new assembly line for electric vehiclesCredit: Jennifer Gross, Battle Motos
We all know the story: The US Industrial Belt, sometimes unkindly referred to as the Rust Belt, is a tale of decline brought on by a changing economy, international competition, costs that outstripped productivity gains, aging infrastructure, or a failure to adjust. This industrial belt typically refers to the Great Lakes area, including Pennsylvania, Ohio, Michigan, and Indiana, as well as the more central states of Illinois and Wisconsin. In some discussions, this economic decline is interwoven with broader social issues such as urban decay, youth unemployment and drug abuse. The memoir “Hillbilly Elegy” by JD Vance, now Senator from my home state of Ohio, paints a poignant picture of the challenges and dysfunctions of family life in a time of economic uncertainty.
Statistics seem to back up this unfortunate story, which says that national manufacturing employment peaked in 1979 at 19.6 million and fell to 12.8 million by 2019. Unemployment in Ohio rose from 4.1% in 2000 to 10.3% in 2010. Some have been able to adapt, but in general such numbers mean much misery for individuals caught in the transition.
But luckily there is an update to this story. I caught up with journalist and author (and fellow Buckeye) Rebecca Fannin for lunch and we talked about her latest book, Silicon Heartland, which tells us the rest of the story. One of the silent success stories of recent years in the Belt industry is the emergence of local venture capital firms driving innovation in the traditional economy. From tech-enhanced manufacturing to independent start-ups in logistics or healthcare, the Industrial Belt has undergone a renewal in startups and startups that have reshaped the local economy.
A History of Economic Renewal in the Industrial Belt
Credit: Imagine books
For example, Columbus-based Drive Capital, founded by two former partners of Sequoia Capital, has funded about 60 startups in the region. In Indianapolis, Scott Dorsey used his profits from the sale of his company to Salesforce to invest in Lesssonly to provide sales training to small and medium-sized businesses. Pittsburgh has grown into a national leader in robotics and automation, backed by the strength of Carnegie Mellon.
I wanted to see this trend for myself, so I drove to New Philadelphia to spend some time at Battle Motors, a manufacturer of specialty trucks. Founded in 1946 as the Crane Carrier Company to modify and rebuild surplus military vehicles for the construction and petroleum industries, the company was producing 336 trucks annually by 2021. Then venture capital came into play with a $120 million investment.
Production increased from 336 trucks in 2021 to 700 in 2022 and Battle received a follow-up investment of $150 million. Production is set for 2,500 vehicles this year.
Employment at Battle Motors followed the same pattern, increasing from 95 employees in early 2022 to 450 currently.
And that growth enabled vertical integration and new models. In 2021, Battle produced no electric vehicles. In 2022, electric vehicles accounted for about 5% of production, and this year they will account for about 10%.
This scale has allowed Battle to enter new lines of business and undertake some vertical integration. New models, from backhoe cranes to shovel stackers, now account for 15-20% of the order book.
“The original company was very specialized, with low-volume, high-complexity products,” said Chief Technology Officer Kelleigh Ash. “We’re becoming a one-stop shop for all customer needs, from food and beverage delivery to utilities to any custom production.”
The lessons of this economic renewal:
- Don’t focus solely on the game-changing global innovators. For every Google or Facebook, there are dozens, maybe hundreds, of smaller innovators experimenting, improving, competing, and transforming the way we live, work, and produce. Individually, these smaller groups may not make headlines, but cumulatively they have a significant impact.
- Play to your strength. If Silicon Valley’s strength is Stanford, Berkeley and its amazing conglomeration of VCs, innovators and engineers, then the Industrial Belt’s strength is an educated factory workforce with a strong value ethic. So ideas that require a manufacturing or logistics dimension are more likely to reside in the Industrial Belt than in Menlo Park.
Silicon Heartland is an important story of industrial renewal led by VCs. And unemployment in Ohio? It deteriorated from 4.1% to 10.3% but recovered to 3.8% in March 2023. When I mentioned Intel’s plans to open a $20 billion chip fab outside of Columbus to Rebecca, Rebecca responded that the region is booming, but it still needs many more trained engineers. The training is already beginning. The battle is just beginning.
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Visiting Fellow, Hoover Institution. Whether it’s banking, trade negotiation or e-commerce, my professional life has been helping companies conquer new markets, with a particular focus on China. As CEO of Export Now, I lead the largest international company in Chinese e-commerce. I previously served as Secretary of State for International Trade at the US Department of Commerce. Before that I was US Ambassador to Singapore. I previously worked in Hong Kong and Singapore at Citibank and Bank of America, as well as at the White House and National Security Council. China e-commerce book: https://amzn.to/2VtfzqQ World War II history book: http://amzn.to/2qtk0wK
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