by Nate Hinkel
Posted 7/23/2007 12:00 am
Updated 2 years ago
The economic development coup was ultimately a team effort by various city and state entities on several fronts, but the idea that an India-based conglomerate could make its first North American foray in central Arkansas surfaced before dawn one quiet morning last fall.
"I'm an old guy, so I'm up at about 5 a.m. one morning checking e-mails," said Paul Latture, executive director of the Little Rock Port Authority. "I get one from a guy who was in St. Louis and looking for information about what kind of facilities we had to offer here and what we could specifically offer to fit his needs."
That guy was Rajesh Chokhani, who was sent to the United States to scope out locations and logistics for a western expansion of Welspun Gujarat Stahl Rohren Ltd. (WGSRL) of Mumbai, India, one of several companies under the Welspun Group umbrella. The $1 billion Welspun Group employs more than 18,000 in more than 50 countries and manufactures things like bathrobes and towels and various types of yarns.
But the steel pipes unit, WGSRL, is Welspun's fastest-growing business, and expanding westward to cut shipping costs and grow its clientele was its goal.
As Latture tells it, the two exchanged several successive e-mails that fall morning, by which time Chokhani's interest in Little Rock was palpable.
"That exchange must've gone on for a couple hours, and then he said, ?I'll be on the 10 a.m. flight from St. Louis so pick me up,'" Latture said. "He liked the fact that he was getting quick answers that he was having trouble getting from other locations. When he got here, our team did what we always do. ? We have never operated as closely and as wonderfully as we did on this project, and I think that was a deciding factor."
Chokhani agrees, adding that some of the other sites he checked out -- Tulsa, Memphis, Baton Rouge, La. -- offered incentive packages richer than Little Rock and Arkansas could offer. But money isn't everything.
"We were looking at several factors, and I will say that incentives were not at the top of that list," Chokhani said. "Incentives are nice, but the overall picture with all of the other criteria factored in was much more attractive here."
And the rest, as Latture says, is history.
Meeting the Needs
When Chokhani arrived in Arkansas the day after the early-morning cyber chat, Latture had rounded up the city and state economic development posse to answer any questions Welspun might have.
"When Rajesh came here for his first set of meetings, he'd meet with the sewer guy and the gas guy and the permit guy ?. Every question he had, we had everybody lined up waiting with an answer," Latture said. "So all he had to do was sit here during his time and they'd come in, meet, answer questions and then follow up. And he got what he wanted more quickly and easily than he did in any other place in this country."
Indeed, the streamlined process benefited Welspun, Chokhani said, by making it easier to find the right location on a fairly tight deadline.
More important than incentives, according to Chokhani, was a good waterway and a solid rail system to import raw materials and export finished products. He found more than he hoped for at the Little Rock Port Authority. WGSRL plans to import much of its raw material into the Slackwater Harbor at the Little Rock Port and export most of it by rail.
"The other factor was the teamwork and the willingness of everyone involved to bring business to Little Rock," he said. "They seemed to share the same dedication to making this as successful a venture as we did."
Our Land, Your Land
A few months later, more Welspun leaders came to Arkansas, and building the company's first North American facility in Little Rock was on the verge of officially being inked.
But first, Arkansas officials reciprocated with a visit to Welspun's facilities in India. "We were very close to a deal when they came to India; before we finalized, it was my insistence that they come to India because I wanted them to take a look at the facility," Chokhani said.
Jay Chesshir, president and chief executive officer of the Little Rock Regional Chamber of Commerce; Mike Maulden, director of external affairs for Entergy Arkansas and chairman of the Little Rock Port Authority; Mitch Chandler, then communication section leader for the Arkansas Department of Economic Development (now business development director at Cranford Johnson Robinson Woods); Joey Dean, vice president of economic development for the Little Rock chamber (and executive director of the Metro Little Rock Alliance); and Latture made the 24-hour flight to India in January. "Everything about that trip was extremely impressive," Chandler said. "Their facilities in India were immaculate and extremely high-tech. I think a lot of our jaws were dropping to the floor imagining this kind of facility in Little Rock."
According to Dean, even families of those involved helped extend a welcoming hand, with the wives of some helping Chokhani and his family find a home here and make it livable.
"It was amazing how everyone came together on the same page on a project that will not only benefit central Arkansas, but the state and the entire region," Dean said. "These are the types of projects that have a tendency to attract more business and draw more attention to some of the great things we have going on here."
Chokhani said the plant in Little Rock will be very similar to the company's two pipe manufacturing plants in Dahej and Anjar in Gujarat, India.
The main reason WGSRL is building a facility in North America is to cut shipping costs and serve more projects in this part of the world, where about 60 percent of its exports from India were heading anyway.
"The only difference is that we'll have maybe more automation and more sophisticated technology in Arkansas," said Chokhani, the busy general manager who is currently the only Welspun employee from India doing the groundwork in this market.
The plant, which will employ about 300 and will be capable of producing about 300,000 tons of material annually, will be divided into two parts -- one unit that makes the pipes and one that coats them. The coating facility hopes to be online by March 2008, while the pipe manufacturing unit will be up and running by September 2008, according to Chokhani.
When completed, annual revenue at the Little Rock plant could be as much as $400 million with an annual payroll of more than $7 million.
The tubular pipes Welspun makes are used heavily in the oil and gas industry worldwide, including major players like Shell, Chevron and ExxonMobil. The company is also a major supplier to ongoing transport projects in the Gulf of Mexico.
The company has not yet, however, gotten involved with the heavy piping needs of the natural gas industry at the Fayetteville Shale Play, Chokhani said.
A Little Motivation
As Chokhani mentioned, it wasn't the incentives package that Arkansas officials put together that brought Welspun to Little Rock. But, he admits, the package offered surely didn't hurt.
When the deal was announced at the end of June, Gov. Mike Beebe said the package offered by the city and state was relatively small compared to Welspun's investment here.
Welspun purchased about 800 acres of privately owned land adjacent to the port, land that is outside the current Little Rock city limit. Little Rock City Manager Bruce Moore said there is a good possibility that the site will eventually be annexed to Little Rock and will fall under the governance of the Little Rock Port Authority.
Moore said the city offered to abate 65 percent of property taxes and to enter into a payment in lieu of taxes agreement for the remaining 35 percent. He said that deal is not unusual, with another example of that type of deal being made with Acxiom Corp. when it built its downtown Little Rock headquarters. But, of course, those tax breaks won't be applicable unless the land Welspun occupies is indeed annexed to the city.
The Arkansas Economic Development Commission gave a $1.75 million community development block grant and disbursed $1.5 million in economic infrastructure funds for Welspun's rail needs. AEDC also approved a $5 million guarantee on an industrial development bond for the plant, while the Arkansas Development Finance Authority guaranteed about $6 million in bonds. The state said it would provide training assistance up to $500 per employee.
"We have not yet spoken to any colleges or universities in the area about training, but that is something that we will most likely do further along in the process," Chokhani said. According to ADED, Welspun also qualifies for performance-based incentives, which will be finalized after the company is up and running. Those include sales tax refunds, income tax credits and payroll rebates, which will be audited by the Department of Finance & Administration after operation starts to make sure the company lives up to its end of the bargain.
From Pipes to Blades
A second summer announcement came last week when a Danish wind turbine blade company said it would build a $150 million production plant and North American headquarters in Little Rock.
"It's been a good summer," said Joey Dean, vice president of economic development for the Little Rock Regional Chamber of Commerce.
LM Glasfiber announced plans for the plant, which it said will employ 500 in the fall and eventually more than 1,000. LM Glasfiber wants to break ground on its plant at the Little Rock Port Authority in September.
Warren Ault, LM Glasfiber's national account manager, said the company chose Arkansas for the project because of its work force and location. He cited easy access to two Interstates, rail lines and the Arkansas River as particularly beneficial. He said the amount of incentives provided by economic developers was a minor component in the company's decision-making.
Gov. Mike Beebe said the incentives the company receives will depend on how much investment the company makes in Arkansas. The state Legislature earlier this year approved a specific incentives measure to provide a major income tax break for a windmill blade manufacturer with the condition that the company commit to a minimum $150 million investment and employ 500 to 1,000 people over time.
Beyond those incentives, Beebe said, the state provided $8 million in Economic Infrastructure Funds and $8.9 million in quick-action closing funds.
Ault said most of the jobs the plant will need to fill will be manufacturing jobs. He did not specify a salary range except to say the salaries will be "competitive" and "living wage."
Ault said making the blades is a learned "craft," and not typical assembly-line work. LM Glasfiber makes fiberglass blades for power-generating wind turbines. Ault said the smallest blades the company makes are 123 feet long. The largest blades reach more than 200 feet.
Ault said the United States is now the hottest market in terms of global demand for wind turbine blades. Texas makes up the largest amount of demand -- 25 percent -- per year, ahead of the upper Midwest, the Rockies, the Pacific Northwest and some states in the Northeast.