The New Southeast Aerospace
Cluster
1
THE NEW
AEROSPACE
CLUSTER IN THE
SOUTHEAST USA
Eliot NormanEliot Norman
Williams MullenWilliams Mullen
www.williamsmullen....
Part I: Introduction
3
Des notions essentielles :
exemples des journaux
• Walll Street Journal: Observation d’un
Belge
(Olivier Legrain, CEO , Io...
5
La Carte
6
7
8
9
THE NEW
AEROSPACE
CLUSTER IN THE
SOUTHEAST USA
Part 2: Les NouvellesPart 2: Les Nouvelles
OpportunitésOpportunités
10
• Mobile, AL (Airbus)
• Melbourne, FL (Embr)
• Savannah, GA (Gulfstream-General Dynamics)
• Charleston, SC (Boeing)
• Gree...
INVESTMENTS
• Gulfstream – Savannah, GA
– Announced in 1966 and has grown since
– By 1982, 2,500 employees
– 2006: $400 mi...
INVESTMENTS
• Hondajet – Greensboro, NC
– $60 million/300 jobs for HQ
– $80 million/419 jobs for manufacturing
plant
– Ann...
INVESTMENTS
• GE Aviation – Durham, NC
– 320 jobs
– Announced in 1993 and has grown since
– 500,000 square feet on 500 acr...
The Big 3
• Rolls Royce
• Boeing
• Airbus
15
INVESTMENTS
• Rolls-Royce – Prince George, VA
– $500 million/500 jobs
– Announced November, 2007
– 1,100 acre site with “s...
South Carolina
17
INVESTMENTS
• Boeing – Charleston, SC
– $750 million/3,800 jobs (some expect
greater than 6,000 jobs by 2016)
– Announced ...
INVESTMENTS
• Airbus - Mobile, AL
– $600 million/1,000 jobs
– Announced July, 2012
– A320 family jetliner final assembly l...
•
•Alabama
•Welcome, Airbus!
•The future home of Airbus’ U.S. A320 Family final assembly line is strategically positioned ...
THE NEW
AEROSPACE
CLUSTER IN THE
SOUTHEAST USA
Part 3: Les OpportunitésPart 3: Les Opportunités
SupplémentairesSupplémenta...
Its not just about Commercial
Business
• Department of Defense Dollars and Military
• Orientation of Boeing, EADS, Governm...
Headquarters HQ
• Solution: la banlieue virginienne de
Washington DC
23
HQ: Fairfax County (Va)
Location
• Prime US east coast
location.
• Washington, D.C. metro
area
• 60% of the U.S.
populatio...
;
25
Foreign-owned Firms (395)
26
European Companies
Sources: Fairfax County Economic Development Authority, Dun & Bradstreet
27
.. of which are Aerospace Firms
28
SPACE Business
• Strong in the Southeast
29
Case Example: Huntsville
Alabama
• Marshall Space Flight Center
– Responsable for launch vehicles, propulsion
systems, spa...
Case Example: Space in
Virginia and NASA
• Space launches from NASA Wallops Flight Facility –
Mid-Atlantic Regional Spacep...
Aerospace Exports from the United States:
Another Reason to Manufacture “ dans la Zone
Dollar”?
• A growth opportunity
• C...
Aerospace Exports from U.S.
• Alabama:
•
ALABAMA
33
Southeast: Center for Exports
• Supply Chain Logistics
• Volatility of Currency Exchange Rates
– Dollars against the Euro
...
IC DISC Structure
Summary of Benefits
1. IC DISC can be paid commissions
• Statutory formula – not required to be Arms
Len...
IC DISC Structure – Illustrative Example
Summary of Calculation
1. IC DISC calculates commissions
• Determines Export Sale...
• IC DISC provisions have been in US tax code since 1971
• IC DISC is nontaxable and can be owned by a non-US company
• If...
Conclusion : Les Opportunites
dans le Sud-Est des USA
1. Boeing, Embraer, Rolls Royce, Airbus, General
Dynamics, GE/Honda,...
PART 4: WHY THE SOUTHEAST?
Answer: The 50 States:
are not all the same.
No Accident: New Aerospace
Cluster Is in the South...
WHY THE SOUTHEAST?
• Quality of Life
– low crime rate
– availability/quality of
health care
– cost of living
– recreationa...
THE NEW
AEROSPACE
CLUSTER IN THE
SOUTHEAST USA
Part 4: Pourquoi LePart 4: Pourquoi Le
Southeast?Southeast?
John-Elink Schu...
WHY THE SOUTHEAST?
Top states for business(Virginia)
Forbes.com CNBC Pollina Corporate Real Estate, Inc.
#2 Best States fo...
43
WHY THE
SOUTHEAST?
WHY THE SOUTHEAST?
Resources:
Transportation
Sites
Infrastructure
44
WHY THE SOUTHEAST?
• Sites
– availability of sites, including airport
sites
– need large sites
– under control
– engineere...
WHY THE SOUTHEAST?
• Lower operating costs
– electricity costs 5.9
cents per KW Hour (SC)
6.15 cents per KW Hour (VA)
Cali...
Why the Southeast
• Transportation assets: Southeast may be
#1in USA
– Ports: Norfolk, Charleston, Mobile,
Savannah : deep...
A look at the Map
48
SAME DAY DELIVERIES THROUGHOUT
THE SOUTHEAST
WHY THE
SOUTHEAST?
Government = pro-
business
Yes, there are variations among theYes, there are variations among the
state...
WHY THE SOUTHEAST?
• Pro-business regulatory environment
– taxation
– environmental
– OSHA
– government “attitude” is frie...
WHY THE SOUTHEAST?
• Right to work States
– important consideration
– Union penetration 2% to 4%
– all Southeastern US sta...
WHY THE SOUTHEAST?
• Workforce
– skilled trades
– training programs
– community colleges
– availability of workers
52
WHY THE SOUTHEAST?
• Wages plus Qualite de Vie
– Makes
Southeast
competitive
53
Workforce Advantages :
Example of South Carolina
• Right to work state
• Rate of unionization in manufacturing: 1.6%: 2nd
...
Workforce Advantages:
Example of Virginia
• Right to Work State
• 8,900 people in Virginia make aerospace
products
• 4,000...
WHY THE SOUTHEAST?
• Large Number of Graduates from
University Engineering Programs
• NASA (provides a highly qualified
ae...
Part Five: What
Methodology and
Analysis Should
Apply to a Decision
to Locate within the
Southeast Aerospace
Cluster ?
Key...
VIRGINIA’S COMPETITIVE COST OF DOING BUSINESS
USE THIS CHART FOR OTHER STATES: ALABAMA,
SC, NC, GEORGIA
Virginia
Right-to-...
VIRGINIA’S AEROSPACE STRENGTHS : COMPARE
WITH OTHER STATES USING SAME CRITERIA: SOUTH
CAROLINA, ALABAMA, NC, GEORGIA, ETC....
INVESTMENTS
• Rolls-Royce – Prince George, VA
– $500 million/500 jobs
– Announced November, 2007
– 1,100 acre site
– First...
South Carolina Mini Clusters
• Aerospace Manufacturing
• More than Boeing and its direct suppliers
• 2009 GE aviation: tur...
62
Innovation Decision
Factors
R&DR&D
University Research CentersUniversity Research Centers
Government Research CentersGover...
VIRGINIA’S R&D ASSETS
Defense Advanced Research
Projects Agency—directs and
conducts military research
NASA conducts aeros...
R&D Alabama and Virginia
• Huntsville Cummings Research Park: 2nd
largest R&D Technology Park in USA
• National Institute ...
Best-in-class manufacturers & Virginia’s flagship
universities
Delivering “production-ready” manufacturing solutions while...
• A global Center of Excellence in
advanced manufacturing research
– Manufacturing Systems
– Surface Engineering
• Focus o...
AEROSPACE IN VIRGINIA: USE THIS TYPE OF
CHART FOR OTHER STATES: ALABAMA, SC, NC,
GEORGIA
68
Incentives
(Les Incitations
Fiscales)
Are they the whole story?Are they the whole story?
69
Incentives
• Incentives: Different types
– tax credits
– cash grants / closing funds
– payroll tax rebates
– donation of l...
COMPARABLE PROJECTS
Project Name Why Virginia Won the Deal
Rolls-Royce Crosspointe
($501.4 million/642 jobs)
•1,000+ acre,...
Why is a State a Top state for business?
Incentives are only one consideration.
Forbes.com CNBC Pollina Corporate Real Est...
Part 6: What
Preparation and
Assistance is
Required if your
company decides to
Locate in the
Southeast?
73
Your Economic Development
Team
• Can assist with preparation of business plans, analysis,
using multidisciplinary experts:...
Your Legal Team:
Services Essentielles
• Government relations, federal, state, local
• Commercial supply contracts, subcon...
Conclusion
Lets look again at The Maps
76
Conclusion
• Southeast cluster can be more than
simply another local market
• It can be your center for innovation,
R&D, n...
78
Thank You
Eliot Norman, Esq.
enorman@williamsmullen.com
www.williamsmullen.com
001/804.420.6000
Washington, DC USA
79
Questions?Questions?
Eliot Norman, Esq.
enorman@williamsmullen.com
Williams Mullen
1666 K Street NW Suite 1200
Washingt...
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New Southeast U.S. Aerospace Cluster (bordeaux presentation)

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Reviews businss opportunities and legal requirements for French and other foreign aerospace suppliers selling to Rolls Royce, Boeing, Gulstream and now AIRBUS in the Southeast U.S.

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  • 1-Cal Poly—San Luis/Obispo
    2-Purdue University
    3-(tie) University of Maryland/Rochester Institute of Technology
    4-Georgia Institute of Technology
  • New Southeast U.S. Aerospace Cluster (bordeaux presentation)

    1. 1. The New Southeast Aerospace Cluster 1
    2. 2. THE NEW AEROSPACE CLUSTER IN THE SOUTHEAST USA Eliot NormanEliot Norman Williams MullenWilliams Mullen www.williamsmullen.comwww.williamsmullen.com enorman@williamsmullen.comenorman@williamsmullen.com 001/804.420.6000001/804.420.6000 Washington, DC USAWashington, DC USA John Elink-Schuurman Managing Director-Europe Business Attraction Virginia Economic Development Partnership Phone: 804-545-5756 Mobile: 804-305-1756 jelink-schuurman@yesvirginia.org www.yesvirginia.org 2
    3. 3. Part I: Introduction 3
    4. 4. Des notions essentielles : exemples des journaux • Walll Street Journal: Observation d’un Belge (Olivier Legrain, CEO , Ion Beam applications) (proton therapy): « the entreprenurial spirit—to me, is part of the DNA of America) • Le Figaro: Gaz de Schiste (USA) 4
    5. 5. 5
    6. 6. La Carte 6
    7. 7. 7
    8. 8. 8
    9. 9. 9
    10. 10. THE NEW AEROSPACE CLUSTER IN THE SOUTHEAST USA Part 2: Les NouvellesPart 2: Les Nouvelles OpportunitésOpportunités 10
    11. 11. • Mobile, AL (Airbus) • Melbourne, FL (Embr) • Savannah, GA (Gulfstream-General Dynamics) • Charleston, SC (Boeing) • Greensboro, NC (Hondajet) • Durham, NC (GE Aviation) • Prince George, VA (Rolls-Royce) 11
    12. 12. INVESTMENTS • Gulfstream – Savannah, GA – Announced in 1966 and has grown since – By 1982, 2,500 employees – 2006: $400 million 7-year plan to expand manufacturing and service facilities (additional 1,100 jobs) – Research and Development Center – 750 employees – 2007: additional manufacturing and engineering buildings – 2010: $500 million 7-year expansion (additional 1,000 employees) 12
    13. 13. INVESTMENTS • Hondajet – Greensboro, NC – $60 million/300 jobs for HQ – $80 million/419 jobs for manufacturing plant – Announced February, 2007 – World headquarters and Maintenance Repair and Overhaul (MRO) and component parts manufacturing plant – 500,000 square feet on 80 acres 13
    14. 14. INVESTMENTS • GE Aviation – Durham, NC – 320 jobs – Announced in 1993 and has grown since – 500,000 square feet on 500 acres – Aircraft engines (GE90 and GEnx) – Expansion into South Carolina: turbine blades and airfoils 14
    15. 15. The Big 3 • Rolls Royce • Boeing • Airbus 15
    16. 16. INVESTMENTS • Rolls-Royce – Prince George, VA – $500 million/500 jobs – Announced November, 2007 – 1,100 acre site with “supplier park” – First factory - $170 million / 150 jobs (180,000 s.f.) – Manufactures turbine disc components for Dreamliner (Boeing 787) and Airbus 380 – Second plant to be announced in 2012: – Third factory: in near future – Founder: Commonwealth Center for Advanced Manufacturing (CCAM) 16
    17. 17. South Carolina 17
    18. 18. INVESTMENTS • Boeing – Charleston, SC – $750 million/3,800 jobs (some expect greater than 6,000 jobs by 2016) – Announced October, 2009 – 787 Dreamliner final assembly and delivery line: deliveries began April 2012. now manufacturing interior components – 1.2 million square foot facility 18
    19. 19. INVESTMENTS • Airbus - Mobile, AL – $600 million/1,000 jobs – Announced July, 2012 – A320 family jetliner final assembly line – Only site in Western Hemisphere to assemble Airbus aircraft – Airbus and parent EADS North American Headquarters are in Northern Virginia 19
    20. 20. • •Alabama •Welcome, Airbus! •The future home of Airbus’ U.S. A320 Family final assembly line is strategically positioned to benefit from water, road, rail and air links – facilitating the company’s first-ever production of jetliners on American soil. •This production facility will comprise 53 acres of buildings, aprons and roadways contained within a 116 acre site – with the option for future expansion. The location at Mobile, Alabama’s Brookley Aeroplex places it in the middle of the Gulf Coast aerospace cluster, between Mississippi and the Florida Panhandle. •Being situated on Mobile Bay adjacent to the Port of Mobile will enable Airbus to deliver fully-equipped aircraft sections from the European continent to Brookley Aeroplex via standard freight container ships. •Some U.S.-origin parts for jetliners built at Brookley Aeroplex will be supplied directly to the facility using the Class 1 network of railroads and interstate road system that serve the region. •Flight testing and customer delivery of A320 Family aircraft from the U.S. final assembly line will be made at Mobile Downtown Airport, located within the Brookley Aeroplex, which has two existing runways with lengths of 9,600 ft. and 7,800 ft. •Airbus’ Alabama Location •Airbus Assembly Line View •Location: Mobile, Alabama •Announced: July 2, 2012 •Production Start: 2015 •Products: A319, A320, and A321 •aircraft •Investment: $600 million •Job Creation: 1,000 jobs within the •production facility •“The time is right for Airbus to expand in America. Mobile is now becoming part of Airbus’ global production network, joining our successful and growing assembly lines in Hamburg, Toulouse and Tianjin.” •- Airbus President & CEO Fabrice Bregier • Economic Development Partnership of Alabama www.edpa.org
    21. 21. THE NEW AEROSPACE CLUSTER IN THE SOUTHEAST USA Part 3: Les OpportunitésPart 3: Les Opportunités SupplémentairesSupplémentaires • Government Business • HQ for U.S. Operations • Space Sector • Using Southeast as Manufacturing Center for Worldwide Exports 21
    22. 22. Its not just about Commercial Business • Department of Defense Dollars and Military • Orientation of Boeing, EADS, Government sales • Virginia $56+ Billion #1 among 50 States, 5,000 Defense Contractors in Virginia – Defense Contractors HQ Northern Virginia: General Dynamics, Northrup Grumman, Boeing SAIC, Booz Allen, CACI, CSC, Raytheon, Thales,etc. • So Locate where the decisions are made • South Carolina $3 Billion • Alabama $10 Billion Alabama : Huntsville Aerospace/Defense Community Huntsville Marshall Space Flight Center • Consider State Government Business (50 Customers) 22
    23. 23. Headquarters HQ • Solution: la banlieue virginienne de Washington DC 23
    24. 24. HQ: Fairfax County (Va) Location • Prime US east coast location. • Washington, D.C. metro area • 60% of the U.S. population within one to two-hour flight of Fairfax County: • Washington-Baltimore- Northern Virginia area is 4th largest US market • Immediate ACCESS to U.S. Government and Dept. of Defense • (Population 8.7 million) 24
    25. 25. ; 25
    26. 26. Foreign-owned Firms (395) 26
    27. 27. European Companies Sources: Fairfax County Economic Development Authority, Dun & Bradstreet 27
    28. 28. .. of which are Aerospace Firms 28
    29. 29. SPACE Business • Strong in the Southeast 29
    30. 30. Case Example: Huntsville Alabama • Marshall Space Flight Center – Responsable for launch vehicles, propulsion systems, space station programs – Heritage: Werner Von Braun and Redstone Arsenal (U.S. Army): Saturn V Rocket, Apollo 4, rocket boosters for Space Shuttles – 400 aerospace/defense companies – Boeing, Lockheed Martin, SAIC, Northrup Grumman, Raytheon, Teledyne Brown 30
    31. 31. Case Example: Space in Virginia and NASA • Space launches from NASA Wallops Flight Facility – Mid-Atlantic Regional Spaceport (MARS) • $145 investment in launch pad by Virginia Government • Orbital: 10 Missions with Antares Rockets to International Space Station Begin April 2013 • Space systems integration expertise at NASA Langley Research Center • Orbital Sciences Corporation manufactures satellites near Dulles Airport, Virginia 31
    32. 32. Aerospace Exports from the United States: Another Reason to Manufacture “ dans la Zone Dollar”? • A growth opportunity • Comment y participer? • Size of U.S. Aerospace Exports Market: $85 Billion • 72% of all civil aircraft and component production: exported from the USA • 42% of all U.S. aerospace production is exported • Positive Trade Balance: $44 Billion for U.S. Aerospace Industry • Southeast mirrors national figures 32
    33. 33. Aerospace Exports from U.S. • Alabama: • ALABAMA 33
    34. 34. Southeast: Center for Exports • Supply Chain Logistics • Volatility of Currency Exchange Rates – Dollars against the Euro • Contracts: in Dollars • Lower Production Costs than EU • Government Incentives favoring Exports – Foreign Trade Zones (FTZ) – Export-Import Bank www.exim.gov 34
    35. 35. IC DISC Structure Summary of Benefits 1. IC DISC can be paid commissions • Statutory formula – not required to be Arms Length • Greater of - 4% of gross export sales from the USA, or 50% of taxable income on those sales 2. Can get Rate Arbitrage • Commission deduction – up to 40% benefit (Fed & States) • Payment from IC DISC to Qualified Foreign Co – likely zero Withholding Tax. • Replaces dividends from fully taxed income of ABC Aerospace, Inc. (USA) with deductible commissions followed by Dividend from IC-DISC 3. IC DISC may also be used for export finance • May receive factoring fees of 2-3% • Additional Commission $3M for $100M export sales, resulting in additional $1.2M tax savings Issues 1. Need to structure properly to get rate benefit ABC Aerospace SA (Toulouse) ABC Aerospace USA Inc. (South Carolina) (deducts Commissions) IC DISC (ABC Exports, Inc. Non-taxable (South Carolina) Commissions Dividends Bottom Line: Reduce U.S. Taxes on Exports by 35% to 40%.
    36. 36. IC DISC Structure – Illustrative Example Summary of Calculation 1. IC DISC calculates commissions • Determines Export Sales and related COGS • Assumed 25% Gross profit here • Allocates and Apportions SG&A • Assumed 10% SG&A on export sales 2. IC DISC receives commissions • 50% of taxable income on export sales 3. IC-DISC may also receive factoring Income 4. IC-DISC is not taxed on its profits 5. IC DISC pays dividend to foreign owner • Payment from IC DISC to Qualified Foreign Co – likely five percent or zero Withholding Tax. Issues 1. Maximization of benefits needs to be calculated correctly IC-DISC 12/31/2012 TAX IMPACT OF DISC No detail considered - 25% Gross Profit Sales 100,000,000 COGS (75,000,000) Gross profit 25,000,000 S.G.& A. * (10,000,000) Net income 15,000,000 Commission calculation: 4% of sales 1 4,000,000 50% of profits 2 7,500,000 Commission (greater of 1 or 2) 7,500,000 = Taxable income of IC-DISC Tax benefit C-Corp 40.0% 3,000,000 Dividend withholding tax ** 5.0% (375,000) Tax savings Fed & states 2,625,000 (Based on 0% Dividend W/H Rate) * SG&A on export sales generally less as exclusions apply Assumed overall net profit achievable on exports 15%. ** Based on 5% withholding Tax For Illustration Purposes only
    37. 37. • IC DISC provisions have been in US tax code since 1971 • IC DISC is nontaxable and can be owned by a non-US company • If IC DISC owner is owned by a shareholder who has a treaty with the USA that was ratified after 1984 the tax treaty would control the taxation of the dividend paid from the IC DISC to its parent – last in time rule • Under certain circumstances the US / Denmark treaty the withholding tax rate is zero How an IC-DISC works: • IC DISC ABC Exports, Inc. is formed as a sister company to ABC Aerospace USA , Inc. • ABC Aerospace USA, Inc. pays IC-DISC ABC Exports, Inc. a commissionon on exports • ABC Aerospaced USA , Inc. deducts commission from ordinary income taxed at 35 percent federal tax (possibly it is also deductible for state tax purposes) • IC-DISC ABC Exports, Inc. pays no tax on the commissions on exports • IC DISC can pay a dividend to ABC Aerospace SA, Toulouse, France, effectively repatriating 50% of the profits on Exports to France • Result is 35 – 40% percent tax savings on commissions and substantial subsidy to finance exports or other operations of ABC Aerospace USA, Inc. in the United States. Summary of IC DISC “Incitations Fiscales”
    38. 38. Conclusion : Les Opportunites dans le Sud-Est des USA 1. Boeing, Embraer, Rolls Royce, Airbus, General Dynamics, GE/Honda, GE, etc. 2. Defense Department Business & 50 States 3. Establish an HQ for commercial and government business near Washington D.C. 4. Worldwide Manufacturing Center for Exports « avec les incitations fiscales du gouvernement federal » 5. Space and Aerospace 6. Multiple Customer Market: 38
    39. 39. PART 4: WHY THE SOUTHEAST? Answer: The 50 States: are not all the same. No Accident: New Aerospace Cluster Is in the Southeast 39
    40. 40. WHY THE SOUTHEAST? • Quality of Life – low crime rate – availability/quality of health care – cost of living – recreational opportunities – cultural opportunities – quality of education (K-12 & universities) – housing opportunities and costs 40
    41. 41. THE NEW AEROSPACE CLUSTER IN THE SOUTHEAST USA Part 4: Pourquoi LePart 4: Pourquoi Le Southeast?Southeast? John-Elink SchuurmanJohn-Elink Schuurman Directeur,Directeur, Virginia Economic DevelopmentVirginia Economic Development PartnershipPartnership 41
    42. 42. WHY THE SOUTHEAST? Top states for business(Virginia) Forbes.com CNBC Pollina Corporate Real Estate, Inc. #2 Best States for Business #3 Top States for Business #2 Most Business Friendly State Forbes.com •Business costs •Labor Supply •Regulatory Environment •Economic Climate •Growth Prospects •Quality of Life CNBC •Cost of Doing Business •Workforce •Quality of Life •Economy •Transportation & Infrastructure •Technology & Innovation •Education •Business Friendliness Pollina •19 business climate categories including taxes, human resources, right-to-work legislation, energy costs, infrastructure spending, worker compensation legislation, and jobs lost or gained •13 state government-controlled factors such as financial incentive programs and state economic development department evaluations 42
    43. 43. 43 WHY THE SOUTHEAST?
    44. 44. WHY THE SOUTHEAST? Resources: Transportation Sites Infrastructure 44
    45. 45. WHY THE SOUTHEAST? • Sites – availability of sites, including airport sites – need large sites – under control – engineered, etc. – all utilities – rail access, etc. 45
    46. 46. WHY THE SOUTHEAST? • Lower operating costs – electricity costs 5.9 cents per KW Hour (SC) 6.15 cents per KW Hour (VA) California (9.2 cents) New York (12.49 cents) – lower taxes – land costs (often donated) – lower workers’ compensation rates – lower unemployment insurance rates 46
    47. 47. Why the Southeast • Transportation assets: Southeast may be #1in USA – Ports: Norfolk, Charleston, Mobile, Savannah : deep water, supply chain advantages. Panamax at Norfolk – Airports: • VA: 9 commercial, 57 general aviation, 47 FAA repair facilities, MRO firms employ 1400 persons • Dulles International: 34% lower costs for air cargo than JFK in NY, next day service to Southeast • Alabama: airports important for Airbus and MRO: (Mobile 6,000 ft and 7,000 ft runways) – Roads I-55, I-95, I-85 I-77 (multiple interstates) – Rail (Norfolk Southern and CSX) 47
    48. 48. A look at the Map 48 SAME DAY DELIVERIES THROUGHOUT THE SOUTHEAST
    49. 49. WHY THE SOUTHEAST? Government = pro- business Yes, there are variations among theYes, there are variations among the states in terms ofstates in terms of • regulation of businessregulation of business • encouraging businessencouraging business 49
    50. 50. WHY THE SOUTHEAST? • Pro-business regulatory environment – taxation – environmental – OSHA – government “attitude” is friendly toward manufacturing – Legal issues (to discuss later) 50
    51. 51. WHY THE SOUTHEAST? • Right to work States – important consideration – Union penetration 2% to 4% – all Southeastern US states have right to work laws 51
    52. 52. WHY THE SOUTHEAST? • Workforce – skilled trades – training programs – community colleges – availability of workers 52
    53. 53. WHY THE SOUTHEAST? • Wages plus Qualite de Vie – Makes Southeast competitive 53
    54. 54. Workforce Advantages : Example of South Carolina • Right to work state • Rate of unionization in manufacturing: 1.6%: 2nd lowest in USA • Low cost business-friendly climate • 180 related aerospace companies, – 20,000 workers • South Carolina a été classé No.1 à l’échelon national pour sa part de main-d’œuvre employée par des entreprises étrangères. En 2009, les investissements étrangers représentaient 19% du capital d’investissement et 13% des emplois totaux créés. 54
    55. 55. Workforce Advantages: Example of Virginia • Right to Work State • 8,900 people in Virginia make aerospace products • 4,000 people in Virginia make composite products • 5,300 people in Virginia work in machine shops • TOTAL AEROSPACE Workforce: 29,200 at 230 firms 55
    56. 56. WHY THE SOUTHEAST? • Large Number of Graduates from University Engineering Programs • NASA (provides a highly qualified aerospace engineering pool) – NASA Langley (VA) – NASA Stennis (AL) – NASA Melbourne (FL) 56
    57. 57. Part Five: What Methodology and Analysis Should Apply to a Decision to Locate within the Southeast Aerospace Cluster ? Key Factors:Key Factors: Long-term not short-term;Long-term not short-term; Can you be competitive?Can you be competitive? Innovation and R&D;Innovation and R&D; Avoid dependence on 1 customer;Avoid dependence on 1 customer; Multiple Markets and Customers:Multiple Markets and Customers: Government &, Commercial;Government &, Commercial; Incentives and Long-Term BusinessIncentives and Long-Term Business CostsCosts 57
    58. 58. VIRGINIA’S COMPETITIVE COST OF DOING BUSINESS USE THIS CHART FOR OTHER STATES: ALABAMA, SC, NC, GEORGIA Virginia Right-to-Work Yes 6.00% Single Sales Factor Apportionment Yes Sales and Use Tax 5.00% Average Workers’ Compensation Insurance for Manufacturers (VA 44% lower than National Avg., 4th lowest in Nation) (Loss cost portion for code 4484—companies engaged in composites and related manufacturing is $1.65) $2.09 Unemployment Insurance Tax Per Employee (VA 32% lower than National Avg., 3rd lowest in Nation) $155 Average Industrial Electric Rate (cents per kilowatt hour--8% lower than national average) 6.15 Average Price of Natural Gas Delivered to Industrial Customers (dollars per thousand cubic feet) 6.68 State Corporate Income Tax 58
    59. 59. VIRGINIA’S AEROSPACE STRENGTHS : COMPARE WITH OTHER STATES USING SAME CRITERIA: SOUTH CAROLINA, ALABAMA, NC, GEORGIA, ETC. Military R&D Space Airports MFG 59
    60. 60. INVESTMENTS • Rolls-Royce – Prince George, VA – $500 million/500 jobs – Announced November, 2007 – 1,100 acre site – First factory- $170 million / 150 jobs (180,000 s.f.) – Manufactures discs for Dreamliner (Boeing 787); A380. – Second factory to be announced soon: – Founder: Commonwealth Center for Advanced Manufacturing (CCAM) 60 Clusters and Mini-Clusters
    61. 61. South Carolina Mini Clusters • Aerospace Manufacturing • More than Boeing and its direct suppliers • 2009 GE aviation: turbine airfoils & blades • BAE: electronics engineering • GKN: all composite fuselage for HondaJet light business jet . (HondaJet is in North Carolina) • Honeywell International • Message: diversification of opportunities 61
    62. 62. 62
    63. 63. Innovation Decision Factors R&DR&D University Research CentersUniversity Research Centers Government Research CentersGovernment Research Centers Consortium: Business & Universities forConsortium: Business & Universities for Advanced ManufacturingAdvanced Manufacturing 63
    64. 64. VIRGINIA’S R&D ASSETS Defense Advanced Research Projects Agency—directs and conducts military research NASA conducts aerospace research at its Langley Research Center and Wallops Flight Facility National Institute for Aerospace —conducts research and awards advanced degrees in aerospace engineering through a partnership with nine universities: Airbus contracts with the Institute Commonwealth Center for Aerospace Propulsion Systems —a joint UVA-Virginia Tech— Rolls-Royce research effort Virginia Modeling and Simulation Center—applies simulation techniques to solve problems and provide training for industry, military and governments National Center for Hypersonic Combined Cycle Propulsion— advances understanding of critical mode transitions and supersonic/hypervelocity flow regimes of combined cycle propulsion The Naval Surface Warfare Center Dahlgren Division—the premier research and development center for advanced weapons system integration 64
    65. 65. R&D Alabama and Virginia • Huntsville Cummings Research Park: 2nd largest R&D Technology Park in USA • National Institute of Aerospace (Virginia): has R&D contract with AIRBUS • Center for Aerospace Propulsion Systems: Univ. Of Virginia, Va Tech & Rolls Royce • NASA Research: Langley Research Center, Wallops Flight Facility, (Boron nitrate nanotubes, etc) 65
    66. 66. Best-in-class manufacturers & Virginia’s flagship universities Delivering “production-ready” manufacturing solutions while combining the speed & ROI expectations of business with the intellectual rigor and innovation of universities. CCAM (Virginia) 66
    67. 67. • A global Center of Excellence in advanced manufacturing research – Manufacturing Systems – Surface Engineering • Focus on translation research – Accelerate new technologies into commercialization – Reduce cost and improve quality – Complement with workforce training efforts • CCAM growth in 5-10 years to: – 10 year business plan & financial model complete – ~60 Employees (49 PhD Researchers) – 35 graduate research assistants resident at CCAM – 35 undergraduate interns resident at CCAM – More than 30 Industry Members – $15-20 Million annual research budget Aerospace Energy Shipbuilding Transportation Electronics Automotive Defense Vision CCAM 67
    68. 68. AEROSPACE IN VIRGINIA: USE THIS TYPE OF CHART FOR OTHER STATES: ALABAMA, SC, NC, GEORGIA 68
    69. 69. Incentives (Les Incitations Fiscales) Are they the whole story?Are they the whole story? 69
    70. 70. Incentives • Incentives: Different types – tax credits – cash grants / closing funds – payroll tax rebates – donation of land – special legislation performance grants (Aerospace) – job training funds – Enterprise Zones – collaboration with universities 70
    71. 71. COMPARABLE PROJECTS Project Name Why Virginia Won the Deal Rolls-Royce Crosspointe ($501.4 million/642 jobs) •1,000+ acre, publically-owned site zoned industrial •Proximity to U.S. headquarters, transportation, and deep labor base •Creativity in solving higher education & workforce development needs •Performance grants to encourage aerospace cluster development Canon ($623.5 million/1,032 jobs) •Long-term relationship with the locality •Creation of a workforce development plan heavily influenced by the company’s needs RTI International Metals ($100.0 million/150 jobs) •Publically-owned, partially constructed building with expansion potential •Ample labor force in a non-union environment •Financial solution lowering upfront costs Orbital ($45.0 million/125 jobs) •Long-term relationship with the Mid-Atlantic Regional Spaceport (MARS) •Wallops Island location allowed for a shared political support between Virginia and Maryland •Structured bond response Merck ($250.0 million/70 jobs) •Demonstrated productivity of existing workforce •Company desire to diversify asset locations •Virginia’s positive regulatory environment and strong relationship with local government 71
    72. 72. Why is a State a Top state for business? Incentives are only one consideration. Forbes.com CNBC Pollina Corporate Real Estate, Inc. #2 Best States for Business #3 Top States for Business #2 Most Business Friendly State Forbes.com •Business costs •Labor Supply •Regulatory Environment •Economic Climate •Growth Prospects •Quality of Life CNBC •Cost of Doing Business •Workforce •Quality of Life •Economy •Transportation & Infrastructure •Technology & Innovation •Education •Business Friendliness Pollina •19 business climate categories including taxes, human resources, right-to-work legislation, energy costs, infrastructure spending, worker compensation legislation, and jobs lost or gained •13 state government-controlled factors such as financial incentive programs and state economic development department evaluations 72
    73. 73. Part 6: What Preparation and Assistance is Required if your company decides to Locate in the Southeast? 73
    74. 74. Your Economic Development Team • Can assist with preparation of business plans, analysis, using multidisciplinary experts: site selection consultants/engineers, accountants, investment bankers, • Choose advisors who have played key roles in major economic development projects • Negotiate packages of incentives for foreign multinationals – Contract formalities – Le diable se trouve dans les details, les garanties de nouveaux emplois , etc., les “Performance-Based Grants” • Evaluate competitive offers from different states, regions and clusters • Can assist with finding financing from Private Equity, Commercial Lenders, or advising on M&A as strategy for entry into the U.S. market 74
    75. 75. Your Legal Team: Services Essentielles • Government relations, federal, state, local • Commercial supply contracts, subcontracts • Government supply contracts, subcontracts • Visas/Immigration • Real estate, land use, environmental permits • Corporate and tax law, • M&A, raising capital from private equity, debt/mezzazine financing • Advice on imports/exports, including IC Disc for exports • Export Controls compliance , including consultants & legal • Supply chain logistics: international trade issues ( ALENA ou NAFTA options) • Labor, employment, benefits • Intellectual Property 75
    76. 76. Conclusion Lets look again at The Maps 76
    77. 77. Conclusion • Southeast cluster can be more than simply another local market • It can be your center for innovation, R&D, networking within the cluster and your base for worldwide exports— subsidized by U.S. government (IC DISC) • With the right team to plan your start-up and guide your business expansion, you can participate and compete in the dollar zone 77
    78. 78. 78 Thank You Eliot Norman, Esq. enorman@williamsmullen.com www.williamsmullen.com 001/804.420.6000 Washington, DC USA
    79. 79. 79 Questions?Questions? Eliot Norman, Esq. enorman@williamsmullen.com Williams Mullen 1666 K Street NW Suite 1200 Washington DC 20006 Direct Dial: 804.420.6000 www.williamsmullen.com •John Elink-Schuurman •Managing Director-Europe •Business Attraction •Virginia Economic Development Partnership •Phone: 804-545-5756 •Mobile: 804-305-1756 •jelink-schuurman@yesvirginia.org •www.yesvirginia.org

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