Reshoring Requires Reinvestment

              Interviewed late in his life, Richard King Mellon (son of Richard Beatty Mellon and nephew of Andrew Mellon) was asked why his family moved to reduce industrial pollution in Pittsburgh more than two decades before Congress enacted the Clean Air Act and Clean Water Act.  Mellon’s answer: the family was motivated less by altruism than by self-interest.  Out-of-town managers and executives offered opportunities at Mellon-controlled companies declined them due to the city’s deplorable condition.

              Mill communities around Pittsburgh fared less well.  In 1971, the year after R.K. Mellon died, ALCOA abandoned its first and largest aluminum manufacturing plant, located in New Kensington, 20 miles up the Allegheny River from Pittsburgh.  Aluminum City was the community’s nickname.  The plant closure initiated a death spiral for the community, now officially an Opportunity Zone under the Tax Cuts and Jobs Act of 2017.  Opportunity Zone is a designation reserved for the most economically distressed communities in America.

              Ten days ago, Pennsylvania Governor Shapiro and regional civic leaders announced plans to spend $81 million to attract advanced manufacturing businesses to 175,000 square feet of the former ALCOA plant, approximately four acres.  Pennsylvania’s share will be $30 million.  Private parties will provide the rest.  At the project’s center is Re:Build Manufacturing, an eleven company enterprise recently assembled by movie mogul and Pittsburgh native son Thomas Tull. 

According to its website, “Re:Build’s goal is to help revitalize the U.S. manufacturing base over the coming decades, creating substantial opportunities for our employees and the communities where we operate. We aim to do that by building America’s next great industrial company—growing a family of businesses that combine cutting-edge enabling technologies and operational superiority in aerospace and defense, cleantech, health, industrial equipment, lifestyle, and mobility. Our expertise is in product innovation, advanced components, systems production, and industrial automation.”

Tull’s challenge is no less daunting than R.K. Mellon’s when he surveyed post-WW II Pittsburgh.  Re:Build’s 16 operating principles are a critique of capitalism as practiced by Wall Street since 1980.  Thus, Principle 02 begins, “Machiavelli was wrong! Winning at all costs is not winning at all.”  Principle 08 implicitly indicts private equity funds: “We buy businesses to build them over the long-term. We do not buy businesses with a plan to sell them.”

Our 40 years of experience creating, reviving and sustaining businesses in this region says platitudes are cheap.  Defining what we call “the art of the possible” and achieving it is what matters.  As the president of a 300-employee manufacturing company on the Ohio River said to us, “You are telling me you will accomplish in six months what I have tried and failed to accomplish for the last decade.”  To which we responded, “Yes, that’s right.  Not because we are smarter or harder working than you, but because we are not you.”

The last of the Mellon-owned businesses to be dismembered was the Mellon Bank.  Former executives have told us then-CEO Marty McGuinn sold the retail bank because he concluded he could not change the entitlement culture of employees.  As evidence he was correct, a former colleague was commissioned by the bank to survey employees about the bank’s health insurance.  Survey results showed most employees considered their insurance coverage to be the least generous among Pittsburgh companies.  In fact, it was the most generous. 

As another example, a banker considering purchasing the plum retail locations Mellon kept despite the sale to Citizens Bank stopped at one such location and asked to deposit $1 million.  “You will have to go downtown for that,” said the employee who waited on the banker.

All of which is to say the New Kensington project leadership will need to inculcate in employees and community members alike the belief that Re:Build Manufacturing is not a jobs program put on by rich carpet baggers.  Rather, everybody must reinvest—in themselves, their employers, and their community and region.  That is a difficult message to hear and embrace.  Yet only if that behavioral foundation is laid can the rest of the initiative succeed.