By Leigh Anne Larance
Senior Editor
llarance@va-business.com

Gov. Jim Gilmore was shrewd in saving a major Pulaski County announcement for his January 1999, state-of-the-commonwealth address. He knew he would make a splash by offering $60 million in state incentives to expand a major local factory. After all, this quiet mountain area is so sleepy that it was big news when the Appalachian-league Pulaski Rangers started selling beer at Calfee Park. Residents would certainly be wowed by Volvo Trucks North America’s plan to expand its truck assembly plant — its only manufacturing operation in North America — by hiring 1,277 new workers and investing $148 million.

Yet a closer look at the Volvo deal shows that when it comes to economic-development plans, even the big rigs can quickly stall out. Virginia can do its best to smooth the pavement with incentives. But many businesses — manufacturing industries in particular — can find their plans scrambled by fluctuations in business cycles and tighter margins brought on by global competition.

Volvo is a case in point. Less than a week after the governor’s address, Volvo threatened to ditch the expansion and move the entire plant to Mexico. To stay in Pulaski, Volvo wanted the United Auto Workers to agree to reduce starting salaries by almost a third. The union grudgingly agreed, with members saying they recognized their decision’s impact on the community. Volvo is the second-largest employer in the New River Valley, with 2,400 workers, and offers the region’s highest-paying production jobs. In addition, the plant is a business lifeline for more than a dozen suppliers that have set up shop in the valley.

Since the announcement, the project has moved in fits and starts. The governor traveled to Pulaski in a Volvo tractor for a ceremonial groundbreaking last summer to announce that Volvo was adding to its payroll. The company did hire about 700 workers over the summer, only to lay off 900 in February, citing a glut of trucks that had cut demand and swollen inventories.

Even so, the Virginia Economic Development Partnership’s year-end report for 1999 (see charts, Pages 42 and 45) lists Volvo’s expansion as the state leader. The Swedish automaker is tagged as No. 1 for planned capital investments for 1999 and No. 4 among employee expansions. All told, the partnership report promised expansions that could bring $1.49 billion in capital investment and 30,093 jobs to the commonwealth, double the number of jobs announced in 1998 — if the deals pan out.

Volvo’s stumbling blocks notwithstanding, other companies’ expansion plans already are bearing fruit. While announced capital investments increased only slightly compared with 1998, job creation plans did almost double — a nod to the growth in business services. The San Diego, Calif.-based information technology firm SAIC, with 3,000 planned new hires, topped the list of employment expansions. The company, which has Fairfax County operations, had 10,107 workers in Virginia in mid-April, almost 1,900 more than it did a year earlier.

Not surprisingly, six of the top 10 job expansions are in Northern Virginia. Even the second largest had a metro D.C. tie: Falls Church-based Capital One announced plans to expand in Henrico County with a 2,000-job service center. The credit-card company’s recruitment campaign has become a fixture in the Richmond area. Telecommunications firm Teligent of Fairfax County, third on the list, announced it would bring 1,500 jobs to the commonwealth. Teligent had 1,477 employees at the end of 1998 and 2,822 at the end of 1999. Roughly one-third work in the Northern Virginia area.

And even while Volvo hasn’t proved to be a poster child for economic development, its expansion is still moving forward. Construction began in June. The company expects it will expand the plant and add close to 1,300 jobs by 2003. "The expansion is ongoing, and it’s on schedule," says Volvo spokesman Phil Romba. Since 1994 and including the current expansion, the company has invested more than $300 million in improvements and expansions, he notes. And what about the Volvo employees laid off in February? "Ultimately we expect the business to pick back up, and we’ll recall workers," Romba says.

Volvo’s predicament is reminiscent of the on-again, off-again Motorola project to build a huge semiconductor plant in Goochland County. First announced in 1995, the project was seen as a critical step toward Virginia’s future as a high-tech hub, prompting talk of a Silicon Dominion. Two other subsequently announced semiconductor plants are up and running, but Motorola has so far failed to live up to the fawning press — in this publication and others — that followed its announcement. As the Volvo example demonstrates, economic development plans may roll off the assembly line shiny and new, but experience shows they face bumpy roads.