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Economic outlook


Economic Outlook – May 2008

If it seems your employees are getting heavier — and less healthy — it’s probably not your imagination. And you’re not alone. Though adults in North Carolina smoke less and get a little more exercise than in years past, obesity is on the rise — from 59% of Tar Heel adults in 2002 to 63% now. So says a report by NC Prevention Partners, a Chapel Hill nonprofit. Meg Molloy is executive director.

BNC: Are we worse off than people in other states?

Molloy: Yes. We’re high in stroke. We’re high in diabetes. We’re high in heart disease. Cancer just surpassed heart disease and stroke as our leading killer. We still see people in North Carolina having higher tobacco use. So we do have a bigger problem than the rest of the country, even though the rest of the country isn’t exactly perfect.

Why should employers care?

Poor health from overeating, tobacco use and inactivity is expensive — about $5,700 per employee per year in North Carolina. People are out of work far more frequently when they’re not healthy. And even before they get to the diabetes or heart-disease stage — when they’re just overweight and using tobacco, maybe have high blood pressure — you see far more sick days. You see people who are at work but not as productive. You see higher workers’ comp claims. You see higher medical and disability claims.

What can employers do?

Keep people healthy. Once people get into that unhealthy category, it’s much more expensive to deal with and difficult to turn around.

How do you keep people healthy?

The first thing is to make the work site 100% tobacco-free. That protects every employee from second-hand smoke. We recommend that the whole campus be 100% tobacco-free. That is huge in encouraging people to quit. People who have been thinking about quitting for years will say, ‘OK, well, now I’m just going to have to do this.’

It’s that simple?

Smart employers are not going to roll out that policy without any communication. They’re going to be talking about it a year in advance, rolling out benefit programs at least six months in advance, offering subsidized or no-cost tobacco-cessation medication through their health plan. They’re going to offer counseling, and they’re going to give work time to help people go get quit-smoking assistance.

What about overweight workers?

Make sure that your work site gives people access to healthy foods. Make sure there are healthy options on the cafeteria line and make more than half of your vending items healthy choices. In our office, we stock the break room with fresh fruit, juices and bottled water. We don’t encourage people to bring in brownies, cupcakes and leftover Halloween candy.

How can employers encourage more physical activity?

Many have a wellness committee map out a half-mile or mile route near the facility or even, in larger work places, within the facility. They give people incentives to use their 15-minute breaks for walking instead of eating a doughnut or smoking. If you log a certain amount of miles, you might be eligible for a small incentive — a gift card or water bottle. Some employers are offering stronger incentives — extra days off or waived or reduced co-pays and premiums.

Wouldn’t extra vacation days offset a benefit of having healthy workers — that they show up more often?

An employer has to balance how many days off it would offer. But if you see somebody lose 15 or 20 pounds and he or she gets a day off, you’re going to save a lot of money.

Are any CEOs leading morning calisthenics?

Several hospital CEOs have told me that until they got involved, where they actually got out there and walked or did whatever the activities were, a lot of the staff didn’t think it was em- braced fully. If CEOs walk the walk and not just talk about it, you have much better buy-in and better participation from management on down.

What about something like the TV show Celebrity Fit Club, where you have teams competing to lose the most weight?

Competitions can be effective if they’re done well. Many people do better when they’re working as part of a group. A lot of people need support to change their behavior.

What are the hallmarks of a good health-insurance program?

Tobacco-cessation benefits should cover counseling and medications. On the healthy-weight side, it should include medical nutrition therapy with a registered dietitian — not just for diseases but to maintain healthy weight. Many plans in our state offer obesity-prevention and -management benefits for kids and adults, be- cause dependent costs are high for employers

What’s the outlook?

Most scientists predict we’re going to see weight trends continue to rise for the next 20 years. That means more of the work force will struggle with high blood pressure, diabetes and other health issues. If employers don’t do anything, we’ll see our health get worse, and our costs are going to continue to go up.


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Wade Reece


Personnel File – April 2008: financial services

Wade Reece, Chairman and CEO
BB&T Insurance Services Inc., Raleigh

It took BB&T’s insurance subsidiary nearly 70 years to reach $6 million in annual sales. Seventeen years after Wade Reece took the reins, it’s about to hit $1 billion. So much for oil and water not mixing — the oil being bankers, who are supposed to shun risk, and insurers, who owe their existence to it.

Reece, 51, didn’t want the job initially. “BB&T was the only place I’d ever worked, and banking was all I knew,” he recalls. “I said, ‘I understand the long-term strategy of the bank, but I don’t know a thing about insurance.’ They said, ‘Well, you’re not opposed to learning, are you?’’’

That was late 1990. The Boonville native, then in his middle 30s, was the bank’s city executive in Gastonia and a regional manager when the brass tapped him to pump up the anemic insurance arm, which was founded in 1922. “We knew we needed to transform BB&T into a more dynamic, true financial-services institution, and insurance was a product all our clients needed.”

The division had shown little or no profit. Under Reece, it began buying agencies in strategic locations, first in North Carolina and then throughout the Southeast and nation. The count now stands at more than 130. They’re co-branded, keeping their old names but adding BB&T’s. Business Insurance, a trade publication, ranks it the nation’s seventh-largest insurance broker.

Reece estimates that acquisi-tions account for two-thirds of the increase in revenue; the rest has been generated by organic growth. “We have competitors who’re just aggregators that like doing acquisitions. We don’t do that because we think it’s a shallow strategy. At the end of the day, if you’re not growing your business the old-fashioned way — by the sweat of your brow — you’re missing the point.”

Tony Plath


Personnel File – April 2008: Financial Services

Tony Plath, Associate Professor of Finance
UNC, Charlotte

How did an associate professor at UNC Charlotte get to be the go-to guy for commentary on North Carolina-based banks, showing up not only in the Tar Heel press but in such national publications as BusinessWeek and The Wall Street Journal? Well, as they say in the news game, Tony Plath gives good quote. Plus, as the son of a sportswriter, “I return reporters’ phone calls.” The Ohio native also knows firsthand of what he speaks. While earning his MBA at Kent State University, he worked for Columbus-based Huntington National Bank and Cleveland Trust. Here he explains how he got where he is and why he thinks bankers should let it all hang out.

“I graduated from Kent in ’78 with a bachelor’s in econ and, like every other kid with a bachelor’s in econ, had trouble finding a job. I went to work for a bank because I figured banking was something I wanted to know about and, you know, they were hiring. If it’s a job in a bank, I’ve probably done it: bill collector, assistant branch manager, head teller. I started my MBA about six months after I graduated, and it took me five years — four part time and one full time. When I finished, the university asked me to stay on and do a Ph.D. At the time the market was good for finance teachers, so I did. When I finished, I was offered jobs all over the country but chose Charlotte because it was where the bankers were.”

“A lot of banks are so controlling of what people say. What always amazes me is banks will tell you, ‘I got misquoted in the paper,’ or ‘This story didn’t accurately represent what we’re doing.’ And what they really mean is, ‘This story didn’t make me look good.’ I think if they were honest, they’d probably win more points in the market and do better with their customers.”

The meat of the matter


The meat of the matter

The labor movement’s future might hang on what happens at this
giant packing plant near the tiny town of Tar Heel.
By Frank Maley

Hermillio Sosa steps into the pulpit of First Baptist Church in Fayetteville, ready to tell his story but unable to speak many words his audience will understand. Beside him, a man repeats his Spanish sen­tences in English for the congregation, most of it black. They’re here on the birthday of Martin Luther King Jr., shot dead 40 years ago on a visit to support striking sanitation workers in Memphis.

Today, the faithful are joined by the fretful: roughly 50 workers from a slaughterhouse about 20 miles south near the Bladen County town of Tar Heel. They’re easy to tell from the regulars by bright yellow T-shirts that say Justice @ Smithfield. Many wear jeans and athletic shoes. It’s not what most consider church attire, but they’re here to rally support for organizing their workplace, the world’s largest pork-processing plant. It’s hard to look oppressed in your Sunday best.

Sosa’s story is short, the narrative choppy. He started working at Smithfield Packing in 1998. A few years ago, he joined a work stoppage to protest how fast production lines moved. Some who participated were fired. He ends with a word that needs no translation. “Gracias.” On cue, the audience bursts into applause. Most of the plant’s 5,000 workers are black, but more than a quarter are Latino. This, the speakers who preceded him have hammered, is a cause they all share. The event lauds not only King but also Cesar Chavez. Scenes from both men’s lives flash on the wall behind the choir.

Public-relations spectacles like this are skirmishes in the nearly 16-year battle for the plant by Smithfield Foods Inc., based in the Virginia town from which it takes its name, and the Washington, D.C.-based United Food and Commercial Workers International Union. Stakes are high for both sides, and the outcome will have effects far beyond the company, the union and plant employees.

With union membership continuing its long decline and representation of the U.S. work force dwindling — from 23% in 1983 to 13% in 2007 — the labor movement needs a big win. There would be no sweeter place to get it than North Carolina, the least unionized state in the nation. “This is one of the largest industrial plants in the South,” says Robert Korstad, associate professor of public policy studies and history at Duke University. “It’s symbolic to the union movement. If they’re able to win there, it sends a real signal to other workers in other industries.”

For Smithfield, a union in Tar Heel could expose the Achilles’ heel of the business model that made the company the world’s largest hog producer and pork processor. “They figure if they can get that done, it will be a catapult into other industry in North Carolina and South Carolina,” says Joe Luter IV, president of The Smithfield Packing Co., the subsidiary that runs the plant. “Then they’ll move on down the Southeast into Georgia, Alabama, etcetera.”

“If the labor movement can’t win the South, we can’t succeed,” Gene Bruskin, director of the union campaign, told Labor Notes magazine, adding: “The Tar Heel plant is big enough and important enough and close enough to other places that it has the possibility of moving other people. The possibilities of organizing packinghouse workers would be transformative to the labor movement, for immigrants, for African American workers, for the South.”

The UFCW has been trying to organize the Tar Heel plant since 1992, the year it opened. There have been longer campaigns in North Carolina and a few that involved more workers, says James Andrews, president of the state AFL-CIO in Raleigh. “But at least in recent history, I can’t think of a worse situation.” Hourly employees twice have voted on whether the union would represent them, and twice the union has lost. It claims the company won by coercion — charges backed by a court decision and the National Labor Relations Board, which has ordered a new election.

Smithfield is willing to try for a hat trick, but union leaders don’t trust it to play fair. They want specific rules guaranteeing company neutrality with “meaningful sanctions.” The company claims that the union wants to win recognition simply by getting a majority of workers to sign cards authorizing it as their collective-bargaining agent. “These are people who are trying to take away the right of employees to decide their own future in a secret-ballot election,” spokesman Dennis Pittman says. “This is trying to take away something that men and women have died for in this country and around the world.”

After negotiations broke down in October, Smithfield sued the union under the federal Racketeer Influenced and Corrupt Organizations Act, essentially claiming that the union was a criminal organization trying to put it out of business with a smear campaign. The lawsuit contends that the UFCW has initiated frivolous regulatory investigations, made false statements to analysts to drive down the stock price and interfered with business relationships.

Undaunted, the union ramped up its PR campaign, even going after Paula Deen, the frosty-maned, magnolia-mouthed TV cook who has become the company’s public face. During one of her promotional tours in November and December, members and their allies met her with signs, urging her to listen to worker concerns. They flooded her Web site with e-mails and her Savannah, Ga., restaurant with phone calls.

As the field of battle has expanded beyond Eastern North Carolina, its duration — the elections were held in 1994 and 1997, though the NLRB didn’t render a decision until 2004 — has seen shifts that have changed both the industry and its work force. According to historian Roger Horowitz, who has written several books about labor relations in meatpacking, Latinos began moving into the industry during the 1980s as big union plants in the Midwest fell prey to smaller competitors with leaner cost structures. The surge of immigrants to North Carolina in the ’90s provided employers with a new pool of cheap, compliant labor.

Latinos made up nearly half of the Tar Heel plant’s workers in 2006. “Historically, Hispanics tend to be pro-company,” Luter says. “They appreciate the jobs, and they don’t mind the hard work. They like the money, and it’s an opportunity for them.” But Hispanic employment has decreased to 26% — about what it was when the last vote was held 11 years ago — due to a U.S. Immigration and Customs Enforcement crackdown that forced Smithfield to fire workers who couldn’t prove their Social Security numbers were legitimate. Union officials say the company’s cooperation with ICE proved a convenient way to oust Latino activists, but executives contend that the crackdown affected pro-company workers as well. “Our participation in that program had a real negative impact on our company,” Luter says.

Tuesday dawns clear and cold, but dark clouds cover much of the western sky. The forecast calls for rain. The church service the previous day had represented a victory for workers. A year ago, the company refused demands to make Martin Luther King Day a paid holiday, so some workers stayed home. This year, Smithfield Packing had closed the plant. It rises, boxy and white, out of the flat, winter-browned landscape just north of Tar Heel, a hamlet of fewer than 100 people. The main building stretches more than a quarter-mile down N.C. 87, crisp and neat except for steam rising and pipes sprouting and snaking out of its roof like intestines from a carcass. At 5:30 a.m., machines crank up. Production begins again.

A worker nudges along a new shipment of hogs, which are still fighting, grunting and squealing, and herds 10 at a time into a chamber. The door automatically slides down, and carbon dioxide floods the compartment. Twenty seconds later, the other door opens, the floor tilts, and pigs, silenced and still, slide out. A back leg of each is shackled to an overhead conveyor, and a worker flashes a blade, slicing its jugular. Like slacks at a dry cleaner, dangling swine keep moving, blood raining from lifeless snouts to freshen crimson creeks in troughs below. The conveyor angles down, submerging them in scalding water to loosen their hair. For about 10 minutes, they stew in a U-shaped cauldron, always moving, then are levitated toward a machine with rubber flaps that plucks most of the bristles, followed by a series of furnaces — nozzles spewing blue, purple and orange flames — to singe off any left.

While large parts of the operation are automated, much of the work is by hand. After a worker slices away pieces burned by the furnaces, others cut off the head and gut the body. Most of the pig — including bellies that will be made into bacon — is sent to the cutting room. Workers there wear gauzy hairnets, dark-blue helmets, light-green gloves and white coveralls with light-blue sleeves. Green plastic mats at their stations keep their feet from slipping. A maze of conveyor belts move cuts of meat around the plant, sometimes taking them above the factory floor before lowering them like luggage at an airport. Machinery combines to produce a rushing sound that’s loud enough to warrant ear protection.

Once butchered to the right size, meat is wrapped and shipped to stores, wholesalers and distributors or to other Smithfield plants for processing. It’s no work for the queasy. Razor-sharp blades and repetitive-motion injuries are constant worries. Union brochures carry stories of workers hurt on the job and rushed back to the line. The company counters that the plant’s safety record is better than most and that the number of job-related injuries and illnesses has fallen in recent years. In 1998, 19 out of every 100 workers reported injuries on the job. Three years later, the number dropped below 10%. It has crept into double digits only one year since. Industry averages ranged from 12% to 29%.

Smithfield officials tout the plant’s economic benefit to the region — a payroll of $150 million a year. “The wages we pay in that facility are close to $2 an hour higher than poultry jobs in that same part of North Carolina,” Luter says. But the plant doesn’t fare so well in other comparisons. It draws more than 80% of its work force from Bladen, Cumberland and Robeson counties. Its average wage of $12.10 to $12.20 an hour for production workers is below Robeson’s average of $12.62, according to the most recent state Department of Commerce estimate, and average wages in Cumberland and Bladen are even higher.

Smithfield Foods has a history of dealing with unions stretching back 30 years. Its oldest union shop is in its hometown. Roughly 40% of its 53,000 employees are covered by collective-bargaining agreements with five unions. According to Pittman, the Tar Heel plant’s wages are about the same as those in the other plants, which explains why some workers don’t want the UFCW: Why pay dues if you’re already making as much as union members? But for the company, it raises another question: Why spend millions to keep the union out?

The Tar Heel plant plays a strategic role in the company’s business. It processes up to 32,000 hogs a day, 64% of Smithfield Packing’s total capacity. “If we had an extended strike in that plant,” Luter says, “we would have hogs backing up throughout North Carolina or we would have to put hogs on trucks and ship them to the Midwest.” One reason Smithfield built such a mammoth plant in Bladen County was its location. It’s close to Interstate 95, pig farmers in Eastern North Carolina and pork consumers on the East Coast.

The company had been a small player until the 1980s. In 1981, it bought Gwaltney, its main rival in Virginia, and doubled in size. Three years later, it acquired Patrick Cudahy, a Wisconsin-based maker of bacon, ham and sausage. At the same time, unions were losing their grip on the industry, as high labor costs made producers such as Armour and Swift vulnerable to new competition with leaner payrolls and heavier investment in machinery. Half the workers in meatpacking were union members in the early ’80s, according to a U.S. Department of Agriculture report in 2000 on consolidation in the industry. “By 1987, union membership in meatpacking had fallen to a fifth of the work force, where it has remained.”

Without having to deal with union work rules, the upstart companies could automate more of the process, speed up lines and keep down wages. Between 1977 and 2007, U.S. Bureau of Labor Statistics figures show, the average pay for production workers in animal slaughtering and processing plummeted from 4% below the national average for manufacturing production workers to more than 30%. It became “a job of last resort,” Horowitz says. “The work force changes, and you have this huge influx of immigrant workers.”

While this was happening, Smithfield was vertically integrating operations by raising as well as slaughtering hogs. In 1987, it launched a joint venture with Carroll’s Foods of Virginia in Warsaw. In 1992, it purchased a majority stake in Brown’s of Carolina in Kenansville. Hog production across North Carolina grew from 4.5 million head in 1992, the year the plant opened, to 9.3 million just four years later. Owning hogs from “squeal to meal” helps a processor control quality and build its brand, Horowitz says.

“They have more control over the input that they’re getting than Oscar Mayer and Hormel. That allows them certain efficiencies in production and manufacturing because they don’t have to worry about variations in supply.” But unlike pure meat processors, which can withstand a strike by ceasing to buy hogs, the company is at a disadvantage, he says. “Smithfield, by creating this integrated structure, is much more vulnerable. If they can’t keep operating, they have this huge inventory, which just tears their cash up.”

So far, Smithfield has kept organized labor at bay in Tar Heel. When the union filed charges with the NLRB after losing the 1994 election, the company agreed to another vote. Losing in ’97, the UFCW again turned to the NLRB, which ruled in 2004 that Smithfield had violated labor law in both contests. In ’94, the company had threatened to fire workers, confiscated union literature and intimidated employees while it was distributed. The ’97 campaign, the board found, had been worse — violations included assaulting a worker and threatening to freeze wages and to close the plant. It ordered a new election and made the company display a sign saying it had been found guilty of labor-law violations and listing more than 30 things it has promised not to do.

When the Court of Appeals for the District of Columbia upheld the decision in 2006, the company gave up the legal fight. Luter won’t talk much about the ’97 election. “Let’s just say that some of the advice we got from outside people 10 years ago was probably not some of the best advice we got.” When pressed about the advice, he says, “I’d rather not go there. It’s a new day.” Luter, 43, has been president of Smithfield Packing since 2004. His great-grandfather and grandfather founded the company in 1936. His father, Joseph Luter III, is chairman of Smithfield Foods and was the holding company’s CEO since it was founded in 1975 to 2006, when he turned the job over to Larry Pope.

That it took the NLRB seven years to act is no surprise, Horowitz says. Weakened during the Reagan Administration, the labor board has never regained its strength. “Routinely, what has gone on in the last 25 years is companies violate the law in union organizing drives and trust that, if they lose, enough time passes between the violations and the ruling that the union is unable to recover.” As evidence that Smithfield isn’t anti-union, Luter points to an election last year at a distribution center in Clayton that the Steel Workers union won by two votes. “It was very close, but they won, so we’re in discussions with them right now.”

Keith Ludlum, a UFCW organizer who has been fired by Smithfield twice — he was reinstated by the NLRB once and is contesting the second — says there’s a world of difference between accepting union representation for 119 employees in a warehouse operation and doing it for more than 4,500 hourly workers in the main slaughterhouse. In March, Smithfield Packing announced it was closing a smoked-ham factory in Kinston — the only union shop among its six wholly owned processing plants in North Carolina. Pittman says the move is to improve efficiency and is not an anti-union maneuver. The plant is 60 years old; some of the jobs are heading for another union shop.

Winning a third election might keep out the union, but company executives shouldn’t expect such a victory to end the war. Reflecting on the previous votes, Pittman makes an observation that mirrors Horowitz’s from the opposite view. “If you’re familiar with campaigns and labor law, every time a union loses a campaign, they file unfair labor practices. It’s just part of their job. They’re supposed to file charges if they don’t win.” There’s just too much on the line, it seems, for either side to give up.

Regional Report Western April 2008



Economic impact of Cherokee casino leaves the reservation 

Gambling, proponents predicted, would be the biggest boon to western North Carolina since the other one — Daniel — crossed the Blue Ridge. Sin, critics cried, calling it the road to perdition when Harrah’s Cherokee Casino opened in 1998. However, the smart money now calls it the path to prosperity: A new report by Harrah’s Entertainment Inc. and the Eastern Band of Cherokee Indians shows the casino has grossed $1.6 billion in 10 years. The Cherokees own the casino and, except for a management fee to the Las Vegas-based operator, pocket the profit, but the economic impact reaches beyond the Qualla Boundary, as the 56,000-acre Indian reservation is officially known.

“It attracts people, and people bring money,” says Jim Smith, a professor at Western Carolina University’s Institute for the Economy and the Future. “That’s like replacing 10 or so paper companies that have gone bankrupt out here or replacing a few thousand manufacturing jobs that have disappeared.” About 3.6 million people visited last year, catered to by more than 1,900 casino, hotel and other workers. Only about 360 tribal members — one in five employees — were on the $73 million casino payroll last year, spokesman Charles Pringle says. The rest of the work force came from surrounding counties. “Our unemployment was 5.8% but started dropping the day the casino opened,” says Rick Fulton, chairman of the Jackson County Economic Development Commission. The average rate was 3.7% in 2007.

The tribe has launched a $633 million expansion to be completed in 2013. It will add a third hotel tower — increasing the number of rooms from about 500 to more than 1,000 — parking decks and more gaming space. “Everything here will pretty much double in size,” Pringle says. There’s still opposition to feeding prosperity with gambling proceeds, and not only among Cherokees and other residents of the traditionally conservative region. Gov. Mike Easley has rebuffed the tribe’s efforts to allow table gaming — only electronic gambling is allowed. Smith doesn’t know why. “There’s never been the slightest whiff of any corruption, untoward activity or shenanigans.” He expects the casino to grow, and he should know. It has supplanted his university, which has about 1,100 jobs, as western North Carolina’s largest employer.

FLETCHER — Jack Murphy, 60, succeeded Mike Cianciarulo as CEO of the Earth Fare grocery chain. Murphy, a board member, is former CEO of Rockville, Md.-based Fresh Fields Natural Grocery. Cianciarulo will remain on the board. The chain has 13 stores in the Southeast.

LENOIR — Jim Sponenberg, 64, replaced Gary Clawson, 46, as CEO of Parkway Bank. Sponenberg was a former executive at Central Carolina Bank and SunTrust Bank. Clawson resigned in January after going on medical leave.

ARDEN — Lebanon, Tenn.-based Custom Packaging plans to spend $4.5 million on machinery for its corrugated-box factory here. It is adding 12 workers to give it nearly 75.

CANTON — Johnson’s Cattle Auction planned to open here by the end of March and sell cattle on Wednesdays. Western North Carolina has not had a livestock market since June, meaning producers had to take livestock either to Shelby or to Kingsport, Tenn.

ASHEVILLE — A study coordinated by Land-of-Sky Regional Council, a planning organization for Buncombe, Henderson, Transylvania and Madison counties, calls for state and local regulation of development on steep mountain slopes. The General Assembly declined to adopt slope rules last year.

Regional Report Triangle April 2008



Panel: Rail is still the ticket 

Nearly two years ago, when it dropped its bid for federal funding of a 28-mile, $810 million commuter-train line, the Triangle Transit Authority made it clear that the project had been sidetracked, not derailed. Increased global demand for concrete and steel had jacked up the cost, and changes in federal requirements made money harder to get.

In February, regional rail crept back onto the main line of public debate — bigger and pricier than ever. An advisory panel put together by planning organizations representing Raleigh, Durham and Chapel Hill, among others, recommended a 56-mile system as part of a transportation package that would include a tripling of bus service and cost an estimated $2 billion, says George Cianciolo, a Duke University pathologist and co-chairman of the 29-member advisory panel. TTA operates 68 buses between Raleigh, Durham and Chapel Hill.

A shortcoming of the old rail plan, according to the feds, was that the proposed line between Durham and Raleigh, with a stop in Research Triangle Park, wouldn’t serve enough riders. “There was nothing in between, so it wasn’t a high-ridership corridor,” Cianciolo says. Routes between Chapel Hill and Durham or Cary and north Raleigh might be better candidates for phase one. “I’m not predicting what’s going to get built first, but it’s probably safe to say it’s going to be a corridor that has high density and high-ridership numbers.”

Finding the money might be tough, though. One oft-mentioned source would be a local sales tax. That faces some high hurdles — approval by the General Assembly and three sets of county commissioners or, if stated in the bill, voters in three counties.

Joe Bryan, a Republican who chairs the Wake County Board of Commissioners, worries that the project might be too big, too costly and too dependent on local money. It’s not his top priority. “I love education more than I do transportation. I’m held responsible for education and not for transportation.” He’s impressed with the light-rail line recently built in Charlotte and noticed the public support given it by top business leaders. “If there is buy-in to this plan, there need to be champions that say, ‘We need this for our business to stay here and to grow here, and we are demanding and expecting that.’”

If community leaders decide that the region needs rail, Cianciolo says, it’s better to do it sooner rather than later. “It’s probably never going to get much cheaper to build something like this.”

State aid is no cure for drug maker

GlaxoSmithKline opted out of a 2005 state incentive agreement that would have paid it $1.4 million for creating 200 jobs at its plant in Zebulon and keeping them 10 years. Spokeswoman Stefanie Mendell says the British drug maker filled the jobs but can’t keep all of them. It plans to cut about 70 in Zebulon, where it will still employ about 1,000. GSK employs about 6,000 in the Triangle, and more cuts could follow. It has been hurt by competition from generic drugs, unexpected regulatory delays and declining sales of its diabetes treatment Avandia — which is packaged in Zebulon — after a study last spring linked it to an increased risk of heart attack.

RALEIGH – The State Bureau of Investigation and the state Department of Insurance are investigating the finances of The Castleton Group, which provided payroll, health-insurance and other human-resources services for more than 100 small and mid-size businesses. Castleton closed and filed for bankruptcy in late December. The company, which had about 30 employees, says its liabilities exceed its assets by $6.1 million.

RALEIGH — Research Triangle Institute, which does business as RTI International, has begun adding 600 jobs at its call center here. That will bring call-center employment to about 850. The nonprofit is collect¬ing information for a federal study of college financial aid.

CARY — Siemens Medical Solutions, part of German electronics maker Siemens, plans to add as many as 300 jobs here, for a total of 975, during the next five years. It makes medical gear and patient-monitoring systems here and could receive $6.1 million in state and local incentives.

GARNER — Golden State Foods, an Irvine, Calif.-based supplier of McDonald’s, plans to build a $23.5 million warehouse that could employ 225. It’s scheduled to open in 2009 and serve about 500 restaurants in the Carolinas and Virginia.

RALEIGH — Extron Electronics plans to build a research, development and distribution center here. The Anaheim, Calif.-based maker of video and audio equipment will employ about 125 when it opens next year but could expand to 350 within five years.

PITTSBORO — Biolex Therapeutics, which is developing treatments for hepatitis C, withdrew plans to go public because of unfavorable market conditions and because it had found financing elsewhere. Biolex never said how much money it planned to raise in the stock offering.

RESEARCH TRIANGLE PARK — London-based mobile-phone maker Sony Ericsson plans to add about 100 jobs by the end of the year at its campus here, for a total of about 850. Most of the hires will be software or radio-frequency engineers. The company is a joint venture of Japan-based Sony and Sweden-based Ericsson.

RALEIGH — Atlanta-based United Parcel Service planned to close its office here by the end of March, cutting about 60 administrative and management jobs. It will move about 100 jobs to other places in the region.

DURHAM — Cree, which makes light-emitting diodes and chips, bought LED Lighting Fixtures of Morrisville for up to $103.4 million, including post-deal incentives. LED Lighting develops light fixtures for homes and businesses, using Cree LEDs. Cree co-founder Neal Hunter was CEO of LED Lighting and is now president of Cree LED Lighting Solutions.

RALEIGH — Lewis R. Holding, 80, retired as CEO of First Citizens BancShares but will remain chairman. He was succeeded as CEO by nephew Frank Holding Jr., 46, who also is president. James Hyler, 60, resigned as vice chairman and chief operating officer. His successor had not been chosen.

SELMA — Columbia, S.C.-based East Coast Ethanol withdrew plans for a plant here because it couldn’t get enough natural gas to the site. It still plans to build one somewhere in North Carolina.

RALEIGH — Progress Energy requested federal approval for a second nuclear reactor at its Shearon Harris plant by 2020. No cost estimate was given, but other utilities have estimated that similar reactors would run $6 billion to $9 billion.

MORRISVILLE — Array BioPharma, a Boulder, Colo., company developing cancer treatments, plans to open an office here by midyear to oversee clinical testing. It won’t say how many it intends to hire.

DURHAM — New York-based drug maker Pfizer plans to acquire Sere- n¬ex, which is developing cancer treatments and other medications. Terms were not disclosed. The fate of Serenex’s 36 employees is unclear.

LOUISBURG — Louisburg College eliminated eight of its 46 faculty positions as part of a move to cut at least $1 million from its $15 million annual operating budget and make its accrediting body happy. It also plans to raise tuition 5% to $21,210 and cut student financial aid.

RALEIGH — Maxwell Marine, a New Zealand-based maker of boating accessories, moved its North American headquarters here from Santa Ana, Calif. The operation employs 11.

Regional Report Triad April 2008



New Goose could be on the loose next year 

Antilles Seaplanes, the Gibsonville company that wants to resurrect the famed Grumman Goose seaplane (cover story, July 2006), plans to have a production line running early next year. The company has purchased two buildings in Graham to house production of the $2.9 million aircraft.

CEO V.L. Manuel says he’s in the middle of hiring about 100 employees to add to the 30 who were working for the company in late February. In the meantime, Antilles continues to make parts and check them against those in existing aircraft. “We’re doing all the preliminary work except pumping planes out the door,” Manuel says. It’s waiting on two things: Federal Aviation Administration approval of its process to build the planes and solid orders for them. “We have more than 30 letters of intent to buy, but it’s real easy to sign a letter. We’re trying to get deposits.” He doesn’t expect problems on either front. He already has conquered what he says was a bigger hurdle — finding investors. He won’t say who they are or how much they’ve put into the privately owned company, referring to them just as “a group of guys out of Greenville.”

Manuel and a partner, who has since left the company, started Antilles in 2000, sinking about $7 million into it initially. Since then, he and others have been developing methods to make the parts and figuring out what to up– date. His version will be powered by jet turbo-props, for example, instead of radial engines.

The company can’t sell any of the parts it turns out because it is still waiting on FAA certification. “We’re helping a lot of people in the aviation business as consultants, but as far as a real revenue stream, we don’t have that.”

Another thing the company is short of is luck. Two employees were injured in January when a Goose the company bought crashed off the Florida Keys. Manuel wouldn’t identify them but says both are doing well. The pilot suffered deep cuts, and the passenger broke a leg. While an official ruling had not been issued on the crash, Manuel says there was no sign of mechanical failure. “The passenger said they came down for a landing, and the plane was running fine until it hit something in the water and flipped.”

While the first planes will hew closely to the old Goose design, created in 1936, Manuel and company also are working on an unnamed updated version. “We’ve got an expert in marine technology and some boat engineers. A new modern version of the Goose is on the drawing board. It’s sleeker, faster, more modern. But the first thing we have to do is finish what we started.”

GREENSBORO – O’Reilly Automotive, a Springfield, Mo.-based auto-parts retailer, is building a distribution center here. It will employ more than 350 within three years.

GREENSBORO – The Wyndham Championship golf tournament will move from Forest Oaks Country Club to Sedgefield Country Club — and a course designed by Donald Ross — starting in August. The tournament has been played at Forest Oaks for 31 years.

WINSTON-SALEM – R.J. Reynolds Tobacco will receive $387.6 million from United Kingdom-based Gallaher Group to terminate a joint marketing venture in Europe. Reynolds, part of Reynolds American, will receive $155 million by April 20 and annual payments of $38.8 million starting in April 2009.

MOUNT AIRY – Perry Manufacturing will cut about 150 of the 180 jobs at its headquarters and factory here. The company makes knit and woven casual apparel, mostly overseas, and employs about 4,000.

MEBANE – Clinton, Mass.-based Nypro plans to add about 75 employees, for a total of 300, to its plastics factory here. No timetable has been set. The plant added about 60 employees after it moved from Graham last year.

RURAL HALL – Chattanooga, Tenn.-based Ken Garner Manufacturing, which makes counterweights for excavators and other construction equipment, plans to open a factory that will employ more than 70 here within three years.

THOMASVILLE – Old Dominion Freight Line bought Sidney, Mont.-based Bob’s Pickup & Delivery. Terms were not disclosed. The trucking company says Bob’s gives it full coverage of Montana. It has full coverage in 38 other states.

RALEIGH – State regulators denied permission to build two hospitals that would have been only four miles apart. Forsyth Medical Center wanted to build a 50-bed, $96 million hospital in Clemmons. Wake Forest University Baptist Medical Center wanted an 81-bed, $125 million one in Advance. Both were expected to appeal.

WINSTON-SALEM – The city wants private companies that do business with it, including those that take incentives, to do more to keep illegal immigrants off their payrolls. City contracts specify that employers comply with federal laws that require them to verify the citizenship status of new hires.

GREENSBORO – Columbus, Ohio-based Skybus Airlines, which has a hub at Piedmont Triad International Airport, hiked fees for checked baggage. The discount-fare carrier now charges $12 — $10 if the bags are checked in online. The fee had been $5.

GREENSBORO – Steven D. Bell & Co., which manages a property portfolio valued at $5.3 billion, and New York-based DRA Advisors purchased more than 25,000 apartments in 86 properties across the U.S. from Denver-based UDR. The deal is the largest by Bell since its founding in 1976. It will add 200 employees, giving it more than 2,600.

REIDSVILLE – Annie Penn Hospital will close its birthing center July 1. It blamed a shortage of obstetricians and neonatal specialists. The hospital is directing deliveries to The Women’s Hospital of Greensboro. Both are part of Greensboro-based Moses Cone Health System.

WINSTON-SALEM – Womble Carlyle Sandridge & Rice law firm laid off 15 of its 650 employees here. Most were secretaries.

WINSTON-SALEM – SilkRoad Technologies, which provides management software to employers, received $10 million in venture capital from Azure Capital Partners of San Francisco. SilkRoad plans to expand its sales and marketing.

WINSTON-SALEM – Sports marketers International Sports Properties and Dallas-based Learfield Sports purchased Alcoa, Tenn.-based Action Sports Media, which manages marketing rights for arena and stadium signs at seven universities. ISP and Learfield plan to rename Action Sports and run it as a joint venture. Terms were not disclosed.

Regional Report Eastern April 2008



Boat builder changes course 

Brunswick Corp. is closing its 200-employee Hatteras Yachts plant in Swansboro, a year after local boosters gave it an award for creating the jobs. But state officials say Brunswick, a Lake Forest, Ill., company with nearly $5.7 billion in revenue in 2007, will get more than $4.5 million in state and local incentives for opening another plant farther down the coast. “Regardless of what they do elsewhere, it’s going to be at our expense,” says Jim Reichardt, director of the Onslow County Economic Development Commission. “The whole thing has been a shocker to us.” Hatteras Yachts’ headquarters is in New Bern, about 30 miles away in Craven County, and Brunswick’s new plant, where hiring is under way, is in Navassa, west of Wilmington in Brunswick County.

Brunswick bought that plant in July from Rampage Yachts and pledged to create 858 jobs by March 2011, says Deborah Barnes, a spokeswoman for the N.C. Department of Commerce. If it does, it will collect $4.36 million from the state’s Job Development Investment Grant fund, $200,000 from Brunswick County and $25,000 each from North Carolina’s Southeast, the partnership that promotes the region, and local recruiters. Eliminating the 200 jobs in Swansboro won’t count against it, Barnes says. “The grant was to build a different line of boats. Hatteras was never mentioned in it. It’s the same company but different jobs.” The Navassa plant will build yachts sold under the Bayliner, Maxum and Meridian brands.

In Swansboro, where a booster group called The Committee of 100 praised Hatteras Yachts last year for creating and keeping jobs there, critics say Brunswick should be rewarded only for net job creation, subtracting the 200 jobs eliminated there from those it will create in Navassa. Brunswick, they contend, has left Swansboro with another problem — credibility. The Hatteras Yacht plant was built by Chris-Craft in the early 1990s. It ran into rough financial waters and was sold to Tiara Yachts. That company also struggled and sold the 165,000-square-foot building to Brunswick’s Hatteras division in September 2005. “I’m afraid,” Reichardt says, “anybody else is going to be a little gun-shy if we try to get another boat builder in there.”

Maybe not. Brunswick spokesman Dan Kubera says the company hasn’t sold the Swansboro plant and might not. It eliminated the jobs and moved production to New Bern but could still find other uses for it. Besides, he adds, this was a business decision, not a reflection on Swansboro or the workers there.

Getting (Rid Of) Randy

Roanoke Rapids officials agreed to pay $750,000 to cut ties with performer Randy Parton, whom they hired in June 2005 to run an entertainment complex that they hoped would spark the city’s economy. Parton, younger brother of country superstar Dolly Parton, persuaded the city to borrow $21.5 million to build The Randy Parton Theatre. He was to perform there and manage it. However, attendance at the 1,500-seat theater has been disappointing since it opened in July. The city replaced Parton as manager in November with Boston-based UGL Unicco. It fired Parton as a performer in December, alleging that he had shown up drunk for a show, then dropped UGL in February. The payment to Parton bought out the remaining five years on his contract, which promised him at least $250,000 a year.

KINSTON – Premier Trailer hopes to begin production of aluminum horse trailers here this month. The company, part of Pink Hill-based Double D Trailers, plans to employ about 55. Double D employs nearly 35 in Pink Hill making galvanized-steel trailers.

WILMINGTON – Durham-based PharmaLinkFHI opened an office that will employ about 35 here. The contract-research organization says it picked Wilmington for its many clinical-research professionals.

WILMINGTON – Las Vegas-based Allegiant Air plans to add two weekly round-trip flights this month between Wilmington International Airport and Orlando, Fla., after it ends two weekly flights from Kinston to Orlando. The airport plans to add 500 parking spaces by the end of the year.

RAEFORD – Pennsylvania Transformer Technology is adding 27 jobs, nearly doubling its work force here. The company, based in Canonsburg, Pa., makes power transformers and voltage regulators for power companies.

WILMINGTON – Pharmaceutical Product Development, which con- ducts clinical research for drug companies, plans to acquire Russian competitor InnoPharm. Terms were not announced. InnoPharm employs about 300.

WILMINGTON – The local daily newspaper here cut 15 jobs, leaving it with about 190. The layoffs were part of a companywide reduction by The New York Times Co., which owns the Star-News.

BEAUFORT – Raleigh residents Nelson and Diana Paul asked the state Utilities Commission for permission to build a wind farm about seven miles northeast of here. It could generate enough power for about 900 homes. The Pauls hope to sell the power to Progress Energy.

CAMDEN – Camden County hired Poyner & Spruill, a Raleigh-based law firm, to persuade the Navy not to build a practice landing field for jets here. The Navy also is studying sites in Gates County and Virginia.

KINSTON – A Long Island, N.Y., father-and-son investment team bought Vernon Park Mall from four Dare County residents for $9.4 million. It’s Alex and Tommy Demetriades’ first purchase in North Carolina. They hope to bring more national retailers and restaurants to the 540,000-square-foot mall.

GREENVILLE – East Carolina University wants to expand enrollment at its Brody School of Medicine. The school admits about 70 students each fall and wants to increase that to 120, but it hasn’t set a target date. The UNC Board of Governors has endorsed the concept of expansion. ECU will need more money from the General Assembly.

FAYETTEVILLE – The state Board of Nursing placed nursing programs at Fayetteville State University and UNC Pembroke on probation. Only 64% of nursing graduates at Fayetteville State passed the state licensing exam. UNC Pembroke did slightly better — 68%. The schools have two years to improve their percentages to 83%.

Regional Report Charlotte April 2008



Business lacks team spirit 

Panthers. Bobcats. Checkers. Knights. Few weekends pass without Charlotte sports fans having something to buy tickets for, and that’s not counting NASCAR, golf and other events. Queen City businesses face similar choices about where to spend sponsorship money. Given all that, a football team for UNC Charlotte might be akin to having too many players on the field.

Still, a feasibility committee has recommended that the school field a team in the NCAA’s Football Championship Subdivision — formerly Division I-AA — in 2012, moving up to the Football Bowl Subdivision, I-A, in 2016. Increasing student fees by $300 would cover most of the $7.7 million needed each year for staff, scholarships and additional money for women’s teams required under Title IX. But the university also would need $60 million to $75 million to build a 30,000-seat stadium. Support from the business community is essential, yet so far companies have shown less enthusiasm than students and alumni.

In a survey of 70 Charlotte executives who support sports, nearly half described their level of interest as “low to minor.” About half wanted more details before they would commit. Others noted they already have commitments to other college teams. Despite the concerns, Max Muhleman, the sports-marketing executive who conducted the survey, says proponents should be encouraged because the idea wasn’t rejected flat out. “It’s difficult because there is still so much that is unknown. Without details to offer them, it’s really about asking whether the idea was something they liked. On balance, I’d say the responses were positive.”

UNCC Chancellor Phil Dubois will recommend to the Board of Trustees by June whether student fees should be increased to accommodate the program. Though a student-government poll found 78% of students favored football, former UNC system presidents C.D. Spangler Jr. and Bill Friday blasted it, telling faculty it would hurt the school’s academics. At this point, Dubois would be hard-pressed to use the business community as a tiebreaker. As one exec responded when asked if his company would make a financial commitment, “My initial reaction was to say probably not, but if it would help, I’d buy a few tickets.”

Beer will be par for the course

Tradition holds Benjamin Franklin once quipped that beer was proof God loved us and wanted us to be happy. Now Gastonia officials are hoping suds will bring in a few extra Benja¬mins. In March, the City Council voted to sell beer at Gastonia Municipal Golf Course. Along with an increase in fees, the move is meant to reduce — at least slightly — the $250,000 to $400,000 a year needed from taxpayers to keep the course open. Course manager Richard Duffie says when he surveyed other public courses, he found beer sales brought in an average of $15,000 a year. High-traffic courses, such as The Tradition in Charlotte, made as much as $56,000.

GASTONIA – Swift Galey planned to close its plant here by the end of March, idling about 250. The Atlanta-based textile maker blamed Asian competition, as it did earlier this year when it cut 150 of 525 employees at its fabric plant in Marion.

CHARLOTTE – Duke Energy spent $2.8 million last year to lobby federal lawmakers on energy issues. That broke its record of nearly $2.2 million in 2005. Duke lobbied on 31 bills last year, most concerning global warming.

CHARLOTTE – Bank of America and Wachovia cut stock grants for their CEOs after disappointing results in 2007. Ken Lewis of Bank of America received a restricted stock grant of $4.3 million, a 60% decrease from the year before. It also cut his stock options. Ken Thompson of Wachovia didn’t receive a stock grant for 2007, but he received more stock options than in 2006.

CHARLOTTE – Continental Tire North America plans to move its headquarters next year to Indian Land, S.C. About 300 employees will move with the company, part of German auto parts maker Continental AG. A 160-employee factory and warehouse will remain here.

CHARLOTTE – Charlotte-based Wachovia, which outsourced some human-resources functions in 2005 to Hewitt Associates, is bringing them back in-house or sending them to other vendors. The transition could take 18 months, and Wachovia hasn’t said why it was done or how it will affect employment.

CHARLOTTE – First Charter will lay off 28 employees at its headquarters to prepare for its acquisition by Cincinnati-based Fifth Third Bank. It has no plans to lay off any more of its approximately 1,100 employees. The deal is expected to close in the second quarter.

CHARLOTTE – Ruddick plans to open 15 Harris Teeter grocery stores this year. That will give it 182 stores in seven Southeastern states. It opened 19 stores in 2007 and 16 the year before.

LINCOLNTON – Robert Bosch Tool plans to close its local plant by the end of the year, letting go about 230 workers. The plant makes bits and other tool accessories. The company, based in Mount Prospect, Ill., says the closing will not affect its distribution center, which employs about 180 in Lincoln County.

CHARLOTTE – State regulators gave Carolinas HealthCare System permission to expand Carolinas Medical Center-Pineville by nearly 100 beds to 206. The $174 million project is slated for completion in 2013. Regulators also approved Carolinas’ plan for a $17 million free-standing emergency clinic, which is scheduled to open in Kannapolis during 2009.

CHARLOTTE – The U.S. National Whitewater Center planned to begin charging admission of $5 per car this month. It has struggled to raise enough revenue to repay $38 million in loans used for construction. It had a $1.3 million operating shortfall last year.

CHARLOTTE – Sonic Automotive, which operates more than 170 car dealerships nationwide, plans to buy Mercedes-Benz dealer Beck Imports of Charlotte. Terms of the deal, ex¬pected to close by the end of March, were not disclosed. Sonic says it will keep Beck’s 140 employees.

R. Scott Anderson


Personnel File – April 2008: Financial Services

R. Scott Anderson, CEO
Bank of Granite, Granite Falls

Talk about a rock and a hard place. When Scott Anderson took over as CEO of Bank of Granite in January, what Warren Buffett once called “the best-run bank in the United States” was facing a crisis of its own making. A few months earlier, Nasdaq had threatened to delist it for failing to file third-quarter earnings. When it finally did in February, it reported a loss of $22 million — $1.40 a share — because it said it needed to set aside $42.7 million to cover bad loans. It ended up losing $15 million in 2007.

“We are embarrassed by the situation we find ourselves in,” Anderson says, “but it is something that has happened and must be dealt with. It’s not easy because you want to be out first with your numbers and have them reliable and accurate. This is not an enviable position, and we don’t intend to be here again.” Bank of Granite’s reputation was what had drawn him when he was recruited as chief operating officer in 2004. “It has had an iconic place in North Carolina banking. It was a more than flattering opportunity.”

In 30 years of banking, Anderson has witnessed the waves of consolidation that have transformed the industry. A branch manager with Forsyth Bank and Trust at 22, he became a commercial lender when it merged with Southern National in 1982. Promoted to marketing executive, he kept the job through Southern National’s merger with BB&T in 1995. He left to become president of Bank of Mecklenburg in Charlotte in 1997. After RBC Centura bought it in 2000, he was regional president for central North Carolina.

Founded in 1906, Bank of Granite had been by comparison a rock of stability. Since 1954, it had been run by John Forlines, who retired as CEO in 2005 and as chairman in 2006 — at age 88. His successor was Charles Snipes, then 73, who had been with the bank 22 years. Snipes relinquished the CEO job in January and will retire as chairman at the stockholders meeting in May. Among such company, Anderson might seem a kid, barely qualifying for an AARP card. “Fifty-two may seem young, but for a community bank it’s not uncommon. Everyone in my team, with one exception, is 52 to 54. They all have 30-plus years of experience but still have a ways to go until retirement.”

Right now, he’s focused on getting the bank back on track. “We do intend to innovate and grow beyond our current footprint, either by de novo operations or by possible opportunities for a merger partner. We’re going to keep doing what we’re doing because we’ve always done it well. I don’t think we need to completely change direction, but we do need to keep innovating.”