Cities advised how to retain firms like O-I

2/19/2005

Toledo is wrestling with how to keep Owens-Illinois Inc. from moving its downtown headquarters to Perrysburg or to another metro area just as other major cities have struggled with retaining their Fortune 500 firms or with luring new headquarters.

Many large cities have lost significant numbers of big corporate headquarters in recent decades, but cities that have been successful tend to attract high-income professional workers and entrepreneurs first to create business "clusters" that appeal to big companies, according to findings from a recent conference held by the Chicago Federal Reserve.

The March issue of the Chicago Fed Letter reports on the forum that many companies are leaner and more global than in the past, and the needs of their headquarters are evolving too.

A panel from the Chicago Federal Reserve found that "cities should emphasize such fundamentals as transportation and communication and providing those high-quality public services that serve to create and retain global businesses and their employees."

Large companies often seek new headquarters when their markets or customers have changed or when they want to establish new identities, Jerry Szatan, a site-selection consultant, told the Fed gathering.

In an interview yesterday, Mr. Szatan said that O-I is typical of firms that grew up in the Midwest but now have global operations. Mr. Szatan, owner of Szatan & Associates in Chicago, said he has consulted with 15 companies considering relocating their headquarters, and most chose not to move in the end.

"The costs were greater than the potential benefits," he explained.

Some firms, he said, vetoed a move after discovering they might lose many valued employees whose spouses also have high-paying jobs and may not be willing to move, and others worried about the costs of interrupting their business and irritating customers during the move.

"The actual cost of the move is trivial compared to the potential costs of business interruption," he said.

But that would apply more to O-I's admittedly slim chance of picking up and moving to another major city.

Company Chief Executive Steven McCracken told The Blade Feb. 3 there was a 60 percent chance the glass container maker would move to its research campus in Perrysburg, 30 percent it would stay in One SeaGate downtown, and 10 percent that it might move to another major city, in part to get better access to an airport with overseas flights.

Mr. Szatan, the site selection consultant, said a move out of downtown to a nearby suburb would not be as disruptive as a long-distance relocation.

"If you're only moving a couple of stops down the interstate, that's different," he said.

O-I has 340 headquarters employees, who a company poll said favored moving to a new building in its 400-acre Levis Development Park in Perrysburg when its lease at the 32-story One SeaGate expires in September, 2006.

Many Fortune 500 firms' headquarters have migrated around the country in recent decades. Even the five favorite headquarters cities in 1975 - New York, Chicago, Los Angeles, Cleveland, and Philadelphia - have all lost corporate homes, topped by New York, with dozens of defections.

Cities hate to lose big-company headquarters - the "prized pelts" of economic development - William Testa, director of regional programs for the Chicago Fed, told the conference.

The headquarters enhance an area's economic strength and image, he said, making it easier for the city to attract investors for bond issues and to generate business service jobs, such as accounting, legal work, insurance, and more.

Further, he said, headquarters employees may be corporate leaders who are active in local civic and charitable ventures, and their departure hurts those ventures.

The panel participants suggested that cities need to foster a culture that will attract and retain corporate headquarters, including having a well-educated work force, and a strong local quality of life and business climate. The latter affords an opportunity to interact with other corporate leaders during the course of the day and discuss the common problems of doing business overseas.

The Chicago Fed report also noted that corporate headquarters tend to be smaller today than in years past. That is true of O-I, which now has only a sixth as many headquarters employees as it did when it moved into One SeaGate in 1981.

Contact Homer Brickey at:

homerbrickey@theblade.com

or 419-724-6129.