Howes: Amazon issues huge challenge to Michigan, rivals
The online retailer steadily transforming American commerce is doing it again, this time convulsing the interstate competition for economic development trophies.
Amazon, the Seattle-based giant controlled by CEO and founder Jeff Bezos, said Thursday it is soliciting bids for what it calls “HQ2.” The second North American headquarters promises a $5 billion investment and as much as 50,000 jobs with average annual pay of more than $100,000.
That’s an enormous undertaking — and a huge opportunity — for just about any community. It’s more people than Ford Motor Co. employs in its plants across the United States, and it’s five times the number of jobs that Taiwan-based Foxconn Technology Group says it plans to create in the industrial Midwest.
“They’re doing a shotgun approach,” Matthew Gibb, deputy Oakland County executive and head of its economic development efforts, says of Amazon’s stunning announcement. “They’re basically saying, ‘Come up with the best package for us.’ Get used to it. This is the new normal. We actually can compete for this one.”
On paper, maybe. But experts say the difficulty of marshaling disparate political forces behind what will necessarily be a rich trove of taxpayer-backed financial incentives cannot be underestimated. Nor can the challenge of offering the required social amenities and assembling a “development-prepped site” that will not “negatively” affect Amazon’s “preferred timeline,” as it said in its press release.
“We do not have in this state a shovel-ready site for a project of this size,” says Birgit Klohs, CEO of The Right Place Inc., the economic development arm for the Grand Rapids region. “In west Michigan we do not have shovel-ready sites that could support an Amazon, a Foxconn or a Toyota,” the Japanese automaker seeking to build a joint-venture plant with Mazda Motor Corp.
Just how big a site? By its own reckoning, Amazon’s Seattle campus occupies 8.1 million square feet in 33 buildings housing more than 40,000 employees. Investments in buildings and infrastructure total $3.7 billion. And the retailer estimates that its investments in the city between 2010 and 2016 generated an additional $38 billion in economic activity there, a staggering sum.
All that makes your garden-variety auto plant look puny by comparison. That reality, however, is doing little to slow the calls and emails into Klohs’ office urging The Right Place to pursue Amazon and the economic Mother Lode it theoretically promises.
It’s not the first. Foxconn’s confirmation that it is seeking to invest billions to build manufacturing and research and development operations somewhere in the industrial heartland has sparked fierce competition between battleground states whose voters helped deliver Donald Trump to the White House.
Wisconsin won the first round, landing a promised investment that could create 10,000 jobs over time. But Michigan officials insist the state remains in the hunt for follow-on investments in automotive-related production, research and development.
And Toyota’s announcement that it is looking to jointly build another U.S. plant has economic development officials scrambling. That includes some in Michigan, who believe the state’s more competitive business environment and its status as a right-to-work state make it more attractive to foreign automotive investment.
Major companies going public with expansion plans is a new twist in the endless interstate competition, experts say. It intensifies pressure from politicians, the news media and the general public, each of which feed off the other in recurring cycles of speculation that complicate the process.
Don’t yet count out Michigan, where Amazon already employs 2,500 in two fulfillment centers and a Detroit office. The online retailer says it is seeking bids from metro areas with more than one million people. Check. It says it wants “a stable and business-friendly environment,” and “urban or suburban locations with the potential to attract and retain strong technical talent.” Check.
It says it needs a state-of-the art airport with global reach and direct flights to Seattle, New York, San Francisco and Washington, D.C. Check. Its says it needs “excellent institutions of higher education” and “highway corridors” with “direct access to significant population centers with eligible employment pools.” Check.
All true and necessary. Sufficient is another question. Amazon seeks “a highly educated labor pool” as Michigan’s educational attainment continues to slip further behind its peers. It “requires a compatible cultural and community environment” for success in a place until recently at war with itself.
“Michigan is in the game for these now,” says Jeff Mason, CEO of the Michigan Economic Development Corp. “For a number of years, our business climate wasn’t right. We’re going to aggressively compete and not be crazy about it.”
You can bet other states will.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.