe without its problems, however. One is the matter of costs,which may include consultative services for interpretation to re-move industry suspicions of local bias. As in the previousrecommendation, however, it may be a justifiable expenditure offunds under Appalachian programs to ease burdens on the individualstates.
Other problems involve ones of judgment--what to add orwhat to leave out. Various local groups and some states have incirculation labor "surveys" which purport to show how many peopleare available for work. Local feelings that these are adequateare not shared by industry. Furthermore, such local surveys sel-dom contain information that is useful for other decision-makingprocesses, particularly those affecting vocational education.
Viewed in all of its ramifications for the locationdecision, it can be seen that providing better labor market infor-mation is a task closely interrelated with programs we haveadvanced for academic education and manpower training. On thisbasis we assign it equal priority--number one.
(c) Machinery to provide realistic labor market informa-tion. One of the tenets of the Vocational Education Act of 1963is that there should be cooperative agreements between vocationaleducation agencies and public employment agencies. This provisowas written into the Act to insure that consideration is givento available labor market data and that there will be effectivecoordination of the counseling services offered by schools andemployment services. Praiseworthy as this objective may be, thereare good reasons for believing that most vocational educators in
-35-
the Appalachian States are limping along with a bare minimum oflabor market information and much of it outdated at that. Oneof the biggest gaps that needs closing is effective communicationbetween school systems, employment security departments, and stateindustrial development agencies. At the most elementary level,this gap points up a need for record keeping by school super-intendents which will quickly make available to others such basicinformation as the graduate output of high schools, follow-uprecords of the graduating class, numbers of high school dropouts,and so on.
To plug this gap, Kentucky's Department of Commerce hasdeveloped machinery for supplying on a county basis uniform andcontinuing information on high school enrollments (grades 10 to12), the number of male and female high school graduates, plusthe status of male and female graduates in each of the followingreceiving categories: college or university; trade, technical ornursing school; commercial schools; sales and office employment;farming employment; factory or trade employment; other employment,including military; at home; and unknown.
Those who have had first-hand experience in trying toassemble similar information for small labor market areas inother parts of Appalachia will recognize the innovative value ofthis system, not only to vocational counselors but also to thelocation-seeking businessman with a need to gauge the dynamicsof local labor market strength beyond the shallow depths of con-ventional labor force statistics.
-36-
Priority No. 2
TRANSPORTATION
Introduction
There is more than a grain of truth in the belief thatchanges in industrial output and in location appear to alter thestructure of transportation, rather than the converse. Indeed,certain types of plant location site selections in rural areas canbe made with the presumption that both the required quantity andquality of transportation services, as well as the necessary ratestructures, will develop or will be created in prompt response toshipper demand.
All too often, however, this presumption cannot be made.This is particularly true for industries which require so-calledpremium service involving frequent movement of goods in small lots,with short door-to-door delivery time, with a high predictabilityof arrival time, plus the requirement of minimum handling, lowlevels of loss and damage. In such cases, site selection usuallymust narrow down to a small handful of carefully chosen urban areas.
Between these two extremes there is a twilight zone inwhich it may be possible to compromise transportation objectiveswithout sacrificing other locational advantages that may be avail-able. The possibilities for such compromise depend in part on thenature and size of the industry, as well as the company and commu-nity involved. There are also the broader and more basic consid-erations of regulatory problems, the realities of intercarrier andintermodal competition plus, of course, regional geography andinfrastructure.
In its 1964 report to the President, the AppalachianRegional Commission did not accept the proposition that the flowof goods to and through remote areas must take an evolutionarycourse in response to the gradual development of industry withinthe region. Instead, the Commission recommended that such areasbe given capabilities for meeting the needs of industry through theconstruction of development highway systems and other roads, air-port improvements, etc.
This recommendation for road construction has since beengiven the highest priority and the largest allocation of funds($840 million over 6 years) under Section 201 of the AppalachianAct. The next priority that must now be considered is the infi-nitely more complex one of building upon this infrastructure (andin other cases grafting to it) a structure of transportation andpolicy guidelines which can supply existing industry (and demon-strate to location-seeking industry) the.distribution servicesthat are needed.
-37-
This undertaking involves (1) identification of specificindustry requirements, (2) removal of impediments to satisfyingthese requirements, and (3)coordination of actions, includingregulatory policies which will generate incentives for trans-portation carriers to make maximum use of the infrastructure nowbeing created. Perspectives on the first of these three con-siderations are supplied by each of the individual AppalachianIndustrial Location Studies.
The remaining two considerations cut across industryboundaries and must be dealt with on the level of policies andactions that are, for the most part, regional in scope. Thefollowing recommendations, presented as individual items, musttherefore be regarded as interrelated actions and policies to bepursued as a total effort to increase the attractions of the regionin the eyes of carriers which supply transportation and in theminds of businessmen who purchase transportation services.
This total effort should have priority only second tothe first priority assigned to "Manpower Development."
Motor Carrier Service-
Contrary to public opinion, the construction of newand better highways does not automatically bring additionaltrucking services to shippers in the affected'areas. Severalformidable obstacles must be surmounted before this service canbecome a reality.
One of the more basic problems concerns the steps neces-sary to modify the franchise (operating rights) of common carriers.Ordinarily, this requires extensive and expensive litigation withsupporting documents before the Interstate Commerce Commission andthe courts. In all cases, the burden of proof is upon the appli-cant to show that service by his competitors does not meet needsof shippers.
For example, Motor Carrier A may propose to extend hisauthority between certain origins within Appalachia and destina-tions outside Appalachia. This petition may be opposed by MotorCarrier B supported, in turn, by Motor Carrier C, and perhapsRailroad X. Carrier A must demonstrate that B, C, and X cannotperform this service. It is not difficult for the three opposizioncarriers to block the petition by contending they can perform theservice, given the traffic, even though they may have little or nointerest in doing so.
-38-
The shipper, or prospective shipper, is caught in adilemma involving a regulatory problem on the one hand and competi-tive infighting on the other hand. The latter, in turn, may haveas its entrants two or more common carriers, a common carrier, anda contract carrier, or two or more modes of transportation (e.g.,water, rail, or truck). As a result, the number of extensions madeis very limited and many situations tend to remain frozen in areasneeding the most help.
A more favorable outlook is encountered for certaincontract carrier petitions, particularly where the basis for peti-tion concerns providing special equipment (certain van sizes ortank trucks of a specialized nature) for hauling a specified com-modity between two points. Rights granted in such cases, however,are limited only to the specific request.
As matters now stand, smaller communities can exertlittle or no influence in solving this everyday problem of plantlocation. Only the very largest chambers of commerce have suffi-cient resources to employ the services of transportation specialistslicensed to practice before the Interstate Commerce Commission andprepared to argue public convenience and necessity.
Smaller communities are also caught in a problem ofanother kind. This concerns non-use of operating certificates bya number of carriers. This non-use, or infrequent use, is rathercommon in areas deemed unprofitable because of the low frequency oftraffic generated. Very often such areas, containing otherwisedesirable small communities, will be bypassed by site-seeking busi-nessmen because the certificated carriers do not (a) openly solicitbusiness in the area, or (b) rely on a local cartage agent whospecializes in service to a few towns on behalf of several long-haul carriers operating out of a central city.
Carriers who have the operating authority to serve aparticular area but use agents to perform the service for themusually keep the legal title from becoming dormant by performingan isolated pickup or delivery once or twice a year.
It matters not that there are cases where manufacturerswho have offered all inbound and outbound traffic to a singlecarrier have been known to activate as much as 125 miles of addi-tional direct routes within Appalachia. These cases tend to bethe exception and, in any event, the potential for this fortuitouscombination of factors is seldom something that can be conveyed bythe small community to the industrial prospect while a locationproject is still in the screening stage.
-39-
Grandfather operating rights issued to motor commoncarriers in 1935 have since been divided, sold, and consolidatedmuch like real estate. Carriers are more than willing to provideregular service within their operating rights where the trafficjustifies. Table 1 gives a good testimony of this by the number ofcarriers offering their services to the major population centers ofNew York, Chicago, Detroit, Atlanta, Pittsburgh, and Charlotte.Further consolidation of operating rights seems inevitable whenindustrialization expands into areas now considered unprofitablefor direct carrier operation. The crucial questions concern timing.
Highway Development
The planning and design of Appalachian road corridorsrecognizes that better highways can expedite traffic movements forexisting motor carriers serving industry within the region It istherefore all the more important to forge first those links in thechain that will give the more remote, less developed areas of theregion more direct access to major market cities outside the region,namely, New York, Chicago, Detroit, Philadelphia,anTiore,Washington, Richmond, Charlotte, Atlanta, Louisville, and Columbus.
Secondary emphasis should be placed on those highwayswhich move people and goods within the region. Important as theseinternal movements may be for tourism and labor mobility, it shouldbe remembered that intraregional highways will be of secondary impor-tance in winning for the region favorable attention from indus-trial prospects.
From this vantage point, the most beneficial highways canbe viewed as tributary streams to industrial basins which surroundAppalachia. Accordingly, major portions of development highwaycorridors and construction projects approved by the AppalachianRegional Commission should be completed as quickly as possible.
The secondary highways listed for priority contain atotal of approximately 1,000 miles of the 2,224 miles alreadyapproved by ARC as of July 14, 1965. In addition, the prioritylist contains nearly 450 miles of interstate highway construction.
One competitive disadvantage of Appalachia may persistfor some time even after the new highways shorten distancesbetween points. This drawback concerns motor carrier rates, whichtend to be constructed and pegged on rail mileages.
In any event, it appears obvious that construction ofbetter highways will not Close..2all competitive transportation gapswhich now separate many Appalachian communities from various keycities on the fringe of the region.
-40-
Providing Incentives for Motor Carriers to Use Appalachian Highways
There is a broad range of weight limitations within the12 Appalachian States as shown by the figures in Table 2. Studiesby highway engineers and the motor carrier industry have demonstra-ted that deterioration of a standardized road is in relation to thebearing of each vehicle axle on the road surface.
Recent legislation in Pennsylvania, following recommenda-tions in these test studies, has raised the single axle limitationsto 22,400 pounds and to 36,000 pounds for tandem axles. Maximumgross weights were set at 71,145 pounds.
In some states, scales are manned 24 hours a day toenforce their weight laws. It is usually the state with the lowestlimits that must bear the burden of weighing interstate trafficbetween major population centers. The long-haul truck traffic thatpasses through this one low-limit state is thus restricted in loadfactors for each of the other states through which the vehic17)passes. Obviously, freight cannot be loaded and unloaded at statelines to meet the specific requirements of each state. As anexample of this condition, east-south interstate traffic is weighedin Virginia. Other states bordering Virginia open their highwayscales only occasionally to check interstate traffic and trafficthat may not have passed through Virginia.
State limits on motor carrier dimensions are fairlyuniform, as can be readily seen in Table 2, Only the states ofTennessee and Virginia have total vehicular lengths establishedbelow 55 feet.
The use of double-bottom trailers in motor transportationis presently very limited. Ohio, Maryland, and Georgia are the onlyAppalachian states permitting this type of operation on prescribedhighways. The Massachusetts Turnpike Authority has written a rigidsafety code for drivers and equipment that has established a 5-yearexperience record that might be used as a model for the jointaction of Appalachian States. Ohio and Massachusetts Turnpikes,with grades less than 3 percent and broad lanes, have demonstratedan enviable safety record. Exit terminals have been built toswitch units from double- to single-bottom units that continue onother highways.
A variety of use taxes currently are levied on motorcarriers. Differing procedures are found in different states andcreate a large accounting burden on interstate carriers. Largeoperations can handle the complex task on automated equipment.Small carriers cannot afford this benefit. Significantly, it isthe latter category which holds the greatest potential for im-proved service in Appalachia.
-41-
Recommendations
(a) It is recommended that the Appalachian RegionalCommission's highway program be completed as quickly as possible.
(b) Provision for an additional highway connectingWilliamsport and Harrisburg in Pennsylvania. (The existingroute is U.S. 15.)
(c) Enactment of legislation by the states to achieveuniformity of:
(1) regulations governing weight limits (axle andgross) for motor carriers and for rail carriers;
(2) use taxes on motor carriers, based either onmileage or fuel purchased;
(3) construction or use standards pertaining toclearances and loads on all new projects forhighways, bridges, rail lines, air cargocarriers, and waterways.
Suggested standards are as follows:
MaximumGross
HIGHWAYS Width Height Length Limits(feet) (feet) (feet) Axles (lbs.)
Lane Clearances:Present Average 14 13.5 40 70,525Suggested 15 15.5 40 73,280
Trailers:Present Average 8 13.5 40 1 22,400
8 14.5 40 2 40,0003 67,2004 73,2805 73,280
(d) Enactment of legislation by the states to facilitateuniform use and regulation of double-bottom truck trailer units oninterstate routes and major corridor highways that have compatiblegrades and lane construction.
-42-
(e) Leasing of land to motor carriers to facilitatesw_tching from double- to single-bottom truck trailer units atmajor exits from interstate and major corridor highways. (Thisprogram might operate under partnership of the Federal Governmentand the individual states.)
(f) Collective action on the part of the ARC and the12 Appalachian States to foster improvement of motor carrierservice throughout the region. Principles to be espoused shouldInc ude the following:
(1) place before the newly organized Federal Depart-ment of Transportation all appropriate informationthat will aid in the formulation of policies con-sistent with the development of better trans-portation capabilities to and from the region;
(2) end-to-end mergers of carrier operating author-ities that will provide single-carrier throughservice and reduce handling of cargo;
(3) expedite, through the Interstate CommerceCommission, applications of motor carriersfor extensions of operating rights;
(4) joint rates between various modes of trans-portation (e.g., highway rail) that takeadvantage of the inherent advantages of each;
(5) continuing competition between carriers withparallel operating authority where the volumeof traffic is sufficient to justify dual over-head costs.
-43-
Table 1.
State Maximum Limits for Typical Motor Carrier Vehicles
Dimensional Limitations
State Height Width
Length eet
Semi-trailer
Tractorsemi-
trailer
Tractorsemitrailer andfull trailer(double-bottom)
Alabama 13' 6" 96" NS 55 NPGeorgia 13' 6" 96" NS 55 35Kentucky 13' 6" 96" NS 55 NPMaryland 13' 96" NS 55 55New York 13' 6" 96" NS 55 NPNorth Carolina 13' 6" 96" NS 55 NPOhio 13' 6" 96" 40 55 60Pennsylvania 13' 6" 96" 40 55 NPSouth Carolina 13' 6" 96" NS 55 NPTennessee 13' 6" 96" NS 50 NPVirginia 13' 6" 96" NS 55 NPWest Virginia 12' 6" 96" NS 50-55(2) NP
to13' 6"(2)
State
Weight Limitations (gross weight in pounds)Axle Load Limits 5-Axle Tractor SemitrailerSingleAxle
TandemAxle(1)
Practical MaximumGross Weight
Alabama 18,000 36,000 73,280,Georgia 20,340 40,680 73,280Kentucky 18,000 32,000(2) 73,280(2)Maryland 22,400 40,000 73,280New York 22,400 36,000 71,000North Carolina 18,000 36,000 70,000Ohio 19,000 24,000 72,000Pennsylvania 22,400 36,000 71,145South Carolina 20,000 36,000 65,000Tennessee 18,000 32,000 73,280Virginia 18,000 32,000 70,000West Virginia 18,000 32,000 60,800
NOTES:71 7Xxles spaced 4 feet apart (2) Permitted on desigmted highwaysNS - Not restricted as to stated limits of combinationsNP - Not permittedSOURCE: State Motor Carrier Guide (Commerce Clearinghouse), Nov. 1965
-44-
Table 2.
Number cf Motor Common .Carriers Providing Single-Line ServiceBetween Selected Appalachian Points and Major Markets 1/
ew orN. Y.
cago,I11.
I-roMich.
narlotte, Atlanta,N. C. Ga.
Binghamton, N.Y. 18 6 3 2 2
Erie, Pa. 13 12 11 3 2Scranton, Pa. 22 7 5 7 6Wilkes Barre -
Hazleton, Pa. 19 7 6 6 5Altoona, Pa. 11 7 2 None NoneJohnstown, Pa. 16 7 4 3 NonePittsburgh, Pa. 24 22 16 6 6
Steubenville, Ohio-Weirton, W.Va. 13 ..5 10 2 2
Portsmouth, Ohio 3 4 4 3 1
Hagerstown, Md. 10 6 3 2 1
Wheeling, W.Va. 9 7 5 2 1
Charleston, W.Va. 8 6 4 4 4HurAington, W.Va. -
Ashland, Ky. 5 6 4 3 2
Bristol, Va. 6 2 2 6 3
London, Ky. -Corbin, Ky. 1 2 None 1 2
Winston-Salem, N.C. 21 6 3 22 13Asheville, N.C. 13 6 5 16 13
Knoxville, Tenn. 6 4 2 8 9
Greenville, S.C. 19 6 4 20 15
Rome, Ga. 6 4 1 5 4
Huntsville, A1%. 5 6 2 3 5Gadsden, Ala. 3 3 2 3 6Birmingham, Aaa. 5 8 3 5 13Tuscal, osa, Ala. 2 4 1 1 5
-45-
Table 2 - cont'd
Number of Motor Common Carriers Providing Single-Line ServiceBetween Selected Appalachian Points and Major Markets 1/
NOTES:
1/ Figures based on motor common carriers of general commoditieswho advertise or otherwise hold themselves out to furnish suchservice. Does not include common carriers who hold authorityto render such service but do not service for various reasons.
2/ SOURCE: Motor Carrier Directories and Tariffs for the MiddleAtlantic Conference, Eastern and Central MotorCarriers Association, Central and Southern MotorFreight Tariff Association, and Southern MotorCarriers Rate Conference.
Rail, Water, and Air Service
The flexibility of motor carrier service makes it theprime area for immediate transportation service improvements withinAppalachia. Nonetheless, a review of the individual industry studiesdemonstrates a heavy reliance on rail service. Moreover, even whenfaced with little or no immediate use, the prudent location-seekerwill prefer the site with a rail siding, thus enhancing the prop-erty's utility and salability while providing an alternate modeof transportation.
Water and air service provide a slightly different story.In most cases, air transportation is important as a passengervehicle for liaison or customer service. Proximity to such ser-vice is somewhat flexible and can be subject to trade off. However,waterway transportation usually appears as a primary locationalfactor for those specific industries which must move large quan-tities of bulk materials.
Rail Carrier Development
Rail carriers are prohibited from quoting unpublishedrates on exempt agricultural commodities. Traffic of this natureis frequently lost to water or motor carriers which can, by law,quote any rate on a day-to-day basis as their operating capacityallows.
-46-
Although many water and motor carriers publish rateson exempt commodities, they often quote lower rates to alleviateout-of-balance operating conditions. Traffic returning only enoughrevenue to cover operating expenses is often accepted by water ormotor carriers to minimize the loss of returning empty units.
More and more railroad volume commodity rates are beingbased on the cost per car rather than the cost per ton. Largercars are allowing higher minimum weights in rate making. Car capa-city rules restrict and burden some bulk receivers who have notattuned their storage capacities to larger shipments.
Railroad rights of way are necessarily limited by topog-raphy and grade. Circuitous routes, some laid out more than acentury ago, create undue transit limitations on curves aad gradeswhen modern engineering capabilities are taken into account.
Railroad rights of way have a variety of roadbed weightlimitations and structural clearances that tend to inhibit theaccess of large-volume cars and commodities common to major indus-trial plant equipment. Old bridges and tunnels restrict thepassage of transformers, steam generator vessels, presses, andheat transfer equipment commonly installed in power plants andheavy industrial plants. "Daylighting," or blowing off the topsof tunnels is costly to the rail carriers. Lowering track levelsin tunnels weakens walls and has been abandoned as an alternativeto increase clearances.
Roadbed limitations are not uniform. Gross weights for4-axle rail cars range from 200,000 pounds per car to 263,000pounds.
In cases where two or more carriers serve a city, jointarea switching limits are often established, permitting the freeinterchange of cars and power equipment within specified limits.
Where heavy traffic prevails, parallel rail lines oftenjoin several major cities. Operations of switching, control, andline haul are duplicated. Management and executive overhead isalso duplicated in many areas where single authority might performthe same capacity.
Prominent among other conditions which might be correctedare those where the operating lines of two or more rail carriersconverge on abandoned coal mine areas, such as those in easternKentucky, yet do aot join each other at these points. Circuitousrouting develops for some traffic that might otherwise enjoy jointline hauls.
-47-
Large electronically controlled rail classification yardsare now capable of putting together trains for more rapid dispatch.The fewer the number of such rail heads a through car must pass,the faster service it receives.
Rail transportation is generally restricted to volumetraffic with more and more restrictions being placed on LCL (lessthan carload) shipments.
Some railroads jointly own carloading companies who per-form LCL service. Carloaders do not operate extensively withinAppalachia. Carloaders tend to operate coast to coast, or atleast between the major industrial centers like New York andChia-ago. Generally, transportation policies within Appalachiawould have very limited effect on carloading companies and theirservice rendered the shipping public.
Maximizing Water Transportation Potentials
CoDstruction of inland waterways, such as those in theTennessee River, has opened industrialization in areas where onlymarginal benefits were offered plant locations before the waterwaysopened.
Locks with 100-foot elevation capacities, canals, andchannels of 9-foot depth and 60-foot width have opened inlandareas to bulk carriage and low rates that encourage industriali-zation. Plants manufacturing paper, chemicals, primary metals,textile fibers, cement, and power plants, even grain users andheavy industrial raw material suppliers, all benefit from water-borne transportation.
Exempt agricultural commodity rates on grain and fertil-izer are conducive to maintaining profitable agriculture. In someAppalachian areas, concentrated protein feeding of livestock isprohibitive because low rates are not maintained on Midwest grainshipments. Low waterborne rates will compel rail carriers toestablish rate structures more attractive to these disadvantagedfarmers.
Raw materials basic to industry, such as iron o.e,bauxite and petroleum, are imported by ocean-going vessels whosedraft frequently forces costly cargo discharge and rehandling atports of Mobile, New Orleans, Norfolk, Philadelphia, and New York.Barge penetration inland extends to the Port of Birmingham,Knoxville, Charleston, West Virginia, and about 30 miles beyondPittsburgh.
-48-
Water transportation is generally the slowest means oftransportation at the lowest cost. With the Tombigbee Riverchannel extension into the Tennessee River, further shortcutsinland will divert a larger share of bulk traffic to waterways insouthern Appalachia.
Upgrading Air Service
The Federal Aviation Agency designates airport classifi-cations by the type of facilities available. General aviationairports can accommodate ptivate planes, including the smallermodels of business aircraft. Commercial airports owned by states,municipalities, or authorities are restricted in use only by physi-cal capacities of runway length, width, and bearing, as well aslanding approaches and systems.
Appalachia has few areas that can justify coast-to-coastpassenger or freight service. Most commercial airports withinAppalachia accommodate either feeder or interregional airlines.
Air carriers with both short-haul and long-haul operatingauthority are now competing with some of the short-haul, feeder aircarriers. In the past year, the economies of short-range jetshave made the short-haul traffic very lucrative for long-haulcarriers who heretofore have tended to shy from this traffic.
Air carrier load factors are important determinants inthe frequency of service they will offer a particular airport.Initial carrier petitions to the C.A.B. for extension of serviceare based upon the profitability of the operation. Usually asecond carrier is extended similar authority if the C.A.B. ispetitioned, simply to guarantee competition.
The rough terrain of Appalachia encourages air carriersto fly out of the mountain ranges and over more level land whenpossible. Trajectory-like flights now possible by short-haul jetaircraft will enhance the access to Appalachia by air transport andprovide schedules more acceptable to the businessman.
Runway lengths and weight limitations are still deterrentsto air service in many Appalachian communities where there may betraffic to justify a profitable air service. Jet aircraft, inparticular, have broadened the requirements for take-offs andlandings.
-49-
Service for general aviation at many community airportsdoes not include runway lighting, radio contact, or hard-surfacerunways. Maintenance facilities and hangars are lacking in manyairports.
Long-range possibilities for air industrial parks in somecommunities of Appalachia are feasible. Lack of strong managementand substantial financing, plus the cost of extending utilities toairports from distant city centers, inhibit immediate growthpotential.
Recommendations
(a) increase the emphasis on completion of waterwaysprograms to foster the further development of competitive rate-making policies on grain, ore, steel, petroleum, cement, andother bulk commodities vital to Appalachia;
(b) secure the maximum cooperation from the FederalAviation Agency in the provision of additional facilities forgeneral aviation, including radio communications, runway light-ing, extended runways, 12-hour tower cont7o1 operations, andadditional maintenance hangars;
(c) encourage joint action by large cities and majormanufacturers generating air freight traffic to seek from thetrunk airlines increased air freight container service to thepopulation centers of St. Louis, Chicago, New. York, and LosAngeles.
Transportation Resources
The Commission, in attempting to resolve the trans-portation problems of the region and during implementation ofthe recommendations contained in this report, should not over-look the assistance available from the various private andsemiprivate transportation advisory groups. Some of the moreprominent groups are contained in the following listing, to-gether with the general classification of membership and theprimary objective of the organization:
-50-
National Association of Shippers Advisory BoardsMembership: shippers and rail carriers; Purpose:to monitor national rail transportation policy.
Middle. Atlantic Shippers Advisory BoardMembership: shippers and rail carriers; Purpose:to monitor rail transportation policy in Nev York,West Virginia, and Pennsylvania.
Southern Shippers Advisory BoardMembership: shippers and rail carriers; Purpose:to monitor rail transportation policy in theremainder of Appalachian States.
Association of American Railroads ResearchConsulting Committee and Engineering DivisionMembership: rail carriers; Purpose: to developlower cost and improved rail service.
National Industrial Traffic LeagueMembership: shippers; Purpose: to monitor allcarrier cost, service and rate action.
Transportation Association of AmericaMembership: shippers and carriers; Purpose: topass legislation mutually beneficial to shippersand carriers.
American Paper Institute - Traffic CommitteeMembership: paper industry traffic personnel.Purpose: to initiate rates jointly for paperindustry members.
American Iron and Steel Institute - TrafficCommitteeMembership: steel manufacturers; Purpose: toinitiate rates and policies that will assist thesteel industries.
American Trucking AssociationState Laws, TaxatiolgElprocity DivisionMembership: motor carriers; Purpose: to promoteuniformity in taxes and regulations.
U.S. Chamber of Commerce - Transportation Dept.Membership: business firms of all types; Purpose:to promote transportation legislation that willbenefit business in genera]..
-51-
Priority No. 3
INDUSTRIAL SITE PLANNING
The urgency of this need is underscored by recent popula-tion and employment projections for Appalachia. According to theOffice of Business Economics in the U.S. Department of Commerce,manufacturing employment in the region will grow at an annual rateof 32,000 jobs between 1960 and 1980. This growth increment, ofcourse, will be the net result of expansion of existing industryand the location of new industry.
What this means in terms of plant sites can be shown by afew simple approximations. Plant location experience over the pastfive to ten years discloses that industrial newcomers to Appalachiahave beenlacquiring properties which, for initial operations, con-sume an average of about 15 acres of land per 100 manufacturingworkers. Translated into total land consumption, this ratio wouldindicate an expectable annual demand for about 4,800 acres ofindustrialreal estate in the entire region.
At first glance, this figure appears tiny in a region asvast as Appalachia. Upon more mature consideration, however, itcan be seen as nosing serious problems if it is considered not as agenerally distributed regional demand but as a requirement thatmust be st.tisfied by a relatively small number of communities.Further, it is not simply a requirement for quantity but quality aswell.
For reasons of labor supply, public facilities, and otherfactors, towns of 5,000 population or smaller cannot compete onequal footing with communities of 10,000 population or larger.This means that the number of Appalachian communities which can berelatively strong contenders for new industries narrows down to afew hundred at most.
This conclusion is well supported by the present geo-graphical and urban distribution of industry within Appalachia.For example, the major manufacturing corporations in Appalachiahave plants in about 450 communities of the region. Many of thesecommunities, however, are suburbs of fairly large urban areas.Thus, the number of active manufacturing locations in Appalachiadwindles to about 300.
-52-
The prospect, therefore, is one which will see possiblynot more than 300 communities (or community clusters) called uponto supply the aforementioned 4,800 acres of additional industrialreal estate each year. This works out to about 18 acres per com-munity--each year. This is, at best, less than one general-purposeindustrial site, not a particularly strong competitive position fordevelopment people who must face up to the reality that industryusually purchases a property only after looking at an assortment ofsites.
Viewed only from this vantage point, the need for moreeffective land use planning in Appalachia cries out for attention.But there are other needs which pyramid the gravity of the situa-tion. These include public and commercial lands in communities toaccommodate normal growth, to provide additional supporting facili-ties for industrial newcomers, plus soil erosion control, conser-vation of forest land, reclamation of strip-mined areas, developmentof recreation areas, and so on. Given the difficult terrain thatis typical of many Appalachian communities, these requirements willnot be easy to satisfy. In reviewing present programs, there mustbe decisions concerning what to concentrate on and what to abandon.
The 25 individual Appalachian Industrial Location Studiesestablish a basis for certain priorities in overall land use plan-ning by Federal, state, and loctl groups. Primary policies andactions are brought together in the recommendation and rationaleswhich follow. Taken as a group, this series of recommendationsmerits third position among all priorities contained in this sum-mary report.
(a) It is recommended that state industrial developmentagencies intensify efforts to guide their communities in theidentification of real estate suitable for development as "general-purpose" plant sites of 40 acres or larger. The following basicprinciples are worthy of consideration
(1) The staging of subregional cor-iunity clinics atregular intervals (semi-annually)f
(2) Sponsoring agencies and groups to incluCe stateindustrial development and planning departments,transportation carriers, utility area develop-ment departments, and state chambers of commerce;
(3) The ultimate objective should be single ownershipor control (by carefully drafted option agree-ments) of suitable properties.
-53-
(4) Sites must be served by public water and sewersor within proximity of expandable public waterand sewers, with explicit agreement that waterand/or sewer will be extended to the propertyline.
Development of new sites, or a general upgrading of siteportfolios, will not in itself insure that new industry will cometo the average community, much less the marginal one. It will,however, be a big leap forward in placing the average or better-than-average community in a position where it can contend for ashare of new payrolls.
It will diminish the number of situations now encounteredwhere local people say, "Bring us the industry and we will supplythe land." It will avert situations that so frequently developwhere, when it becomes rumored that an industrial plant site is tobe constructed, the price of a site under consideration is inflatedbeyond all reason.
Plant location experience demonstrates that while mostmanufacturers are willing to overlook a slight increase in landvalues for industrial occupancy, they are easily irritated by anyhint of gouging. The actions of independent land owners are un-predictable, and many communities have lost prospective plantsunder adverse pricing conditions or circumstances which lead to"sticky" bargaining.
As indicated, firm control of industrial real estate bylocal action groups must be exercised either through ownership orlong-term option a&eements. The latter are all too often looselydrawn. They frequedtly do not contain clear-cut provisions forright of entry; for right of the purchaser to make boundary andand topographic surveys, core borings, test wells, and other engi-neering tests; requirements for appropriate zoning; provisions foreasements, development of utilities, :rail lines, access roads, etc.
As a general rule, it is recommended that all propertiesreserved for conveyance to the industrial prospect should haveaccess to rail service. Even if the company is not primarily arail user, the continued value and marketability of the propertyis enhanced by the ready access to rail facilities.
-54-
In a limited number of cases in Appalachia it may bedesirable to consider development of industrial parks or industrialland use districts. These are most useful in an area where goodindustrial sites are scarce,'difficult to assemble or acquire,difficult to preserve against the.encroachment of residential andcommercial uses, and where the demand for industrial land is strong.Ordinarily, this combination of factors will be found only in largeurban areas experiencing vigorous manufacturing and distributionindustry growth.
(b) It is recommended that the States cooperate in poolingtheir information for large riverside sites by creating a Regionii--Site Bank. This recommendation applies particularly to sites ofseveral hundred acres or more needed by pulp and paper milfg-giatextile mills.
In Report No. 1 of the Appalachian Location ResearchStudies Program, it is demonstrated that (1) the pulp and paperindustry has strong growth potential in the Nation and in Appalachia,and (2) that choice riverfront sites which pulp and paper makersprefer are a dwindling commodity in the eastern half of the Nation.It is further demonstrated that assembling such sites involvescrucial questions of woodland ownership, effluent disposal, andservice by two or three rail lines.
Because these questions cut across watersheds, riverbasins, and even state lines in many instances, it appears neces-sary to set aside purely local considerations and tackle theproblems on a regional basis, bringing in not only state industrialdevelopment agencies but also rail carriers, utilities, and region-al bodies, such as the TVA. Except for the woodland questions,many of the same considerations enter into large site identifica-tion and development for textile mills, the chior- alkali industry,and synthetic fiber plants.
Further questions of public policy are involved. Forexample, the public has a greater ability to absorb risks, cancommand more resources, and can wait longer for results than anindividual or a few individuals can. When an economically feasibleproject cannot be handled by an individual or a group of individ-uals because they cannot assemble the resources, cannot stand therisk, or want an early return, the public must act if the best useof Appalachian natural resources is to be achieved.
-55-
This then establishes a basis for considering the SiteBank not merely as a vehicle for pooling information but possiblyone which might acquire, own and reserve riverfront land of primepotentials for future industrial use. The creation of an appro-priate body undoubtedly would require Federal and State fundingto support surveys, land purchase and operating expenses.
(c) It is recommended that planning and management ofprivate forestnag-be advanced through expansion of servicesnow provided by public foresters and extension foresters nowfunctioning under programs financed cooperatively by-lhe FederalGovernment and the states.
Most of these assistance programs reach relatively fewowners in the nation--possibly 300,000 a year--because there areso few service foresters in relation to the number of owners tobe served. Although the large pulp and paper companies have largeforest land holdings, most firms buy stumpage and pulpwood fromprivate holdings for Nghich they may have little or no direct controlover cutting methods.
The better planning and use of these lands will(1) facilitate the growth of the pulp and other forest-usingindustries, (2) foster the Site Bank and forest land ownershipconcepts presented in Recommendation "C", and (3) will beconducive to control of soil erosion.
-56-
Priority No. 4
INDUSTRIAL WATER DEVELOPMENT
Any Appalachian community ambitious enough to seek newindustry needs to remember that (1) industries can locate onlywhere plant sites are available and (2) water can be delivered onlywhere service mains of adequate size and reserve delivery capacityare available. Once this duality of site selection is understood,other elements of water's role in plant location fall into theirproper places.
Most manufacturing operations consume modest amounts ofwater. Half of those in the nation use less than 50,000 gallons aday; a quarter purchase, less than 10,000 gallons a day. In contrast,establishments with daily water intakes of more than 500,000 gallonsa day account for fewer than a quarter of the nation's plants.
Appalachian industrial plants (and candidates for loca-tion within the region) ale not greatly different from those inthe nation. They use water in five principal ways: for sanitarypurposes, for fire protection, in processing operations, as acooling agent to dispose of heat, and as a medium for carrying a-way waste products derived from manufacturing. Since the firstthree uses predominate, most plant operators prefer to purchasepotable water from public supplies. Only the relatively few arelarge enough users to be interested in developing, pumping andtreating their own raw water supplies.
If attractive plant sites are available, if the localwater system has sufficient reserve water delivery capall.lity,if properly sized and engineered service mains are nearby, ifother location factors are favorable, a community can establisha contender position for many attractive payrolls--if it can supplycredible factual information on the cost and time involved inextending mains to the prospect site.
Usually when water utilities can be extended to the sitewithin 45 days after sale of the site and the prospect has confidencein the promises of the municipality and developers to perform,a community will not run too much risk of being eliminated in theearly screening process by not having all utilities at the linesof the property reserved for industry.
-57-
Gauging the water delivery capability and reservecapacity of,Appalachian community water systems is frequently afrustrating experience for the site - seeking businessman All toooften communities rely on claims such as "abundant water resources,""large reservoir capacity" and the like. Seldom does the localdevelopment group proffer the basic information that is needed:(1) population served, (2) normal rated capacity of the. supplysystem under average conditions, (3) maximum capacity. (4) averageoutput. and (5) maximum-day output.
Given these factors. it is possible to determine whethera water utility can be considered adequate According tothe FWPCA 1/ a system with at least a 20-percent totalexcess in rated capacity above its maximum-day demand should beable not only to maintain a continuity of service for normal growthof population and industry but also to meet any major conflagrationor defense emergency.
Plant location assessments of community capability forsatisfying the needs of a. single new industry demand a more conser-vative approach, however. Usually, as in electric utility ratings,it is desirable to introduce a safety factor of three. Thus, a newplant expecting to use an average of 50,000 gallons a day wouldwant to be assured of 150,000 gallons reserve capacity, assumingthat water main sizes and the distances they would be extended arein proper balance.
It is fairly obvious from the available statistics thatmunicipal facilities folf satisfying new industry water needs arenow concentrated in relatively few communities rather than gen-erally dispersed throughout Appalachia. It is less obvious butimportant to recognize that efficient use of federal and localmonies for construction of water systems needed to support industrdemands careful identification of those communities having viableeconomies and other attributes for industry. To accomplish this,it is strongly recommended that:
(a) All decisions at the local level having to do withgrant applications for waterworks expansions be made only afterfull coordination with the state agency handling communit plan-nlng an' in us ria eve opment. he por ant princ p e ofollow here is that there must be clear differentiation of water-works expansion programs needed for public health purposes andthose which may or may not be desirable for industrial developmentpurposes.
1/ Federal Water Pollution Control Administration
-58-
(b) Funds should be made available to expand and intensifydata collectin programs now operated b FWPCA in cooperation withstate hea t h departments and local waterworso ca s: A-howFITITAFs, at five-year intervals, an Inventory of Municipal WaterFacilities. The latest issue, published in 1963, provides 12columns of information for each community water system or waterdistrict in the states. Where data are complete, it is possible todetermine from the figures whether water supplies are adequate.
Unfortunately,.there are many gaps in the figures forsuch key items as Safe Yield Impounded, Maximum Dependable Draftfor Ground Water, Rated Plant Capacity, Average Plant Output andImprovements Needed. Further, the five-year span separating theseinventories limits their value as industrial development planningtools. Finally, few local industrial development groups are skilledin interpreting the data for industrial prospects.
Accordingly, it is highly important that more frequentinventories be made. It is equally important that state andlocal groups extend greater cooperation. Finally, there is neededan education program which will make community action groups awareof the values of this information to industrial prospects.
(c) States should enact legislation recommended by HEWin its codified "Urban Water Supply and Sewerage Systems Act".Implicit in the value of this package proposal by HEW is that themost effective use of water for area development would result ifpatterns of potential industrial sites and subdivisions could besuperimposed upon the patterns of potentially available industrialwater, and if industrial areas could be developed so as to balanceavailability with demand if the need might arise.
-59-
Priority No. 5
SEWAGE TREATMENT AND EFFLUENT DISPOSAL
The Clean Waters Restoration Act of 1966 has nationwidesignificance. Whether the new legislation will fulfill its spon-sors' expectations in Appalachia, and whether it will enhance com-munity prospects for, new industry soon enough, however, turns on anumber of uncertainties. Chief among these are (1) the availabil-ity of construction grants, (2) the cost of money to state and lo-cal governments, (3) the money and men needed for effective func-tioning of state water control commissions, and (4) tax relief forcompanies installing new industrial waste treatment facilities.
The mere existence of a municipal sewage treatment plantcan be misleading. Sometimes such plants do not work properly orare run by incompetent personnel. Monitoring a stream is no easytask. In policing the situation, water control commissions arehandicapped by a thin staff, small budgets and the ever-prssentlegalistic byplays which surround enforcement.
If Appalachian communities are to derive maximum benefitsfrom the new legislation, fairly high priorities are needed for thefollowing recommended actions:
(a) Larger legislative appropriations for water controlcommissions in the states. Such appropriations must be ample tosupport a larger trained staff for monitoring streams, to ex-pand the number of stream monitoring stations, and to educate per-sonnel in the operation of municipal sewage disposal plants.
(b) Tax relief for industry on facilities designed tocontrol water pollution. The principle should be that, industryshould not be taxed as heavily on structures and equipment in-stalled to improve air and water quality as it is taxed on profitmaking properties. Virginia and a dozen or more states in the na-tion offer such tax relief. This relief is particularly importantfor capital intensive industries which generate large volumes ofdifficult-to-treat wastes.
Application of these tax relief provisions should bebroad enough to encourage the use of industrial bio-filtrationpackage units in communities where the public cost of expanding'municipal disposal plants or extending sewer lines to serve fringearea plant sites is unreasonably high. Bio-filtration units areavailable, completely factory assembled, to serve plants with popu-lation waste equivalents of from 50 to 500 people.
It is further recommended that the states ez:actlegislation for the use of such package plants that will be consis-tent with HEW proposals codified as the "Individual Sewage DisposalSystems Act."
-60-
(c) River basin management programs should be expandedto include periodic surveys on the waste assimilative capacity ofstretches of streams at or near sites reserved for pulp and papermills. As stressed in the Appalachian Industry Location study forthis industry, the degree of information considered most useful isthe 5-day Biochemical Oxygen Demand (BOD) assimilative capacityover the range of water temperatures and streamflow rates that willbe encountered in any year.
In some instances, these values can be computed fromexisting data or are substantially available in documented publi-cations, such as those issued by the State Water Control Board ofVirginia. In other cases, only the sketchiest of information isavailable and additional studies by the appropriate federal andstate agencies will be required.
-61-
Priority No. 6
FEDERAL STATE AND LOCAL INCENTIVES TO INDUSTRY
Incentives designedbe of varying significance toeven within a given industry,tive will vary with differing
to foster industrial growth willindividual industries. Indeed,the impact of a particular incen-management philosophies.
The 12 Appalachian States run the scale as to varietyof incentives offered. Federal programs, available to all, pro-vide the only common denominator. Socioeconomic and'politicalfactors prescribe the variations in state offerings which, inturn, frequently establish the tenor of community efforts.
Financial Incentives
There exists today a broad range of financial inducementsused to solicit new industrial development. Many of these haveproven their effectiveness, as representatives of "Fortune's 500"move to enjoy benefits previously thought of as the domain ofsmaller, less financially able concerns.
Executives involved in selecting new locations willseek to minimize both financial and operating risks. .Potentiallosses are usually substantial. In many cases, failure at thenew location can mean the demise of an organization. Thus, prudentlocation searchers frequently will look for such cushions as finan-cial assistance, tax relief, aid in manpower training, extensionoi utility or community services to chosen sites, etc.
Experience has demonstrated that financial inducementsof one nature or another can play a key role in giving a com-petitive edge to one of the community finalists which otherwisesatisfies the industry's primary locational requirements. Thus,these types of incentives must be looked upon as a significanttool in industrial development efforts. As a word of, caution,however, these incentives must be properly applied so communitiesmay avoid dissipation of the area's tax base. Some of the toolswhich should be considered by industrial development agencies;are discussed in the following paragraphs.
(a) Industrial Financing - Financial assistance pro-grams evidenced in the 12 states range from the privately fi-nanced quasi-public Virginia Development Corp. (making industrialloans) or the business development groups (and financial advisor.oh the development board) serving the same purpose in SouthCarolina, up to Maryland's comprehensive offering which includes
-62-
county and municipality revenue bond issues, a state mortgageinsurance program, development credit corporation, and stateparticipation in EDA industrial loans.
An increasing, open solicitation of revenue bond fi-nancing by leading U.S. industrial giants, demonstrates theattraction of this low-cost method of establishing new facilities.Examples abound where small communities have successfully fi-nanced large-scale projects for top-name concerns. Communities,where revenue bond financing is available, are frequently indirect competition with those where enabling legislation is notin effect. The latter can remain competitive by taking fulladvantage of the Treasury Department ruling 63 -20.. Local non-profit development corporations can thus supply 100 percentfinancing of plant and equipment through the issuance of tax-exempt securities. Care must be taken to ensure compliance witheach of the ruling's stipulations. Financing is based on thefinancial strength of the corporate tenant, and the bond amountand coupon rate are determined accordingly. Interest ratesgenerally run 4 to 5 percent with terms of 20 to 25 years. Bondsare normally sold in private placement, and the manufacturer'sname is not publicly advertised.
One key stipulation of the Treasury ruling requires theproperty to be deeded to the city or county upon retirement ofthe bonds. Lease renewal options can be written into the origina]agreement and generally run for 40 one-year renewals at nominalrentals (designed primarily to cover ad valorem taxes lost whenthe facility becomes the property of the city or county).
Purchase options must not be included in the initiallease. However, the Federal Government is not concerned with thedisposition of the property, once it reverts to city or countyownership. Possibilities of a side agreement exist--if suchagreement is entered by the manufacturer and local governmentunit after the bonds are sold, and involves a "valid consideration."
(b) Tax Exemptions 7 Suspension of the 7 percent in-vestment tax credit has required a review of cash flow calculationsfor project justification on the part of most leading firms.
Adoption of programs such as Maryland's (equipmeUtexempt from state taxation; equipment and inventories partiallyor totally exempt from county taxation) will be most effectivein offsetting dampening effects created by suspended Federalcredits. While the appeal of this type of incentive will notbe universal, its inherent selectiveness emphasizes an attractionfor capital intensive operations--operations which would be mostbeneficial to the industrial mix of the region. Tax incentives
-63-
will seldom be of sufficient import to override other, primarylocational advantages. Frequently, however, they will dictatethe final selection between two or three equally attractive com-munities. Moreover, adoption of this recommendation couldprovide the means to justify moving ahead with investment plansrendered marginal by the Federal action.
Presently, five Appalachian States do not offer anytax relief. The balance offers programs which range from ac-celerated depreciation to outright exemption from property taxesover a specified period. Two states rely on arm-to-arm negoti-ations for tax shelter at the local level. Maryland stands alonein this highly effective approach, and enabling legislation would,thus, be required in all remaining states.
(c) Shell Building Program - Under some circumstance',workable inducements or incentives, which go beyond presentlyavailable incentives, are probably necessary to encourage outs deindustry to "test" areas with a minimum of risk.
We believe this can be accomplished through shell build-ing programs (on .a short-term lease), or the renovation of someexisting structure and conversion into manufacturing space. Ad-mittedly, such action carries a risk factor. In fact, what itdoes is transfer the risk from the prospect to local interests,who would have a selfish interest in seeing the project succeed.In fact, they could not afford.to have it fail.
(d) Extension of Uti,11.ties and Services - As notedearlier, community responsiveness will be critically evaluatedby the location-seeking executive. Sites where utility or otherservices are lacking will not be competitive unless firm commit-ments are readily available. Local action groups must be attunedto the needs of industry and aware of their area's shortcomings.To capitalize on a locational opportunity, decisive action willbe required. Rarely, does any community uniquely fulfill allthe locational needs of a specific industry.
Typical areas where such assistance is frequently re-quired include: (1) the extension of rail service, (2) installationof gas lines, (3) providing fire and police protection outsideestablished districts, and (4) installing water and sewerage lines.The costs of providing rail and-gas services might well involvecommunity financing with a rebate agreement from the railroad orgas company based on actual utilization or consumption.
-64-
(e) Specialized Incentives - When an area can demon-strate a potential for a special industry, there are occasions,where a tailored approach may, speed industrial development.Such is particularly true for the pulp and paper industry withinAppalachia. The following are two specific considerations worthyof attention:
(1) existing taxation of woodlands be replaced ormodified with yield or severance taxes; and,
(2) the establishment of preferential tax creditsfor the increased utilization of hardwoods.
-65-
Specialized Road Programs
Recommendations which should govern basic transportationpolicies and activities for Appalachia are presented elsewhere, inthis report. Those recommendations are of first importance.
On a somewhat lower rung of importance are needs forsecokidary actions which best can be described as "SpecializedRoad Programs." From one point of view they may be regarded asa bits-and-pieces type of planning or lack of it. From stillanother vantage point these planning deficiencies can be seen asimpediments, some serious, others of irritant value at most, inthe path of site-seeking businessman. Few such conditions canbe said to be so generally prevalent as to carry broad regionalsignificance.
For example, Appalachian Kentucky has more than itsshare of "swinging bridges"--usually narrow, light-duty suspensionstructures for pedestrian or light vehicle crossings of creeks- -which isolate people and some potential site areas from mainroadaccess.
In some states, among them Pennsylvania, there appearsto be a policy that state routes will be improved or extended toremote industrial plant sites only if a definite need for thisexpenditure is shown. Placing the entire burden of the proofupon the prospect, this policy puts unnecessary roadblocks inhis way. Various Appalachian states will commit themselves inadvance to make reasonable expenditures conditional only uponlocation of the plant.
Elsewhere, the lack of all-weather,farm-to-market roadshas two consequences: (1) failure to develop reliable supplies offarm raw materials for industry processing, and (2) poor accessof farm workers to the factory labor market.
Somewhat the same consequences appear when logging accessroads needed to connect stumpage with highways and mechanizedyards for pulpwood loading are missing. Often these work roadsdo not get built because costs plus maintenance charges may rangeas high as $200 to $1,000 a mile or more. The lack of suchroads acts to restrict the potential availability and continuedflow of pulpwood, as well as hinder good land management.
One of the more common experiences in Appalachia is tofind roads which are difficult to travel in bad weather because ofheavy rain wash from the hillsides. Often the corrective measures
-66-
-41
required involve nothing more complicated than installation ofculverts and other forms of storm drainage on stretches of roadknown to be troublesome.
If there is any common denominator to this assortmentof problems it is possibly a need to make clear to the industrialprospect that local road programs do not have to wait on the com-pletion of long-term Federal construction projects. Most liveand breathing industrial prospects attach less importance to whatwill be done in the distant future than they do to actions whichexpedite the start-up and smooth operation of a new plant.
In theory it should be possible to assign some ordersof priority to the more than 1,000 miles of local. access roadsauthorized under Section 201 of the Appalachian Act. Theory andthe exigencies of plant location frequently must part company,however. Accordingly, it is recommended that:
(a) Decisions at the state level having to do with theconstruction of local access roads shoula be made oni after fullcoordination and review of plans by the following groups: thestate agency handling industrial development, the local communityaction group, and utilities and trans ortation carriers servinthe affected area. There should be suffic ent f exibil ty ofresponse care of needs as they develop. Possibly this wouldbe aided by a set-aside of funds for contingency use. It isfurther recommended that informative maps and information sheetscontaining completion dates for local access roads and improvementsbe issued periodically for dissemination to local groups and in-dustrial prospects.
-67-
Access to Technological Resources
For the Appalachian economy to achieve fuller utilizationof its large human and physical resources means, over the long run,greater introduction of technology into the region. Ways must befound to have the region gain better access to such technologythrough the creation and development of appropriate institutionswhich function as parts of a viable regional economy.
Among the 25 industries presented as Appalachian IndustryLocation Studies there are at least two--pulp and paper and refrac-tory metals--for which appropriate public institutions of technolo-gy may have crucial significance. The first of these industriesis rather well-disposed throughout the region. The second is con-centrated in a relatively few islands of activity, which might wellbecome an archipelago of broad regional importance, given the stim-uli of appropriate public policies and actions.
To the extent that public funds can be made available, itis strongly recommended that the following steps be taken:
(a) Creation and staffing of two regional centers forresearch on the pulping of hardwoods and the utilization of hard-wood pulp fibers. In general, the practical limits of substantialand economic increases in softwood utilization have been reached,according to many observers. The major gains to be made, in theopinion of many, is development of hardwood pulping technology tothe present level of softwood pulping technology. When this hap-pens, it is believed that a much wider range of pulps will be with-in reach of the papermaking industry.
Present paper and board production in Appalachia isabout 7 to 8 percent of the nation's total. Hardwood reserves,however, may be large enough to sustain an industry of twice thatsize. Since the present industry disburses annual wages and sala-ries of about $200 million, it is readily apparent that success inthis technological effort could have a major impact on the region'seconomy.
(b) Creation and staffing of a new Bureau of Mines re-gional center for research on extractive metallurgy of refractorymetals and development of alloying and tabricating methods. indus-trial, space effort and defense requirements for the refractorymetals appear poised for growth that will demand a larger share ofpublic support of technology in centers proximate to areas whichcan satisfy the locational requirements of this group of industries.
Appalachia has the necessary energy and water resources,coupled with access to consuming centers for the products of theindustry. Needed is the forced draft of regionally-centeredpublic research.
-68-
(c) More effective application of the'State TechnicalServices Act of 1965. Consideration might be given to concen-trating efforts largely on achieving greater efficiency inproduction. Dissemination of this type of information andtechnology is conducive to cost reduction and is,'therefore,a direct stimulus to economic growth.
State and Local Tax Burdens
In Appalachia, as elsewhere, the expectable state andlocal tax burden for any manufacturer locating a, new plant dependson (a) the nature of the project and the business, (b) the precisesite where the project will be constructed, (c) who the manufactureris, and (d) intercommunity competitive considerations then prevail-ing. It is an academic exercise to present interstate comparisonsof taxes as an element in the cost of doing business when intrastatevariations tend to be of greater magnitude, particularly in theAppalachian States.
To cite one example, state and local taxes for a newsynthetic fiber plant with sales of $27 million can vary by asmuch as $58,000 a year in one Appalachian state, depending uponthe particular locale where the plant is built. This is not asingular case, for variations of from $30,000 to $50,000 are notUncommon in states surrounding the example cited.
Because of these circumstances, no specific recommendationsare presented in this section. Attention is directed, however, toitem (b) under "Financial Incentives" earlier in this section.
-69-
Priority No. 7
COMMUNITY ENVIRONMENT
Industrial Orientation
Obviously, the choice of community size and environmentis a problem to be solved individually by each company. What isthe most suitable environment for one firm, may not be so foranother. Like all imponderables, there are too many differentangles to'be covered in catch-all generalizations.
Among the factors which the Location consultant mustappraise, mostly in qualitative terms, are.(1) local traditionsand attitudes regarding work and its place in life, (2) feelingsabout women working, (3) reactions of friends and neighbors to"outsiders", (4) receptivity to shift work, (5) community expecta-tions for the new plant, and (6) who speaks for the community.Often these down-to-earth considerations override community sizeand determine not only the potentials for successful staffing ofa plant from the local labor force but also how well the communitymay adapt to transferees and their families.
A sizable number of Appalachian communities are industri-ally sophisticated enough to have a proper appreciation of thesenuances. A much larger number are not, however, and there is thevery real problem of developing -this awareness. Because they havebeen said over and over again, all the usual platitudes, stereo-types and folklore of industrial development seem to go in oneear and out the other. Something else with impact is needed andthis is probably first-hand exposure to what goes on in other com-munities and their industries.
There exists a tremendous opportunity for interchangeof information. There are also channels in the process of formationwhich could be used to promote this interchange. All that isnecessary is to bring the two together.
Under Section 302 of the Appalachian Act appropriationsprovide for grants to be used for the formation of local developmentdistricts and reasearch. Each state also has on file with theU.S. Travel Service a listing of plants which offer tours of theiroperations. These tours, part of the program to welcome internationalvisitors to the United States, are classified by industry and bystate in Plant Tours, published by the U.S. Department of State.(There are several hundred such tours available in Appalachia)
If it makes good sense for the industry and the foreignerto meet face to face on the factory floor, it makes even more sensefor community action groups from one area to acquire this same
-70-
experience away from their home communities. Accordingly, it isrecommended that:
(a) Development district activity should be expandedto include "exchange" visits and tours of industrial plants invarious parts of Appalachia and outside Appalachia. It is furtherrecommended that this become a systematic and continuing programof education, giving communities in one development districtaccess to experiences in another.
The immediate benefits of this program would be first-hand exposure to a variety of industrial operations, providinginsights not likely to be acquired by any other means. The longer-term benefits would be a dwindling of parochial attitudes throughcross-fertilization of successful community action programs.
Undoubtedly, this activity would require larger fundsthan are now available. It is strongly recommended that suchfunds be appropriated by Congress.
-71-
Public Health Measures
'Poor health is a root cause of absenteeism in industry- -and excessive absenteeism has attached to it a high: price tag forthe employer
The effect of absenteeism cqn be illustrated by citinga specific example. A plant of 125 employees operates 4 finalassembly lines where 56 workers put together the completed product.The absence of one worker at any of the 14 stations will result ina 19 percent drop in productivity. Efficiency is impaired allalong the line. This losS in production will require 72 hours ofmake-up overtime production. At $1.85 straight time earnings,one man-day of absenteeism on the final assembly line will costthe company $200 in overtime. In addition, the unit cost forthose items prpduced will juMp radically and result in lost timevalued at $118. The total loss will come to $318, not includingoverhead and fringe benefit charges. Although the absent workermay view the cost. of his absence at $14.80, the expense to thefirm is much greater.
The presence of chronic, poor health and environmentalconditions, or any suspicion that they may exist, is a source ofdisquietude on other counts which the site-seeking businessmanmay be reluctant to bring out in the open. This is certainly truewhere a new plant move involves a sizable number of transfereesand their families.
Virus-borne health disorders, such as hepatitis, whichoften escape diagnosis, will be suspected when potable water sup-plies in small communities come under scrutiny. There is morethan enough material printed about Appalachia to feed such fears.One of the most vivid accounts yet to appear is the documentaryon the Kentucky River written by staff writer John Fetterman andphotographed by Bill Strode in the Sunday, August 8, 1965 editionof The Courier Journal Magazine (Louisville).
.Other aspects of environmental.health that do come undersharp scrutiny are facilities for hospital, medical, and dentalcare. There are no reasons. for believing that the major urbanareas offer facilities inferior to those found elsewhere. Thereare, hOwever, reasons for believing that Appalachia as a regionmaybe the subject of'unfavorable comparisons.
A measure of care available within regions is the accredi-tation of hospitals by Joint Commission on Accreditation of Hospi-tals for the United States. Approximately 59 percent of the UnitedStates hospitals are thus accredited. In states with considerableterritory within Appalachian Region, the:respective rates are
-72-
Alabama 45 percent, Tennessee 52 percent, Kentucky 53 percent,. WestVirginia 60 percent, and Pennsylvania 75 percent. For comparisonpurposes, accreditation data for other selected states reveals thefollowing ratios: New York 82 percent, Massachusetts 81 percent,New Jersey 74 percent, and California 62 percent. It should benoted that the mere existence of a hospital in an area providesno magnet for industrial development. However, a hospital's levelof services offered and the standards it meets can often preservefor an area its opportunity to attract manufacturers.
Another gauge of health services focuses attention onthe number of physicians and dentists per 100,000 people. In theUnited States, 149 medical doctors on the average serve each100,000 persons. The corresponding numbers for principal Appala-chian states are Alabama 79, Tennessee 113, Kentucky 95, West-Virginia 103, and Pennsylvania 153. In the leading industrialstates, the comparable figures are New York 207, Massachusetts,196,New Jersey 143, and California 178.
Similar records for dentists reveal .the following data:Alabama 31, Tennessee 42, Kentucky 37, West Virginia 40, and Penn-sylvania 60. The industrial states being used for comparisonexhibit generally higher numbers: New York 79, Massachusetts 69,New Jersey 62, and California 59.
Generally it can be expected the Appalachia countieswill compare less favorably with the parent states. Further, itcan be anticipated that transferees tend to ba more critical ofconditions in communities where they are expected to start uphousekeeping anew than in their home communities.
Appropriations available to Appalachia under Section 202of the Act provide substantial sums for construction and operationof regional health centers. There is also a Health Advisory Com-mittee. Industrialists will welcome both moves once they get toknow more about them and their objectives. In our opinion, indus-trialists will also support the following recommended actions:
(a) The Health Advisory Committee should accelerateefforts to help the many hospitals wifEaT7516ENEFFOTEF-EFEin toachieve this mark of quality care. In many cases, this wal requireextensive grants to pay for equipment or facilities. In othercases, professional staffing requirements will have to be meta Todetermine where money and efforts should be expended will requirea study in depth by those with the proper credentials.
-73-
(b) The Health Advisory Committee must develop a masterplan which would outline the strategy for a massive assault on en-vironmental health problems and provide for the program's imple-mentation-WO-continuous evaluation. Such a master plan would in-corporate the recommendations made in the pollution control sectionof this report.
In its conception, the plan would specify the purposes orgoals to be achieved, such as the elimination of the most prevalentinfectious and contagious diseases. A clear statement of thegoals is necessary to the success of the program. When combinedwith continuous evaluation, the tendency to drift away from the.purpose or to take. satisfaction from. an increase of services orpersonnel--which may actually detract from the ability to achievethe stated goals--can be avoided.
By closely defining the goals, a gauge is furnished tomeasure the program's progress. It also presupposes a factual de-termination of present conditions from which to base improvement.A series of objectives, each capable of practical achievement,would be the building blocks of the master plan's structure.
-74-
Liaison- The Role of Communications
While many branch plants operate as self-sustained unitsin Appalachia, liaison with a headquarters office (typicallyNew York or Chicago) is an important locational factor, particularlyduring the startup period. Excellent communication will be acontinuing necessity.
Experience in the apparel industry, for one, bringshome tae urgency of the needs. Typically, many apparel plantsoperate without policy manuals. Company policy and changes -inpolicy are communicated orally, in conferences, or occasionallyby exchange of memoranda. Usually the local plant manager is theonly executive intimately acquainted with production problemsin his plant, and he 13 directly involved in policy formulation.Conferences are not scheduled for specific days. Instead, theyare arranged on rather short notice. Their purpose, in additionto policy setting, involves production and sales coordinationand exchange of information.
In addition to the conference type of communication,many apparel plants utilize frequent standardized reports, includinga daily production report, a sales report from the main office tothe branch, semimonthly financial statements, bimonthly inventoryreports, and semimonthly labor cost reviews. In all cases, the sta-tus of orders, production, finished inventory and shipping datesmust be carefully coordinated.
From a locational standpoint, the cost and effectivenessof liaison will be measured by the distance' between the New York(or Chicago) office and the branch plant, mail deliveries andtransit time for executives traveling to or from the plant. Theseproblems can be minimized by selection of a community withinreasonable distance (one-hour driving time) of an airport havingfrequent flights to and from New York or Chicago. Investigationmust also be extended to include the quality of telephone service,the availability of teletype facilities, and frequency of maildispatching.
Many small and medium-size Appalachian communitieswith established industries appear to be unaware of the importancethe businessman attaches to liaison because local people them-selves frequently are guilty of poor liaison with area employers.Something which approaches a massive task of education is needed.Accordingly, it is recommended that:
-75-
(a) Develo ment districts establish "communicationsclinics" to educate commun t es n pract ca s eps gat can .etaken to facilitate liaison of branch plants with home offices.Participants in these clinics should include area postmasters,communications carrier representatives, and airline customerservice agents.
Specific goals should include adjustment of rural maildelivery schedules to provide early-Morning delivery of mail tomanufacturing plants; introduction of telephone trunklines topermit direct long-distance dialing of calls and leaSed wiretime sharing, and expedited delivery of business mail to and fromairports. Further upgrading of facilities at. airfields forexecutive craft can make a secondary contribution.
-76-
APPENDIX A
-77-
Appendix A
Industry Definitions, Selection Methodology,and Analytical Techniques
Industry Definitions
The experienced location analyst has little difficulty inconveying what he has in mind when he speaks of the "motor vehicleparts industry." He tends to think in terms of the basic decision-making units of the industry, i.e., companies with an importantstake in producing parts for motor vehicles. He defines the indus-try in terms of common denominators which are the essence of itscompetitive structure--the size and location of its markets, productlines related as to production and marketing, who shares in thebusiness, pricing structures and cost relationships, decentraliza-tion of manufacture, and so on.
All of these factors have paramount significance inselecting locations for the industry. This significance overridesconventional definitions of the industry as given in the StandardIndustrial Classification Manual used by the Bureau of the Budget.For example, the Manual classifies "Motor Vehicle Parts and Acces-sories" under Code 3714, But major elements of the industry arescattered under other codes, including SIC 30, 32, 33, 34, 35, 36and 38. Any realistic appraisal of locational trends in the indus-try must take this situation into account.
The 25 Appalachian Industry Location Studies, brieflycharacterized in the appended Table 1, are constructed from thispoint of view. The analysis of "Motor Vehicle Parts," one of theindustries, does in fact cut across conventional SIC codes. rtconsiders the industry from the function of the location analyst.e same premise is asis or se ec ing and grouping 6Tar
specific SIC codes for unified industry analysis treatment.
Selection Methodology
In deciding what four-digit industries to include andwhich ones to leave out, a systematic selection process was used toscreen all 424 four-digit industries found in the Standard Indus-trial.Classification Manual. To be considered as a candidate forfurther study, each four-digit industry first had to satisfy certainqualifying requirements for "growth." While there are fumy conceptsof growth, the concept of the decision-making units of the industry(i.e., companies) was the rationale used in this program.
-78-
Conceptually, the screening process placed emphasis onapplying to the industry these well-accepted criteria for a growthcompany:
(1) Quality of management. Superior managementcan be measured by three standards:(a) Good return on equity(b) High operating profit margin(c) High net profit margin
(2) Research and development. Growing firms arereceptive to new ideas and new projects.Therefore, emphasis on applied research isan indication of growth.
(3) Diversification. In itself, diversificationis not enough; broadening of product linesmust extend into growth areas.
(4) Monopoly or semi-monopoly. Control of, or astrong basic position in, a profitable prod-uct or group of commodities has been essentialto the growth of chemicals and electronics.
(5) Mobility and plant location activity. If theindustry has continued to operate in the samelocations over a long period of time, itcannot be considered a true growth industry.
Each of these aspects of growth can be considered asexpressions of underlying locational factors. Further, many ofthese factors lend themselves to one or more types of measurement:direct quantitative measurement, trend analysis, proxy measurementand first approximations.
Of all these, mobility is the most difficult to measuredirectly from published statistics. In practical terms mobilitymust be gauged by plant location activity and investmeni--whichincludes expansions, new facilities and the entry of additionalproducers. Generally, plant location activity is highest in thoseindustries which are growing faster than the national economy.
One measure of locational activity, generally the leastsatisfactory, is through a Census of Manufactures count in twocomparison years (e.g., 1958 and 1963). Appended Table 2 givesthis comparison for the 25 industry groups finally established forfurther location analysis. The basic defects in this type of anal-ysis are three: (1) conceptual limitations in industry definitionsof the Standard Industrial Classification Manual, (2) lack of quan-tification by capacity and employment data, and (3) lack of data
-79-
for more recent years. Further, even with adjustment for theselimitations, the trends and dynamics of plant locatidn.activity aremissing from this snapshot.
Additional published services of locational activityinclude the 1963 and 1966 editions of the. Fortune Plant and ProductDirectory, semiweekly editions of Moody's Industrials (generallylimited to firms in which there is,public ownerchip) and announce-ments of the various state development agencies. No two stateskeep their books exactly alike, however. Many report under theheading "new manufacturing plants" announcements which are not newplants but expansions and establishments not engaged in manufac-turing or incorrectly classified by branch of manufacturing. (See,for example, Summary and Recommendations for State Agencies Definingand Reporting7MWTEiTiFizd and Relocated Manufacturing Firms, pre-pared by Industrial Development Division, Ohio Impartment jr-Indus-trial and Economic Development, 1961.)
Thus to arrive at reliable assessments of trends of loca-tional activity, many independent and private sources of. informationhad .to be utilized. .These included items from the Dun & BradstreetData Bank (see appended Table 2), trade association surveys andreleases (e.g., American Paper Institute), as well as a large bodyof proprietary information in the Contractor's plant location files.
These searches reduced the number of four-digit industrycandidates first from 424 to 127 and, finally, to the 90 which areembraced by the 25 Appalachian Industry Location. Studies,
Analytical Techniques
In the early stages of the screening process, preliminaryapproximate measures of basic locational factors were introducedinto matrix analysis. Such factors initially included averagehourly earnings, required labor skills, transportation cost signifi-cance, water use orientation, labor intensivity, power orientationand fuel orientation.
At intermediate stages, this information was refined byquantifying most of these factors and introducing additional ones.As an example of the latter, growth was measured historically overthe 1960-65,and as growth forecasts, for the 1965-75 span of years.The latter, in all instances, were derived from composites ofindustry opinion on the outlook for sales or consumption.
When intermediate analysis was completed, the determina-tion of associative groupings of four-digit industries for finallocational analysis became a straightforward undertaking settingthe stage for:
-80-
(1) Making detailed evaluations of industry structuresand locational characteristics. These evaluations were shaped bybackground information in the Contractor's proprietary files, mostof it acquired in the course of making several thousand locationalsearches for industrial corporations.
(2) Verifying the locational experiences of appropriateindustries inside and outside Appalachia. This task was carriedout,by making personal calls on both establishments and headquartersoffices.
(3) Developing additional background information on suc-cessful programs used to make areas more attractive to industry.For the most part, this information was developed through personalcontacts with state and community planning groups, and the area orbusiness development departments of transportation industries, andelectric and gas utilities.
Each of the 25 Appalachian Industry Location Studies ispresented in a uniform format with content classified under thefollowing headings:
Section ISection IISection IIISection IV
Section V
Profile of the IndustryThe Industry's Prospects for GrowthTechnology and TrendsPrimary Factors Influencing Selection
of LocationsSelecting Public Investment Policiesand Activities Which Will Enhancethe Competitive Position ofAppalachia
In Section V an effort is made to deal with policies andactivities which appear relevant only to the industry under analysis.As the preparation of these studies proceeded, certain common de-nominators having relevancy for a majority of the industries beganto reappear. Further, the interlocking relationships of many suchfactors made it clear that regional considerations would in manycased transcend industry considerations.
Accordingly, the Section V recommendations in each loca-tional study must be regarded as extensive rather than .intensive.Recommendations presented in this Summary Report comprise thedefinitive policies and actions which should be considered as atotal program to make Appalachia more attractive for the 25industries.
-81-
As necessary background, Sections I, II and III of eachlocation study present information on the structure of the overallindustry, its economic impact, prospects for growth, and develop-ments in technology that are germane to locational activity. Theemphasis is on trends now shaping the industry's growth rather thanon historical developments which no longer may be significant in theoutlook. Accordingly, the evaluations are accompanied by only themost necessary technical qualifications and explanations.
Throughout the project, many choices had to be made.Often these involved the use or non-use of privileged informationthat was (or appeared to be) in conflict with some standardpublished sources, such as the Census of Manufactures. Whereverpossible, these conflicts were resolved by compositing data, byusing proxy measures which do not disclose the operaticns of anyone company, or by making reference to other governmental ornongovernmental data more appropriate to the purpose.
These extended evaluations convey a number of importantinsights which are meaningful in locational strategy. Specialattention is directed to the following:
Degree of Industry Vertical Integration
A company has a high degree of vertical integration whenit is largely self-sufficient in all or most of its basic rawmaterials. The degree to which a company is vertically integratedmay have more influence than any other single factor in shaping itsinvestment activity. Thus, one set of locational choices may beopen to the corrugated shipping container manufacturer who mustpurchase his materials on the open market. An entirely differentcombination is available to the manufacturer who is "basic" be-cause he controls, through company-owned units or affiliates, anetwork of production facilities for corrugating medium, liner-board, wood pulp, pulpwood, lumber and tree farms-.
The degree to which companies in an industry are inte-grated can be gauged from data provided for plant ownership, sizestructure, and sales. Additionally, profit ratios provide cluesto the abilities of companies in an industry to expand. Whereverpossible, each industry analysis provides three measures of profitratios: on sales, on tangible net worth, and on net workingcapital.
Net profit on net sales is obtained by dividing the netearnings of the business, after taxes, by net sales. This impor-tant yardstick in measuring profitability should be related to theratio which follows.
-82-
Net profits on tangible net worth. Tangible net'worth isthe equity of stockholders in the business, as obtained by subtract-ing total liabilities from total assets, and then deducting in-tangibles. The ratio is obtained by dividing Net Profits aftertaxes by Tangible Net Worth. The tendency is to look increAsinglyto this ratio as a final criterion of profitability. Genervlly, arelationship of at least 10 percent is regarded as a desirableobjective for providing dividends plus funds for future growth,including investmett in new plants.
Net profits on net working capital. Net Working Capitalrepresents the excess of Current Assets over Current Debt. Thismargin represents the cushion available to the business forcarrying inventories and receivables, and for financing day-to-dayoperations. The ratio is obtained by dividing Net Profits, aftertaxes, by Net Working Capital.
Industry Growth Characteristics
In the national economy there are many yardsticks formeasuring manufacturing industry growth: employment, value addedby manufacture, capacity, shipments, consumption, income,investmentactivity, and so on. The regional economist is inclined toconcentrate on employment and value added by manufacture, becausepositive changes can be regarded as measures of regional growth.The businessman, however, tends to view the prospects for hiscompany, or the industry for which he is spokesman, in terms ofshipments, consumption, income and, sometimes, capacity.
It would be highly desirable to forecast the growth ofany particular industry in Appalachia. Unfortunately, the neces-sary information from which to construct reliable forecasts is notregionally available at a fine enough level of industry detailover a continuous span of years. In most cases the forecastswould amount to arbitrary extrapolations of changes between twoor three base years, no two of which are likely to have the sameposition in the business cycle. Further, it would be highlyunlikely if extrapolation of any single factor (e.g., employment)coincided with an overall assessment of the industry's prospectsfor measured growth. Finally, extrapolation of what'has happenedin the past runs counter to the experience of skillful areadevelopment groups and the plant location consultant, whichdemonstrates that regional economic development programs can bedesigned to influence the location, timing, or growth rate of priv-ate business.
-83-
In contrast, there is an excellent body of authoritativeinformation predictive of growth that may be expected for specificindustries in the national economy. Much of this is anchored tocontinuous records of saes, demand, and capacity which areconstantly being evaluated and reevaluated in rolling forecastsby businessmen concerned with making investment decisions. Be-cause of the relatively high degree of reliability involved, suchforecasts are used wherever possible throughout Section II of eachlocation study. Obviously, the area development specialist whoknows how much an industry is growing and why it is growing is ina better position to understand the locational search and how itmay impinge upon his local area.
Research and Development Activity
Much growth of manufacturing industry in Appalachia isgenerating what may be broadly described as "research and develop-ment activity". This activity embraces a broad spectrum of func-tions, including basic research, product and process research,sales engineering services, government liaison offices, and soon. Appalachian industries which have prominent local identifica-tion with such functions include instruments and controls, air-craft and aerospace parts, primary metals, textiles and chemicalprocess industries, such as chlor-alkalies, synthetic fibers,foamed plastics and textile chemicals.
Although the Appalachian Location Research StudiesProgram does not deal explicitly with the factors governing theestablishment of research and development facilities, it can beexpected that substantial growth in the basic industries analyzedwill be accompanied by increased emphasis on the above functions.The extent to which local areas will share in this activity re-mains conjectural, however. One reason for this is that, contraryto the manufacturing function, the decentralization of researchcontinues to be governed more by individual corporate policiesrather than by industry characteristics.
The establishment of a new laboratory for basic researchis a comparatively rare event. In any event, proximity to corporateheadquarters appears to be the major controlling influence. Incontrast, the opening of regional and subregional sales engineeringlaboratories and customer sales-service centers with laboratoryfunctions is dictated by the need to provide service to the cus-tomer on an almost day-to-day basis. Facilities of this type areusually placed in an urban area within convenient reach of asizable concentration of customers.
-84-
Productivity
The subject of productivity is controversial even whenmeasurements are made of a national economy. It is infinitelymore difficult to demonstrate differentials within an industry: whencomparing one area (or a region) with another. So much dependson the range and quantity of inputs, including people, capital,technology, management and labor union skills, work measurement,etc.
Because of the many variables, no attempt is made in theAppalachian Location Research Studies Program to evaluate produc-tivity in the region as against that in the nation. Instead,several national measures specific to the industries are employed.One is the change in the value of shipments per employee betweentwo specified years. A second is the change in units of outputper employee, as in the steel industry.
A third involves the use of indexes of output per man-hour published by the Bureau of Labor Statistics (BLS). As de-fined by BLS, output indexes are based primarily on the physicaloutput of the products of the industry combined with fixed periodweights, usually value weights for 1947-58 or value weights for1958 for years after 1958. The index of output per man-hour iscomputed by dividing an output index by an index of aggregateman-hours actually worked.
For local area development groups, it is important tonote from productivity measures that the role of salaried employeesas opposed to hourly workers is be coming increasingly important.The educational level of salaried workers is usually higher andthe costs of hiring are probably greater. This means that thegeneral level of education in an area is coming under sharperscrutiny when the location decision is made. It also means thatdismissals, or layoffs of salaried workers during downturns inbusiness that are expected to be short-lived, will be less fre-quent. On the other hand, it should be pointed out that take-homepay of hourly-rated employees, in an industry where productivity isrising rapidly, may still be subject to wide fluctuations becauseearnings frequently depend upon output that is adjusted to businessconditions.
-85-
Table 1.Appendix A
Synopsis of Selected Characteristics for IndustriesTreated Under the Appalachian Locational Studies Program
1. PAPER AND ALLIED PRODUCTS
Specified product opportunities
Wood PulpPaperboardPaperCorrugated shipping containersFolding paperboard boxesSanitary food containersPressed and molded pulp goods
Typical investment characteristics
Pulp and Paper: Large investment in plant and equipmentEmployment averages range 400-800; female representationminor
Containers: Moderately high investment in machinery andequipmentEmployment typically 150; females 25%
Representative unit operations or processes
Manufacture of wood pulp by the sulphate, sulphite, chemicaland semichemical processes
Manufacture of paper and paperboard from wood pulpMolding of containers from wood pulpFabrication of shipping containers from paperboard andcorrugating medium
Conversion of paper and board into sanitary food containers
Major end uses
Printing and publishingOffice suppliesConstructionPackagingSanitary paper products
-86-
Table' 1.
Appendix A - cont'd
2. TEXTILE MILL PRODUCTS
Specified product opportunities
Woven and knitted cotton and synthetic fabricsThreads and yarnsTufted carpets
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment typically 300; females vary between 23% infinishing operations to 70% in knitting or seamlesshosiery
Re resentative unit operations or .rocesses
Fiber preparationYarn spinningWeaving, knitting or braiding or yarn into gray orunfinished fabric
Bleaching, dyeing, or printing of gray fabric to producefinished goods for cutting
Major end uses
ApparelHome furnishings (e.g., carpeting, upholstery, draperies,white goods, etc.)
Industrial applications (filters, etc.)Military apparel and equipment
-87-
Table 1.Appendix A - cont'd
3. APPAREL
Specified product opportunities
Men's, women's, and children's clothing
Typical investment characteristics
Large investment in training workersInitial employment averages 100--close to 80% females
Representative unit operations or processes
Cutting and sewing fabric
Major end uses
Final consumer demand (see specified products)
4. PRINTING & ALLIED INDUSTRIES
Specified product opportunities
Manifold business formsGreeting cardsBlankbooks; looseleaf binders
Typical investment characteristics
Moderate investment in machinery and equipmentEmployment typically 150 and 250, manifold businessforms and greeting cards, respectively
Female requirements moderate to high
Representative unit operations or processes
Offset and continuous rotary press printingCutting, collating, and binding
Major end uses
Office suppliesSchool suppliesFinal consumer demand (greeting cards and school supplies)
-88.-
is
Table 1.Appendix A - cont'd
5. ELECTRICAL COMPONENT PARTS
Specified product opportunities
Standard specification parts.of the following types:Electrical measuring instrumentsIndustrial controlsSwitchgearMotors and generatorsElectric housewares and fansCurrent carrying devicesElectronic parts
Typical investment characteristics
Large investment in training workersEmployment size 250; females 30-60%
Representative unit operations or processes
Pressing and stamping metal partsAssembly, soldering, welding, finishingTesting and inspection
Major end uses
Industrial apparatus - mechanical and electronicAircraft and aerospaceConstructionAppliances - industrial and consumer
-89-
Table 1.Appendix A - cont'd
6. TEXTILE MACHINERY/PUMPS &.VALVES INDUSTRY
Specified product opportunities
Textile machinery and partsCompressors and pumpsValves and fittings
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment size typically 300; female representation 10-15%
Representative unit operations or *processes
Metal forming and machiningAssembly, inspection, and testing
Major end uses
Textile productionProcess industriesConstruction, including industrial, commercial,residential, agricultural
-90-
Table 1.Appendix A - cont'd
7. OFFICE MACHINERY
Specified product opportunities
Computing, accounting, and electronic data processingequipment
Cash registersTypewritersCopying equipmentOther miscellaneous office equipment (e.g., dictating,addressing, etc.)
Typical investment characteristics
Large investment in training workersEmployment size 1,000; females 25%
Representative unit operations or processes
Stamping, cutting, and forming metalAssembly - soldering, welding, cementing.Inspection and testing
lajor ene uses
Industrial, commercial, and institutional offices
-91-
Table 1.Appendix A - cont'd
8. MOTOR VEHICLE PARTS
Specified product opportunities
Plastic, ceramic, asbestos, metal, and molded rubber partsclassified as follows:
Motor vehicle parts and accessoriesAutomotive job shop stampingsCarburetors, pistons, and machine shop productsMotor vehicle hardwareEngine electrical equipment
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment size 200; females 17%
Representative unit operations lr processes
Metal forming, including catAing, stamping, molding, andmachining
Assembly of components.nspection and testing
Major end uses
Motor vehicles - original equipment and replacement
-92-
Table 1.Appendix A - cont'd
9. CHLOR-ALKALI INDUSTRY
Specified product opportunities
ChlorineCaustic soda (sodium hydroxide)
Typical investment characteristics
Large investment in machinery and equipmentEmployment size 150; female representation negligible
Representative unit operations or processes
Electrolytic separation of products from sodium chloride(salt) solution
Product refinement into concentraixs or solid form
Major end uses
Organic chemical productionPulp and paperAluminumTextilesPlastics
-93-
Table 1.Appendix A - cont'd
10. MATERIALS HANDLING EQUIPMENT
Specified product opportunities
ConveyorsHoists and overhead cranesIndustrial lift trucks
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment size 100; females 9%
Representative unit operations or processes
Metal forming emphasizing machining, welding, forging, casting,and stamping
Heat treating and finishingAssembly, inspection, and testing
Major end uses
MiningManufacturingWarehousing
-94-
Table 1.Appendix A - cont'd
11. MOBILE HOME AND SPECIAL PURPOSE VEHICLE INDUSTRIES
Specified product opportunities
Mobile homesTravel trailersSchool busesAmbulances and hearses
Typical investment characteristics
Large investment in training workersEmployment 150; females less than 5%
Re resentative unit o erations or processes
Wood forming and carpentry, sheet metalwork, and installationof plumbing, heating, and electrical systems
Welding and automotive bodyworkFitting and finishing of unitized fixtures
Major end uses
Final consumer demand (see specified products)
-95-
Table 1.Appendix A - cont'd
12. INSTRUMENTS & CONTROLS
Specified product opportunities
Process instrumentation and controlsScientific and engineering instrumentationAutomatic temperature controlsGas and water meters
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment size 450; females 15-25%
Representative unit operations or processes
Metal forming emphasizes stamping, brazing, welding, solderingAssembly, testing and inspection
Major end uses
Petroleum and chemical industriesResearch and developmentUtilitiesOther process-oriented manufacturing
-96-
Table 1.Appendix A - cont'd
13. THE NONCELLULOSIC SYNTHETIC FIBER INDUSTRY
Specified product opportunities
Filament yarns and staple fiber from acrylics, nylon,and polymers
Typical investment characteristics
Large investment in plant and equipmentEmployment of 1,000; 25 percent female
Representative unit operations or processes
Extruding synthetic chemical syrup into filament formTextile-type cutting, spinning, and/or texturizing
Major end uses
ApparelHome furnishings
-97-
Table 1.Appendix A - cont'd
14. METAL STAMPINGS
Specified product opportunities
Contract stamping for other manufacturersIn-plant stampings for captive use
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment 150; 20 percent female
Representative unit operations or processes
Blanking of shapesProgressive die stampingRoll formingDrawingImpact extrusion
Major end uses
Transportation equipment assemblyMachinery manufacturingInstrumentation and controls productionPackaging
-98-
Table 1.Appendix A - cont'd
15. AIRCRAFT & AEROSPACE PARTS
Specified product opportunities
Aircraft parts and auxiliary equipmentGuided missile components and subassembliesSpace probe rocket parts and components
Typical investment characteristics
Large investment in machinery and equipmentEmployment 500; 14 percent female
Representative unit operations or processes
Machining and assembly of partsFabrication of subassemblies by fitting, fastening and weldingInspection and testing
Major end uses
(See specified product opportunities)
-99-
Table 1.Appendix A - cont'd
16. PRIMARY ALUMINUM INDUSTRY
Specified product opportunities
Aluminum ingot, slabs, rods
Typical investment characteristics
Large investment in machinery and equipmentEmployment 1,000; less than 5 percent female
Representative unit operations or processes
Electrolytic reduction process purifying alumina to aluminumCasting into semi-finished form
Major end uses
Nonferrous rolled, drawn, or extruded productsCastings and forgings
-100-
Table 1.Appendix A - cont'd
17. NONFERROUS CASTINGS
Specified product opportunities
Contract casting for other manufacturersIn-plant casting for captive use
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment 150; 8-12 percent female
Representative unit operations or processes
Die casting of parts from aluminum, zinc, and alloysPermanent mold casting of aluminum, brass or alloysSand casting of brass, bronze or aluminumShell mold casting of thin-walled pastsInvestment casting of precision partsTrimming and cleaning
Major end uses
Automotive and industrial machineryAppliancesElectrical and electronic equipmentConstruction and industrial machinery
-101-
Table 1.Appendix A - cont'd
18. MALLEABLE AND DUCTILE IRON CASTINGSAND STEEL FORGINGS INDUSTRY
Specified product opportunities
Malleable, ductile and pearlitic iron castingsCarbon and alloy steel forgings
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment 300; 97 percent male
Representative unit operations or processes
Casting: Melting by direct arc electric furnacesTeeming into green sand moldsHeat treating
Forging: Preheating raw stockDrop, upset, open-die, and press forgingHeat treating parts
Major end uses
Component parts for:Transportation industryIndustrial machinery and equipmentConstructionMining equipment
-102-
Table 1.Appendix A - cont'd
19. FOAMED PLASTIC PRODUCTS
Specified product opportunities
Upholstery cushioningThermal and acoustical insulationFoamed products, e.g., protective packaging, thermal foodcontainers
Impact absorption materials
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment 100; females 30%
Representative unit operations or processes
Foaming of plastic resins by chemical reaction or heatingForming into sheet and products via extrusion or moldingtechniques
Major end uses
Home furnishingsMotor vehiclesAppliancesConstructionPackagingApparel
-103-
Table 1.Appendix A - contid
20. ROLLING DRAWING AND EXTRUDING OF NONFERROUS METtLS
Specified product opportunities
Nonferrous metals (principally aluminum, copper, andtitanium) mill products, including plate, sheet, rod, foil,and shapes
Wire and cableTubing
Typical investment characteristics
Large investment in machinery and equipmentEmployment 300; less than 10% females
Representative unit operations or processes
Melting and casting rolling ingots or billetsRolling, drawing, and extruding of finished productsCoating of wire and cable
Major end uses
ConstructionPower transmissionManufacturingPackagingFinal consumer demand (foil)
-104-
Table 1.Appendix A - cont'd
21. MEAT AND POULTRY PROCESSING, DRIED AND FROZEN PRODUCE
Specified product opportunities
Beef, fresh and frozenBroilers, fresh and frozenPvepared meats (e.g., sausage, frankfurters, salami, etc.)Dried, dehydrated, or frozen fruits and vegetablesFreeze-dried fruit
Typical investment characteristics
Large investment in training male meatpacking workersEmployment 300; females 30-55%
Representative unit operations or processes
Meat packing to portioned cutsMeat processing, converting to sausages, frankfurters, etc.Broiler processing and freezingFreeze-drying of fruit and vegetables
Major end uses
Final consumer demand
li
-105-
Table 1.Appendix A - cont'd
22. PLASTIC AND POWDER METAL PRODUCTS
Specified product opportunities
Pressed and sintered structural metal partsOil-less bearings and bushingsCustom-molded plastic parts (e.g., bottle caps)Proprietary molded plastic parts (e.g., toys)Other formed plastic parts (e.g., signs)
Typical investment characteristics
Large investment in training workersEmployment 100; females 30%
Representative unit operations or processes
Compacting and furnacing of shapes from metal powdersInjection molding of thermoplastic resinsCompression molding of thermosetting resinsForming of sheet plastics
Major end uses
Plastics: Packaging, construction, and surgical suppliesPowder metallurgy: aun,omotive and appliance
-106-
Table 1.Appendix A - cont'd
23. REFRACTORY METALS
Specified product opportunities
Titanium spongeTungsten powderFerroalloys
Typical investment characteristics
Large investment in machinery and equipmentEmployment 400; female representation negligible
Representative unit operations or processes
Beneficiation and reduction of oresElectric furnace alloying of metalsChemical processing of titanium sponge
Major end uses
Nonferrous mill productsAlloy steelNonferrous alloys
-107-
Table 1.Appendix A - cont'd
° 24. PRIMARY STEEL AND STEEL MILL PRODUCTS INDUSTRY
Specified product opportunities
Stainless and alloy steelsRolling mill products, including plate, strip, sheet, shapes,
bars, and rods
Typical investment characteristics
Large investment in machinery and equipmentEmployment 1,000; females negligible
Representative unit operations or processes
Alloying materials in electric furnace operationCasting billets, blooms, and slabsRolling, drawing, and extruding into finished mill products
Major end uses
Process equipment manufactureElectrical apparatusAppliances and kitchenwareConstructionIndustrial machinery and equipment
-108-
Table 1.Appendix A cont'd
25. PLASTIC RESINS, ADHESIVES, AND RELATED COMPOUNDS INDUSTRY
Specified product opportunities
Plywood and particle board bonding resinsTextile treating compositionsTufted carpet latexesPaper coatings, sizings, and impregnating compositions
Typical investment characteristics
Moderately high investment in machinery and equipmentEmployment 50; females 10%
Representative unit operations or processes
Solution and emulsion compounding from purchased ingredientsResin manufactureLatex formulatingDry powder blending
Major end uses
(See specified product opportunities)
Table 2.
Appendix A
Statistical Measures of Locational Activity and Geographical Prevalence 1/
Rpt.
No.
Total
1958
Industry
Plants
Total
1963
Plants
Net
Increase
(Decrease)
Percent
1963
Change Appalachia
'58-'63
% of U.S.
1966 Plants
Employ Over 50/
Actual
Appalach a
% of U.S.
1Paper & Allied Products
Appalachia
92
102
10
10.9
5.3
54
5.0
Total U.S.
1,661
1,928
267
16.1
1,070
2Textile Mill Products
Appalachia
596
633
37
6.2
20.5
373
23.7
Total U.S.
3,366
3,082
(284)
(8.4)
1,573
1-1
3Apparel
0Appalachia
707
846
139
19.7
8.4
534
16.2
Total U.S.
10,096
10,044
(52)
(0.5)
3,305
4Printing & Allied
Industries
Appalachia
36
37
12.7
3.2
16
5.2
Total U.S.
1,420
1,169
(251)
(17.6)
308
5Electrical Component Parts
Appalachia
156
203
47
30.1
4.3
93
4.9
Total U.S.
3,908
4,714
806
20.6
1,879
6Textile Machinery
Appalachia
132
153
21
19.9
8.1
50
8.3
Total U.S.
1,755
1,892
137
7.8
604
7Office Machinery
Appalachia
22
29
731.8
5.7
14
5.7
Total U.S.
345
512
1(.:
48.4
244
Table 2. - Cont'd
Appendix A
Statistical Measures of Locational Activity and Geographical Prevalence 1/
Rpt.
No.
Industry
Total
1958
Plants
Total
1963
Plants
Net
Increase
(Decrease)
Percent
1963
Change Appalachia
'58-'63
% of U.S.
1966 Plants
Employ Over 50 2/
Actual
Appalachia
% of U.S.
8Motor Vehicle Parts
Appalachia
735
905
170
23.1
5.1
85
4.6
Total U.S.
15,373
17,838
2,465
16.0
1,833
9Chlor-Alkali Industry
Appalachia
56
120.0
15.8
710.9
Total U.S.
34
38
411.7
64
10
Materials Handling
Equipment
Appalachia
44
45
12.3
5.1
11
4.4
Total U.S.
763
887
124
16.3
250
11
Mobile Homes
Appalachia
16
22
637.5
5.3
33
7.7
Total U.S.
386
413
27
7.0
428
12
Instruments & Controls
Appalachia
47
48
12.1
3.5
30
6.2
Total U.S.
1,274
1,366
92
7.2
485
13
Noncellulosic Synthetic
Fiber
Appalachia
36
3100.0
24.0
17
20.7
Total U.S.
14
25
11
78.6
82
14
Metal Stampings
Appalachia
116
118
21.7
4.6
37
5.9
Total U.S.
2,456
2,574
118
4.8
613
Table 2. - Cont'd
Appendix A
Statistical Measures of Locational Activity and Geographical Prevalence 1/
1963
Appalachia
% of U.S.
3796
gTr)
its
Employ Over 50 2/
Rpt.
No.
Industry
Total
1958
Plants
Total
1963
Plants
Net
Increase
(Decrease)
Percent
Change
'58-'63
Actual
Appalachia
% of U.S.
15
Aircraft & Aerospace
Parts
Appalachia
15
17
213.3
1.7
41.3
Total U.S.
1,200
1,000
(200)
(16.6)
307
16
Primary Aluminum
1Appalachia
44
17.4
510.4
H H NI
Total U.S.
20
23
315.0
48
1
17
Nonferrous Castings
Appalachia
100
99
(1)
(1.0)
5.2
22
5.2
Total U.S.
1,965
1,894
(71)
(3.3)
427
18
Malleable & Ductile
Castings
Appalachia
211
195
(16)
(7.6)
13.1
95
13.6
Total U.S.
1,693
1,492
(201)
(11.9)
699
19
Foamed Plastic Products
Appalachia
NA
NA
NA
NA
NA
12 3/
9.0
Total U.S.
NA
NA
NA
NA
NA
133 7/
20
Rolling, Drawing & Ex-
truding of Nonferrous
Metals
Appalachia
55
50
(5)
(9.1)
6.7
30
6.7
Total U.S.
711
748
37
5.2
447
0 0
Table 2. - Cont'd
Appendix A
Statistical Measures of Locational Activity and Geographical Prevalence 1/
Rpt.
No.
Industry
Total
1958
Plants
Total
1963
Plants
Net
Increase
(Decrease)
Percent
1963
Change Appalachia
'58-'63
% of U.S.
1966 Plants
Employ Over 50 2/
Actual
Appalachia
% of U.S.
21
Meats, Dried & Frozen
Produce
Appalachia
506
503
(3)
(0.6)
8.2
74
6.0
Total U.S.
6,110
6,102
(8)
(0.1)
1,242
22
Plastic & Powder Metal
Products
Appalachia
128
198
70
54.7
4.3
45
4.3
Total U.S.
3,451
4,616
1,165
33.8
1,046
23
Refractory Metals
Appalachia
52
(3)
(60.0)
5.7
12
26.1
Total U.S.
29
35
620.7
46
24
Primary Steel & Steel
Mill Products
Appalachia
185
166
(19)
(10.3)
22.3
147
25.1
Total U.S.
712
745
33
4.6
585
25
Plastic Resins
Appalachia
21
32
11
52.4
6.3
28
7.7
Total U.S.
349
509
160
45.8
365
NOTES:
1/ Source: 1958 and 1963 Census of Manufactures, except as otherwise noted
2/ Source: Dun & Bradstreet, Inc. Data Bank, May 1966, except as noted under 3/ following
3/ Source: Stanford Research Institute, Menlo Park, Calif., and Fantus Area Research files
