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Rethinking a Manufacturing Economy
(avg: 4.00 of 5)
Objective: This case study highlights how the private industry, led by Bank of America, invested in and transformed the Charlotte economy from a strong manufacturing base to a national hub for banking and financial services.
Main Topic: Industrial
Sub Topic: Manufacturing to Banking cluster
Sub-Sub Topic: CEO-led economic development strategy
Geography: Charlotte
Major Participants: Local CEOs, Bank of America
Background: In 1980, the manufacturing industry in Charlotte, North Carolina began to rapidly decline. Specifically, between 2000 and 2005, the city lost nearly 30% of its manufacturing base. The loss of the manufacturing sector, comprised of primarily textile and apparel firms, threatened to decimate Charlotte’s economy.
The challenge: Finding a way to revitalize the Charlotte economy without a heavy reliance on the diminishing manufacturing sector.
How it happened: CEOs took the lead. Beginning in 1980, Hugh McColl (Bank of America) and Ed Crutchfield (Wachovia) pushed to increase the role of banking in Charlotte. They met with other CEOs and formed the Charlotte Regional Partnership—based upon the fact that a regional approach would benefit everyone, rather than pitting municipalities against each other to attract and retain businesses. The major strategy employed by the CEOs was to aggressively expand the banks, consolidating when possible.
Bank of America (BOA) became one of the leading powerhouses in Charlotte. The company realized it was vital to build cultural and entertainment facilities, coupled with affordable downtown housing, in order to attract and retain a qualified workforce. As such, BOA began buying up properties in the downtown area to facilitate the city’s growth. They then provided attractive loans to entice residents and business owners to locate in the downtown area.
Results for Charlotte Economy: With newfound access to capital thanks to the strong banking industry (second strongest banking center in the nation), several small businesses have flourished. Fortune magazine named Charlotte one of the nation’s best large cities for entrepreneurs to start and run a small business. Of the 25,600 companies in Charlotte, only 102 employ more than 500 workers. Of these larger companies, many are among the Fortune 500. As of 2008, the city had more headquartered Fortune 500 companies (including Bank of America, Duke Energy, Sonic Automotive, and SPX) than all but five other U.S. cities.
Remnants of Manufacturing: Though Charlotte lost the majority of its manufacturing sector over the past three decades, one bright spot is auto manufacturing, which has experienced a 94.9% increase. Manufacturers, to accommodate the region’s NASCAR base, moved from producing stock cars to producing custom parts using advanced manufacturing processes. Auto manufacturers have been able to easily retrain workers from other manufacturing industries to retrofit skills for auto production.
Remaining Challenges: Charlotte hedged its economic strategy on the banking industry, which in 2008 began to collapse nationwide. Charlotte also has a strong health care industry to which it can rely on when banking weakens; however, Charlotte is the largest U.S. city without a medical school and this stalls the growth of the local health care sector. Thus, neither of Charlotte’s two main sectors (banking and health care) are currently able to live up to their potential and economic growth stalls.
While this example is interesting, it doesn't provide much guidance for other cities. Cities can't easily transform industries. It took Charlotte a long time, and much of what happened was by chance, to get to the place where they are now.
By Fred Lunda on 01/30/2012
Last Updated on January 20th, 2012
TAGS: cities | manufacturing | banking | charlotte | bank of america | wachovia | small businesses | entrepreneurs | ceos | cluster | economic development