Dow Chemical being courted by other states

Numerous states are aggressively courting Dow Chemical Co. to move jobs out of its Midland birthplace – and business leaders are increasingly concerned that Michigan does not have the tools to fight back.

In recent weeks, Dow management has quietly acknowledged to Michigan business leaders that the company is fielding significant incentive offers to move jobs to other states, according to business leaders who spoke to Bridge Magazine on condition of anonymity.

“Other states are courting Dow and putting in offers,” one executive told Bridge. “I am sure that the business community in Midland is very concerned – as they should be.”

Late Tuesday, Dow spokeswoman Rachelle Schikorra downplayed what she referred to as rumors about jobs moving out of Michigan five months after the company announced it would be merging with DuPont.

“Dow has repeatedly expressed its commitment to the community of Midland,” Schikorra told Bridge and Crain’s Detroit Business. “The new materials science headquarters will remain in Midland. We’re building a new corporate center. You can see our commitment in steel in the ground.”

It is unclear how much of Dow’s Midland workforce might be affected if some part of its operations move out of state. About 1,160 people work in Dow headquarters, which Schikorra said Dow is committed to keeping in Midland. But more than 5,000 people work directly for Dow in numerous facilities in the area, many in high-paying jobs.

Schikorra was less committal about the ultimate disposition of those jobs. “Our Michigan operations are assets that align with different operations (of the merged Dow and DuPont),” Schikorra said. “There are changes going on in Dow and the impact of those changes remain to be seen.”

A major relocation of Dow jobs would almost certainly also impact other Midland companies that provide services to Dow.

The move of a sizable portion of Dow’s workforce would be devastating to Midland, where the international chemical company has been based since its founding nearly 120 years ago. Dow is far and away the largest employer in Midland, providing paychecks to 5,087 people in a city of 42,000.

An additional 1,422 work for Dow Corning Corp., a joint venture between Dow and Corning, N.Y.-based glassmaker Corning Inc. that Dow plans to assume full ownership of later this year. Dow Corning makes silicone products and other silicon-based technologies.

Loss of Dow jobs would would also be a blow to Gov. Rick Snyder, whose administration has made a strategic decision to cut economic incentives designed to keep and attract businesses, contending that government is ill-equipped to decide which companies should receive state support.

Doug Rothwell, chairman of the Michigan Economic Development Corp., the state’s quasi-governmental organization charged with attracting and keeping business, declined to address growing speculation that other states are competing for Dow’s Michigan workforce at a time when Dow is in the midst of a $130 billion merger with Wilmington, Del.-based DuPont.

“Dow is an iconic company for Michigan,” said Rothwell, who is also president and CEO of Business Leaders for Michigan, the state’s business roundtable. “We need to do everything we can so Dow sees Michigan as a great place to invest for years to come. We have to do whatever we can to make this work.”

Rothwell and other leaders have expressed concern about the state’s approach to competing for companies, a concern that extends beyond Dow.

Rothwell oversees the state’s jobs attraction strategy as chairman of the MEDC board. His concern is that Michigan has disinvested in the types of incentives that could help it compete with other states, such as Texas.

A spokesman for Snyder said Tuesday that the governor does not believe the loss of incentives has hurt the state’s position when it comes to business attraction.

“You can’t put all your eggs in one basket,” said Snyder spokesman Ari Adler, who noted that he has not heard about other states trying to lure Dow. “You can’t insist that if you have the best cash incentives in the world that that will attract companies.”

Adler added, “You have to look at everything in your entire package when you’re to sell your state to a company.”

A message left for MEDC CEO Steve Arwood on Tuesday was not immediately returned.

Economic development agencies in numerous other states would not confirm a Dow courtship.

Big merger, big changes

Dow is in the midst of finalizing its merger with Wilmington, Del.-based DuPont, with the deal expected to be completed in late 2016. The new company will be called DowDuPont. It plans to then split into three separate companies, with headquarters for two of them in Wilmington and one in Midland, the companies said in December. However, the three-way split also creates opportunities for states to lure operations of the spinoff companies.

The merger announcement was big news, producing anxiety in Michigan and Delaware. Within weeks, DuPont revealed it would be cutting 1,700 U.S. jobs and more overseas.

Dow officials, meanwhile, told Midland leaders at the time the community had nothing to fear from the merger. And the current courtship of Dow doesn’t necessarily mean one of Michigan’s largest companies will abandon Midland.

The three companies that will result when the merger and spinoff process is complete will focus on materials science, agriculture and specialty products. Midland is slated to be the headquarters for the material science company, which will retain the Dow name. The company is also constructing a 150,000-square-foot building at its Midland headquarters campus, which will house 600 employees when finished.

Andrew Liveris, Dow’s chairman and CEO, affirmed the chemical manufacturer’s commitment to its hometown as recently as May 12 during a shareholders meeting.

“(W)e will create a new material sciences company with $51 billion in revenue, a company powered by innovation and integration. A company more focused on key markets than ever before,” Liveris said, according to a transcript of an annual stockholders’ meeting filed with the U.S. Securities and Exchange Commission.

“That company will be the new Dow, your new Dow generation 6.0, if you will,” he added, “headquartered right here in Midland in that new building that’s rising into the skyline just a short distance away.”

The possibility that Dow might be swayed to transfer jobs from Michigan has rattled leaders in the business community, with some saying they are increasingly concerned that Michigan does not leverage the type of robust business attraction incentives to battle aggressive, business-friendly states such as Texas.

In addition to jobs in Midland, Dow employs about 900 workers in other Michigan communities, and more than 24,000 nationwide. The company serves a number of industries, including agriculture, automotive, consumer goods and packaging.

Most of those jobs are high-paying and considered to be among the highly skilled, knowledge-based positions some economists say Michigan needs to attract. For example, Dow employs more than 440 scientists and engineers working on research and development in Midland. The average salary among chemistry industry workers in Michigan is $80,500, according to Dow.

Earlier: Leaders say Dow Chemical is committed to city’s future

Company assurances

Midland is the definition of a company town, with the Dow name appearing on everything from the public library to a minor league baseball stadium. Several foundations with Dow roots provide funding for public service efforts in the area.

After the merger was announced in December, company officials gave Midland leaders reason to believe there would be no negative impact on the community.

“Dow’s going to be here,” Jim Fitterling, vice chairman and chief operating officer of Dow, told the Midland Daily News. “We’ve always been here and we’re committed to the community, so there shouldn’t be any questions on anybody’s minds about our commitment to be here.”

State Rep. Gary Glenn, R-Midland, told The Detroit News in December that Dow officials had assured him the “new materials division that will be headquartered in Midland will be larger than Dow Chemical is now, so the potential for job creation in the region is significant.”

Snyder expressed similar optimism in a statement released to media in December, saying “there are numerous advantages for the company to continue having a strong presence in Michigan. We’ll work with leaders to emphasize the value of Michigan’s many resources, especially its skilled people, to support its efforts in our state.”

More recently, Midland city leaders told Bridge and Crain’s Detroit Business they were not worried about the possibility that Dow might leave the city. Leaders of Midland Tomorrow, Midland County’s economic development agency, said Tuesday they were not aware of any speculation surrounding Dow.

State Sen. Jim Stamas, R-Midland, said Tuesday that he, too, had not heard any rumblings about other states courting Midland’s Dow facilities. Stamas said he is confident Dow will remain in Michigan.

“Dow’s been very clear that Midland is the home of Dow Chemical, and they’ve made that statement multiple times,” Stamas said.

Incentives arms race

While declining to discuss Dow specifically, Rothwell does raise red flags, generally, about what he deems to be Michigan’s limited toolset to compete with other state’s economic development incentives.

Texas, for example, promotes itself as “Wide Open for Business,” and as of 2012, had the most generous business incentives in the nation.

Dow employs 7,000 people in Freeport, Texas alone, which is one of six cities with Dow facilities in the state.

Tracye McDaniel, president and CEO of TexasOne, the economic development arm for the state, declined comment this week.

“Texas believes it is up to companies to comment on site location decisions that may or may not be in the works,” McDaniel said in an email response to Bridge sent via Development Counselors International in New York. TexasOne is listed on that company’s website as a client of DCI in the area of “site selection relationship building.”

Louisiana has a booming chemical industry, which may be attractive to Dow since it currently employs about 6,000 in the state. Louisiana’s economic development office did not return inquiries.

Indianapolis is home to Dow Agrisciences, which employs 1,400. Abby Gras, director of communications for the Indiana Economic Development Corp., said she was unfamiliar with any negotiations with Dow to move facilities to Indiana, but that “our negotiations with companies are confidential until a finalized commitment from the company has been reached.”

Snyder has opposed tax incentives for business, saying government should not be in the business of “picking winners and losers.”

In a 2011 interview, Snyder said, “One of the problems with the tax credit world is that you’re picking winners and losers, and government is not really competent to do that. I was a venture capitalist. I know how hard it is to pick winners and losers, let alone [saying] government can do it.”

Torn between two levers

Michigan used to offer tax credits to keep and attract companies, through a program started under Gov. John Engler and expanded under Gov. Jennifer Granholm called the Michigan Economic Growth Authority. But most of the jobs promised by the tax credits never materialized, and Snyder eliminated the program.

According to Rothwell, (who serves as a director and steering committee member for The Center for Michigan, which includes Bridge Magazine) the Snyder administration believes the MEGA tax credit system “created a real fiscal hole for the state and needed to be scaled back.” But, he added, “Reform is one thing, but elimination is another.”

As a result, “you don’t know what you’re not going to get,” Rothwell said. “We have not landed any of the major job creation projects in America for years.”

The state remains on the hook for more than $9 billion in outstanding MEGA credits, which exert negative pressure on the budget as companies redeem them. State treasury administrators said Tuesday during a state revenue estimating conference in Lansing that refunds are forecast to crest this fiscal year - including $600 million in MEGA credits and another $200 million in credits to battery manufacturers - before beginning to ebb.

The MEDC also has fallen on hard times, and saw its budget cut by 27 percent this year. The cuts are the result of both legislative budget cuts and a loss of tribal casino revenue. That affects available staffing for such services as business attraction.

Perhaps Michigan went too far with some of Granholm’s incentive strategies, Rothwell acknowledged.

“But now perhaps we’ve gone too far in the opposite direction,” he said. “Michigan is one of only two states with a corporate income tax that does not offer job creation and research and development tax credits. We are outspent by our competing states by up to seven-to-one on these incentive programs.”

One point of comparison is the incentive package put together in Delaware to secure two of the three headquarters for the new DowDuPont.

According to the Wilmington, Delaware News Journal, Delaware offered a strategic fund grant worth $9.6 million over five years and a variety of tax credits to land the agriculture business headquarters of the new company. That included passing the Delaware Competes Act, which changes how companies based in Delaware are taxed, and a research and development tax credit.

Rothwell pointed, particularly, to states like South Carolina and Texas which are heavily focused on attracting jobs from elsewhere.

“They are very business-friendly states,” Rothwell said, noting that Michigan ranks 36th in the nation in per capita income – a significant hurdle to future economic growth in the state.

“For us to be a top job state, we’ve got to do better than other states, and that’s why to use incentives,” Rothwell said. “Michigan right now looks at incentives as a cost rather than an investment. That’s the reason a lot of states use tax credits – because they can be performance-based. Tax credits are still state of the art.”

Instead of tax credits, the MEDC now has a very limited tool set to retain or attract major employers and facilities, Rothwell said. The MEDC can offer cash incentives, though those are best designed to support small and medium-sized operations, not major global companies like Dow. Or, Michigan can legislate “one-off” incentive packages as done last year for the multi-billion-dollar Switch data center in Grand Rapids.

But according to Adler, the governor believes Michigan is competitive now, particularly given recent growth in private sector job creation and the decline in unemployment.

More than just incentives, Michigan can offer companies access to talent and an attractive quality of life, Adler said. That’s why Snyder has focused on building the state’s skilled trades workforce.

“Having the talent pool of well-trained employees as a resource,” he said, “that’s what we’re trying to do.”

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William Plumpe
Wed, 05/18/2016 - 9:30am
Dow and Dow Corning provide direct employment for 15% of the population of Midland and a very significant additional number of indirect jobs at restaurants, supermarkets, hotels, retail stores, real estate agents and the like. Dow or Dow Corning moving a considerable number of jobs out of Midland would be a financial disaster for the City of Midland, the County of Midland, all the School Districts that serve the area surrounding Midland and the State of Michigan. I hope Governor Snyder makes the right call on this critical decision and does everything he can to make sure Dow Chemical and Sow Corning remain in Midland where they have been for 120 years and where they belong.
Wed, 05/18/2016 - 9:34am
Dow Chemical picked Michigan, and became a 'winner' in our state. Not the other way around. Doing all you can to maintain home grown industry will be much more successful than luring culturally foreign business' here and praying they stay for more than a short few years.
Wed, 05/18/2016 - 10:14am
Hey, I thought that we were doing many things to attract and keep businesses here in Michigan. Should be a "no worry" that Dow stays here right? Oh, you mean that schools, roads and infrastructure etc. may be important? How about the tax breaks to the wealthy and corporations we have already given? This doesn't help the situation? Surprise, surprise, surprise:)
Warren Cook
Wed, 05/18/2016 - 10:32am
Where a company 'belongs' shouldn't be a loyalty test. The intangibles of location decisions do count, but they pale in comparison to target markets locations, geographic positioning of competitors, transportation costs to markets, raw materials resource options, availability of specifically skilled labor, timely access to sufficient capital, and many other elements. In business, like life, everything keeps changing. Most of these things afford little local control.
Wed, 05/18/2016 - 10:35am
I remember a good number of years ago when Toyota was considering Michigan and Canada for a new plant. Much was made that we needed to throw some big tax cuts their way to attract them. Toyota chose to build in Canada and later it was revealed that the two biggest considerations were: educational level of the workers (Canadians were better educated and Toyota wouldn't to 'dumb down' and re-educate workers) and national healthcare in Canada so Toyota didn't have to spend a lot of time and money to handle employee healthcare. But don't expect any Republican to learn from that lesson.
Wed, 05/18/2016 - 2:43pm
Yes and that's why they have built so much manufacturing in Texas, National Healthcare and education level! I wondered who really believed Toyota would bring a plant to Michigan especially given their wonderful experience with the UAW out in California, which they shut down and ran as soon as the opportunity presented itself!
Bill H.
Wed, 05/18/2016 - 11:37am
Now that we are "Right to Work" we have to fight to save jobs in Michigan?
Stephen Brown
Wed, 05/18/2016 - 12:01pm
Rick here is totally correct. This "race to the bottom" among all the states has left many case studies for all of us to examine. Gov. Snyder seems to have learned some lesson, as one Republican, and might educate some others. Governments' responsibility in this regard is infrastructure, education, and healthcare-any other "incentives" are bribes. Look at the German model, where government supports small businesses to increase their market share and export capabilities. Large corporations, like Pfizer, Dow, GM, etc. will do whatever they please and a bribe will just be throwing good money after bad.
William Plumpe
Wed, 05/18/2016 - 1:24pm
True that issues like quality of education, access to healthcare and quality of infrastructure are all important but these are longer term and require major changes in how the State spends money. Dow and Dow Corning could leave Michigan based upon very short term economic incentives and if Michigan doesn't at least match those incentives the State could lose a significant number of jobs and tax revenue that would totally devastate the City of Midland and the entire State of Michigan. I think the Governor should make an exception and come up with an incentive package designed specifically to help keep Dow and Dow Corning in Midland. Remember that Dow and Dow Corning already have company locations in many other States some of which offer generous incentives.
Gary S
Wed, 05/18/2016 - 1:47pm
Where did the 1.3 billion dollars go for businesses?
Stephen C Brown
Thu, 05/19/2016 - 12:29pm
Gary-where did you find this number? I can't find it in this article.
Wed, 05/18/2016 - 2:31pm
It has been over ten years since I drove thru Midland. As I recall it is a small town [about 40,000] in a rural county. What no one seems to be interested in is how and why a global company which must employs people from around the world or at least the US in their headquarters is able to draw those well-educated [scientists, engineers, researchers, technology experts, etc.] to such a small town in the middle of Michigan. As I read the news we hear more about Bay City, Saginaw, even Mt. Pleasant than Midland, and yet this town that seems to be in the middle of a ‘cornfield’ is home to a global company that has operations around the world. I wonder why. What is there about this ‘company town’ that causes such a big company being courted with large financial incentives to stay committed to Midland, Michigan. I wonder if it is the people and the quality of live they feel they have there. If they are so well paid why aren’t they going to the big cities where it is so easy to spend that money? Is there something we in towns across Michigan can learn from Midland that could help us keep or draw in employers? Is it their schools [do they pay more, do they have smaller classes, is the community more actively supportive of learning], is it government services, do the county and city do something special there or is it more community involvement in the services, does the company influence or is it the residents expectations, etc.? It seems we read mostly articles in Bridge about struggling communities in our State, what is there about Midland that discourages Bridge from writing about [except when it comes to money] what appears to be success? Is there something about being in Midland that has help Dow Chemical to not only survive for over a hundred years in that small town but to grow into a global company that prospers around the world? How does the town impacts the company that it seems less about money that creates such loyalty in that small town. It would seem there is more to the story then just the dollars.
David Waymire
Wed, 05/18/2016 - 5:11pm
Times change. Young American college grads used to go to a job, wherever it was. Now, young internationl grads move to a city, and find a job they want. That makes creating the kind of city the top 15 or 20 young PhD chemists IN THE WORLD want to live in. Michigan is sending the message that: It doesn't like immigrants. It doesn't like members of the LGBT community. It doesn't care about mass transit (which young talent wants so it need not buy a car). It doesn't care about higher education (cutting support for higher ed, pushing the cost on students and families). It doesn't care about its cities by cutting revenue sharing (we've laid off 5,000 police and fire fighters in the last decade or so.) We are in competition with states and cities that have shown they do care about these issues. There is a reason why Mississippi has 0 Fortune 500 headquarters. Alabama has 1. There is a reason.
Thu, 05/19/2016 - 9:52am
Dave, Please give us evidence supporting that these same issue you always point issues you at have any relevancy at all. Anti immigrant or LGBT in Michigan... this is nonsense, Michigan has tons huge numbers of immigrants , give relevant facts showing mistreatment. Doesn't exist anymore than anywhere else and probably less. Grads base location decision on job opportunity, avocations, family and jobs far more than any other factors. Saying that grads base location decision on revenue sharing, support for higher ed or mass transit ... give us a break. Clearly you are spending too much time listening to metro sexual Pajama Boys rather than people who actually work.
Sun, 05/22/2016 - 9:16am
Matt - just look at what our state Attorney General spent all his time on over the last few years: fighting Obamacare, gays, immigrants. Oh, he wants to be the next governor...
Wed, 05/18/2016 - 2:45pm
Great, not only did Snyder know nothing about the Flint water situation, now he knows nothing about Dow moving. Time for a new governor that will give the corporate fleecers, like the Illitches, what they want.
Wed, 05/18/2016 - 2:55pm
FYI, Illitches are big time Democrats!!! So go ahead and stick it to them!
Wed, 05/18/2016 - 7:35pm
Since he has already pretty much eliminated all taxes on businesses and crippled the unions, what can Snyder possibly offer? Raising taxes on senior citizens again and depositing the revenue in the company's bank account?
John Q. Public
Wed, 05/18/2016 - 8:26pm
Thu, 05/19/2016 - 12:49am
Citizens of Midland & the State of MI: It is "time to smell the coffee." I left Midland in 1968 & I have never returned to live in Midland. Not that I did not want to, but I could not find a job at because I had liberal arts degree in Psychology. Plus, I did not have a Ph.D. in Chemistry or Physics. I did not go to MPS with the then, one of the best school systems, in MI. My family did not have a big name that carried any type of clout in Midland. Consequently, there was no reason to return. I have had a long family history at . My g. g'father was hired by Dr. Dow. He was the 2nd employee after the original nine (9) employees were selected. My maternal g'father, a Master Machinist, who was hired after WWI. My mother worked as as a secretary in the Sales Department during WWII. My father, a Master Electrician, who was hired after WWII. I remember returning to Midland at the time in the March, 1974, UMWA Strike. was reported to have 5,700+ hourly employees at the time. The strike very much polarized the city & county residents of Midland. The strike lasted just short of six (6) months. There was many hurt feelings between the Management Team and the Union Members. That hurtful scar on both sides finally healed around 2000. Why am I writing about this "irrelevant" information? Well, it shows that both sides at could coexist even after a time of adversity. Today, I would imagine that there are less than 500 hourly employees are actually employees because all those jobs have evaporated because of "subcontracting" their jobs. You cannot have a successful strike with 500 or < employees against a Goliath corporation of Chemical. My wife and I are both stockholders with and have the opportunity annually to vote on proxy issues. I have not seen at least one member of the Dow extended family on the board in a long time. To my knowledge,, there has never been a union representative(s); middle management employee(s); or part of the clerical staff who made the whole activity at possible. When the Executive Team started hiring their upper echelon employees and people to be the on Board of Directors from some god unforeseen place that we have never heard of . That is when I was a soothsayer saying that this was the beginning of the end of Chemical as we know it. Sure enough, that is what is happening at at this time and the citizens of Midland & the state of MI are going to be the loser - B*I*G T*I*M*E L*O*S*E*R*S!!! Thank you for reading my comments.
Kevin Grand
Sat, 05/21/2016 - 8:43am
After reading the piece above, I'm failing to see any real fundamental difference between people like Doug Rothwell and Bernie Sanders. Both view government as some type of endless bank account to be tapped on for their voting base. As someone who apparently has less of a claim to the money that I have gone out and earned due to the actions of republicans and democrats, I say enough! I work to support my family and myself. I DO NOT go off to work so that the business community can use the politicians that they have literally bought and paid for with campaign donations, to create "incentives" to offset their bottom line. I DO NOT go off to work so that some freeloaders who claim to be oppressed/discriminated/fill-in-the-blank for their latest excuse for their current situation can live comfortably off of the labor of others. There once was a time here in America where people like Henry Ford, George Westinghouse and Andrew Carnegie built hugely successful corporations without resorting to the tactics that those like Doug Rothwell and the contemporary American business community are currently advocating for. Has modern American business become so impotent that they can no longer succeed on their own without government sanctioned bribery? It's time to take a lesson from history, and a little tough love, to address this issue once and for all.