Tom Martin Q&A: Manufacturing partnership between Lexington and Louisville 'makes good business sense'

Lexington Mayor Jim Gray and Louisville Mayor Greg Fischer took in the Kentucky-Louisville game at the KFC Yum Center in Louisville on Dec. 31, 2010. The two politicians made a "friendly wager" over this year's UK-U of L basketball meeting. The winner will host the other at their respective city's hometown racetrack.
Lexington Mayor Jim Gray and Louisville Mayor Greg Fischer took in the Kentucky-Louisville game at the KFC Yum Center in Louisville on Dec. 31, 2010. The two politicians made a "friendly wager" over this year's UK-U of L basketball meeting. The winner will host the other at their respective city's hometown racetrack.

To longtime Kentuckians it had been a given that Lexington and Louisville were rivals. So it was no small irony when, at a UK-U of L basketball game, Jim Gray, below, and Greg Fischer, early in their terms as mayors of Lexington and Louisville, decided the time had come for a mutually beneficial economic partnership between Kentucky's two major urban centers. They formed the Bluegrass Economic Advancement Movement (BEAM) and commissioned the Washington, D.C. think tank, The Brookings Institution, to conduct a study into the feasibility of creating a 22-county economic region anchored by Lexington to the east and Louisville to the west.

Tom Martin sat down with Gray to discuss some findings of the study and the vision.

Tom Martin: The Brookings Institution study documented a lot of overlapping between the two cities. That's a fairly recent development, isn't it?

Jim Gray: In the 19th century, early 20th century, the cities were competitors. Today we're competing in a global economy. And in order to hit that threshold for competition across the country and the world, a number of 2 million population is what is focused on. So for Lexington and Louisville to think collaboration, cooperation, yes, that may be a novel idea but it just makes good business sense. What can we do as cities working together? What can we do to elevate the profile of this region? What can we do to actually dive into the numbers and discover more about who we are, what are our competitive strengths and our competitive advantages? That's been a big part of the BEAM Project.

Martin: Twenty-two counties. That's a lot of political structures to bring onto the same page.

Gray: What we've discovered in this process is that we have many more similarities than we do differences. In terms of the counties around us, the boundaries are political boundaries, but they really should not and don't affect our economies. We have people crossing those borders working in Lexington. We have folks in Lexington working in our neighboring counties. So working together, putting a good plan together is really what this is all about — leveraging the strengths of these two metropolitan areas and the brands of both of our cities.

Martin: The BEAM Initiative revolves around advanced manufacturing?

Gray: That's right. What we needed to do was focus on a cluster, where the two regions have real competitive strength. There is good authority that tells us that one manufacturing job will create almost three more jobs. So the value-add in manufacturing is significant. That's been the history throughout America. And today what is occurring is in many respects a manufacturing renaissance, a manufacturing moment in America. This was unexpected, but it's occurring as a result of economic trends worldwide.

Martin: In the advanced manufacturing setting, is the factory floor quite different from what we have traditionally associated with manufacturing?

Gray: Yes.

Martin: I mean, it's robotics.

Gray: Yes. We almost have to do a mind shift to think about the manufacturing of today. In the former way of thinking it was "smoke stacks' industry. Today clean manufacturing is the order of the day. And what is occurring especially through advanced manufacturing is that the value chain is rising. So someone can enter the workforce in a technical trade with good training and rise in the enterprise. Let's say, for example, an automotive supplier. Where the technical training is occurring well, the opportunity to grow and gain career advantage is also occurring. So at a time when everybody in the world wants a good job, thinking of manufacturing in a new way, in a more informed way is a big part of this project, as well.

Martin: What kinds of jobs are these? What skills are necessary in a factory where things are being put together by automation?

Gray: Well, tool and die makers and millwrights, for example. These are skilled jobs that are still needed and yet with automation and new technology it's not unexpected that higher levels of training are required. That's one of our recommendations: more skills training. When you have an advanced manufacturing employment center like a Toyota, for example, you know an abundance of engineers is required.

One of the facts that was illuminated was that Kentucky ranks really low, 48th in the nation, in terms of engineers that we graduate. So one of our recommendations is to double the number of engineers graduated by Kentucky colleges and universities. One of the major recommendations in the dimension of human capital is to create an advanced manufacturing training center. Two of them; one at Georgetown and one in Louisville, and we've met with the governor to lobby for and to encourage this.

Martin: Within this geographic region do we have adequate infrastructure?

Gray: Yes. I would characterize it as being a close second to human capital in terms of priorities. Today the number one priority is workforce. A prepared, trained, skilled workforce.

The demand exists, the capacity to produce is the challenge. Now, this is not unlike other countries, but why is it that America today has a competitive advantage? Because we have a more stable government, a more stable economy and because the labor differential, that is the difference between labor in, for example China and in America, on a unit cost basis, that gap is closing. And it's projected to close dramatically in the next 10 years. At the same time it's more expensive for leadership of companies to travel all over the globe in order to create their manufactured products.

Martin: Something as complex as a regional economy, something that you and Mayor Fischer and the BEAM organization and all of its committees are out to construct is complicated on the surface, but throw in the onrush of the disruptive technologies we have now in our lives. Now, in a few years everything changes. How do you plan in the face of that?

Gray: In the face of change it's so important that we focus on very specific goals. And the BEAM goals are very specific: dial up our exports; create an innovation-centered and focused economy; and focus on growing human capital — developing more graduates within our technical skills, engineers and improve the skills of mid-skill workers.

Martin: What's your vision of the outcome of BEAM? What will Kentucky and in particular, this 22 county region look like? What will it be like to be in?

Gray: You are going to see more design, more engineering, more centers of excellence related to, for example, automotive. We already have the manufacturing. What we know today is that a collaboration between the design component of a manufacturing process and the manufacturing component creates a more robust product. So the kinetic energy that occurs when people are working close together creates added value. And even in an electronic age where we can so easily communicate, people working in proximity to one another still has a big value...

One of the principal recommendations is for Louisville and Lexington to continue to focus on building quality of life and quality of place. Fifty years ago, people moved to where the jobs were. Think IBM in Lexington. Today jobs move to where the people are. To where the talent is and where the talent is going. To places where there is a premium quality of life and quality of place. And that's why all of this has to be taken together strategically in a holistic way and worked on very deliberately. That's why our initiatives in Lexington are to ... add to quality of life. And the awakened and vibrant downtown where we have the music and arts, they add to the quality of life which adds then to our competitive strength, which adds to the capacity then for us to recruit and retain talent and jobs.